It was standing room only at 1 MetroTech Center in Brooklyn on Wednesday night. More than 100 landlords and investors packed into a conference room that Marcus & Millichap scrambled to reserve after receiving a flood of registration requests.
“I hope you brought a bottle of Advil,” Belkin Burden Wenig & Goldman’s Daniel Altman told the crowd. “And we have social workers and counselors in the back.” It wasn’t long before someone from the crowd yelled, “We’ll need more than that!”
Altman, who co-led the presentation, instructed audience members to brace themselves for widespread changes in the wake of “the rent revenge act of 2019.” His colleague Alexa Englander told attendees that there is “no safe harbor” for landlords under the new rules, which affect about 1 million stabilized apartments in the city.
What landlords are trying
As lawyers carefully went through each key point of the new law, gasps or eruptions of disbelief were heard from the crowd.
But there are some routes landlords can take to juice the rents, and many are exploring “creative” options under the new law.
“A vacancy is now the only path to raise rents to the legal rent if a tenant has preferential rent,” Marcus & Millichap’s John Horowitz said. “So you’re going to see a return of buyouts.”
But a quicker workaround seems to be gaining popularity with some landlords. “We have some clients getting ‘creative’ signing leases at an earlier date, which might not hold up, and depending on the tenants, is a risk some might want to take,” said Englander.
Blaine Schwadel at Rosenberg & Estis is wary of that tactic.
“If it’s true that’s fine, but if it’s fraud — take your pick. So we’re going to lie? No. If a tenant wants to file an overcharge complaint, they know exactly when they moved in. People are outsmarting themselves.”
Though there remains some confusion, the legal community seems to agree that if a lease goes into effect before the rent laws were signed on June 14, the old rules apply. Otherwise, lawyers at Belkin Burden Wenig & Goldman suggested getting a new lease altogether.
It’s a branding problem?
After the seminar concluded, landlords stood around in groups of three or four, some yelling Margaret Thatcher quotes and others shaking their fists at Charles Barron — the Assemblymember who locked horns with Rent Stabilization Association’s Joe Strasburg during a public assembly hearing on the rent laws.
Some landlords on Wednesday night said they were frustrated the industry’s messaging.
Odin Realty’s Thomas Laskaris, who claims to own 24 apartment units, offered a cheeky approach to rehabilitating real estate’s image.
“We need a rebranding. The name ‘landlord’… it just doesn’t work,” Laskaris said. “How about ‘sweat equity general?’”
Another developer, who left his native Ukraine for Rockland County and declined to give his real name, was aghast at the changes. “Not even Karl Marx in his manifesto would have dreamed up such laws,” he said.
Sam Sarcona, senior project manager at Macklowe Properties, said that the new changes won’t necessarily hurt the landlords who were reaping the fattest profits under the previous rules. Instead, he said, small landlords will bear the brunt of the costs and larger firms will come in and clean house.
“The big corporate guys have the financing to sweep out all the little guys, buy out everyone, and put in luxury towers.”