When you lease-t expect it

As rental market stays hot, landlords pile on new contractual requirements for tenants

Sep.September 01, 2012 07:00 AM

Late summer and early fall in New York City is moving season — the busiest time of year for apartment hunters, rental brokers and landlords. And thanks to a hot rental market, this year is especially hectic.

But before New Yorkers get the keys to their new digs, they first have to sign a lease.

Nothing is as “complicated, and simple at the same time” as a New York apartment lease, said Harold Kobner, a sales and rental broker at Argo Residential in Manhattan.

Most city landlords use standard leases, like those offered by the Real Estate Board of New York, so clauses in the leases themselves tend to be fairly uniform.

What does vary widely from landlord to landlord — and causes confusion among renters and brokers — are the riders: six or seven pages of addendum that clarify, expand and add to the lease terms. These riders reflect landlords’ personal preferences, spell out the building’s rules or are tailored to specific tenants. For example, landlords may include a rider concerning rules for pets for a tenant with a dog, but omit it for a pet-less renter.

Anthony Lolli, the founder of brokerage Rapid Realty and owner of several small apartment buildings in Brooklyn, said he uses lease riders prohibiting smoking and the use of candles in all his units, due to a fire in one of his properties years ago.

In one of Kobner’s recent deals, a rider detailed the tenants’ responsibilities for maintaining the apartment’s 700-square-foot terrace, including watering the hydrangeas and clearing out the outdoor drains on a biweekly basis.

This month, TRD looked at how the changing market and other factors have impacted the growing list of stipulations in today’s rental leases.

Security deposits and guarantors

Buoyed in part by the still-uneven sales market — which has pushed many would-be buyers into rentals — the average rent for a Manhattan apartment hit a record $3,459 in July, according to data from brokerage Citi Habitats.

And while vacancy rates rose slightly for the month — to 1.2 percent from 0.8 percent — the city’s rental market is still extremely tight. That competition for apartments means landlords can be more selective, said Gordon Golub, executive vice president and director of rentals at Citi Habitats.

“Landlords will go with more qualified renters or someone who pays the most rent,” he said.

They can also require tenants to pay the equivalent of two months rent for a security deposit, instead of the more typical one-month requirement.

With certain landlords or management companies, two months security has recently become standard — “even for the most qualified tenants,” said Bond New York executive director of leasing Douglas Wagner.

Of course, those well-qualified tenants are in shorter supply than in the past, due to the Great Recession and its aftereffects. “I’ve seen more bruised credit this year than ever before,” Wagner said.

Perhaps for the same reason, some landlords now require every tenant to have a guarantor, regardless of how much money they make. In the past, renters typically needed guarantors only if their salary was less than 40 times the annual rent.

This shift presents some challenges for rental agents.

“From a brokerage perspective, it’s very hard to explain to someone who makes 50 times the annual rent that they need a guarantor,” Wagner said. In fact, when faced with this request, “many [clients] will reconsider submitting an application.”

Still, the market is strong enough that most renters in today’s market are going along with landlords’ demands.

In fact, Wagner recently came across a lease where the landlord forbade the tenant from having any “adult material” in the apartment.

“That was one of the weirdest things I’ve ever seen,” he said. His clients were outraged that the landlord would presume to control what they could and couldn’t bring into the apartment, he noted, but they signed the lease anyway.

Bedbug riders

The most significant change to leases recently, brokers said, is due to bedbugs. The pests have made their way into many New York apartment buildings and retail locations in the last few years, grabbing headlines and creating an overarching sense of paranoia.

Fears of infestation prompted former Gov. David Paterson to sign the Bedbug Disclosure Act in 2010, requiring landlords to notify new tenants if there has been an infestation in the apartment, floor or building in the last year and how it was addressed. This typically happens in the form of a rider included with a new lease, which the tenant signs and returns to the landlord as a way of acknowledging the information has been shared. Brokers said this is the most significant and widespread new rider in use today.

In addition, some landlords are choosing to also include language in the rider about dealing with an infestation, should one occur after the tenant moves in. Some owners specify that renters are responsible for the cost of removing bedbugs from the apartment, Kobner said.

Other landlords have unofficial policies of paying for one remediation, but charge tenants for future incidents.

Pet policy

During the recession’s soft rental market, some New York landlords began allowing pets to help fill vacancies in their buildings. Now that the rental market has recovered, however, they are reinstating no-pet policies, sources said.

“If it was previously offered as an enticement, they don’t need it anymore,” said Wagner. “Buildings are mostly full and, if they aren’t now, they will be next week.”

These days, “landlords who prefer not to take pets are not doing it,” said Golub, though he noted that rentals in outlying areas or new buildings needing to fill many units quickly are more likely to allow pets.

Landlords who do allow pets take precautions to prevent them from damaging their property. Some riders specify that a certain percentage of the floor — especially original hardwoods — be covered by carpets or area rugs if a tenant has a pet. And some include language requiring dogs’ removal if neighbors complain about barking.

Lolli, for example, said he now allows pets, provided his tenants pay an additional security deposit and can show him the animals’ “credentials,” like obedience school or other training courses.

Bicycles

New York has become significantly more bike-friendly in recent years, with the Bloomberg administration installing bike lines citywide. But landlords and their tenants struggle with where to store all these bicycles.

“New York has become eco-friendly lately, it’s sort of an ‘in’ thing,” said Lolli. “But if you own a [building], your hallway can look like a bike shop.”

That can create fire and safety hazards, as well as aesthetic issues for the building, and has recently led some landlords to adopt lease riders expressly prohibiting bike storage in common areas of the building.

Mold

Mold is the new asbestos, according to Sherwin Belkin, a partner specializing in residential real estate at the Manhattan-based law firm Belkin Burden Wenig & Goldman.

In recent years, he said, there have been “many claims the presence of mold.”

As a result, Belkin said he’s seen an increasing number of leases that contain riders concerning mold, including specific instructions for preventing its growth.

Some go so far as to instruct tenants to run the AC whenever windows are closed, fully close the bathroom door while showering, and avoid over-watering houseplants.

Air conditioners

Kobner said many landlords have begun to include riders requiring new tenants to hire a licensed professional to install air conditioning window units rather than putting them in themselves. That’s due in part to well-publicized incidents like one earlier this summer, in which an air-conditioning unit fell from the 20th floor of an Upper East Side housing complex onto a playground.

These riders also typically state that building personnel and supers are not allowed to install ACs, so as to limit the landlord’s potential liability from incorrectly installed units.

“Let’s just say air conditioners take up lots of pages of leases today,” Kobner said.


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