May 30, 2013

Renewal of Residential Leases in New York

apartment.jpgOur firm often fields inquiries from clients regarding residential lease situations. One common question relates to the right to renew an existing lease. This blog post will explain certain conditions which may apply to the renewal of a lease after it expires.

We are first assuming that there is a written lease between the landlord and the tenant for the premises in question. If a tenant takes possession of the premises without any written lease whatsoever (this situation arises more than one would expect), then the tenancy is considered a month-to-month tenancy. This means that either party may terminate the tenancy by giving one month's notice to the other party. For this reason, a written lease will protect both party's interest in the tenancy.

A written lease between the landlord and tenant will generally be for a specific period of time. Many leases run for multiple years, such as two, three, or even five year terms. Smaller premises or those for cooperative or condominium apartments may rent for only one year. The question we are asked is what rights the tenant may have to a renewal lease after the lease term expires.

The first legal requirement our firm will check is the terms of the lease itself. The lease may contain a clause providing for a renewal at the option of either party (landlord or tenant). The lease may state that either party may exercise an option to renew the lease no more than thirty days prior to the end of the lease term. For example, if the lease expired on December 31st, the option must be exercised by November 30th. The lease may also contain the method by which the renewal should be communicated, such as a written notice sent by certified mail to the landlord. It is important to review the notice provisions in any lease so that the notice is sent by the correct method and is therefore legally valid.

If the lease does not contain a renewal clause, the next issue to examine is whether the premises in question are subject to rent stabilization. Certain rental units with New York are subject to rent stabilization. Rent stabilization is a law in New York which gives tenants an automatic right to renew their residential leases at a rental rate established by law. Rent stabilization does not apply to commercial property, although there have been calls to extend the law in that direction.

When an apartment is subject to rent stabilization, the landlord may only increase the rent in keeping with a formula set by the New York City Rent Guidelines Board. The Board will usually establish a ceiling for a one year lease renewal, as well as one for a two year renewal. For example, if the one year renewal rate is 5%, and the tenant is paying $2,000.00 per month for their rental apartment, then the landlord must offer a one-year renewal lease for $2,100.00 at the end of the current lease term. The tenant has the option of renewing their lease at this rate, or moving out at the end of the lease term.

By law, the landlord of a rent stabilized unit must provide a "rent stabilization rider" with their lease. This rider is a form that explains the rights and responsibilities of rent stabilization, in basic form, as well as the renewal rights to the unit.

It should be noted that not every rental unit is subject to rent stabilization. Certain types of new luxury construction may fall outside of the rent stabilization law. In addition, if the tenant's annual income is more than $200,00.00, then the unit is deemed "free market," allowing the landlord to charge any rent that he wishes and that a tenant agrees to pay. Apartments renting at free market rates are also not subject to automatic renewal rights.

Finally, cooperative and condominium units are also not subject to rent stabilization, unless the tenant was living in the unit prior to the building converting to cooperative or condominium status. For instance, if a tenant is renting a cooperative apartment from the owner, she should be aware that there is generally no right to renew the lease. Once the lease term ends, the landlord has the legal right to raise the rent to any amount, or have the tenant vacate the premises.

Further, rentals in cooperative and condominium buildings are subject to the individual building's rules. Some buildings only permit one year, non-renewable subleases.

If the tenant continues to pay rent after the lease term expires, and the landlord accepts such rent, then the tenancy is converted to a month-to-month tenancy. As explained elsewhere in this post, either party may terminate a month-to-month tenancy after giving thirty day's notice to the other party.

Weiss & Weiss welcomes inquiries from both landlords and tenants regarding their legal rights relating to residential rental properties.