Tenants seek opportunity to purchase. Landlords: Go for it

Landlords in New York City — the ones on social media, at least — are a caustic bunch. They seem to be in a perpetual state of discontent.

Common subjects of their complaints include socialists, Democrats, the financial state of their buildings, and, of course, problem tenants.

Occasionally landlords need comic relief. The Tenant Opportunity to Purchase Act provides it, even as it worries them.

The bill would pause the sale of a multifamily building for several months to give its renters a chance to bid. The reaction of owners has ranged from “That’s outrageous!” to “Be careful what you wish for” and my personal favorite, “Take my building, please!”

The universal view in the real estate industry is that the bill, called TOPA, is unnecessary because tenants already have a right to make offers on their buildings, and harmful because it would interrupt pending sales for the sake of implausible ones.

Those are good arguments but not nearly as fun for owners as imagining tenants operating their buildings. The phrase “welcome to my world” comes to mind.

Many would like their renters to know what it’s like to deal with residents, agencies, lenders and contractors — especially when a building is falling apart, doesn’t generate enough rent to be renovated and has a mortgage coming due.

“Nobody wants to willingly raise their own rent to pay for repairs,” landlord group leader Jay Martin tweeted last year. “Take a look at the failure rate of HDFCs and their insolvency.”

“If a tenant were to buy a building, it would be good to get experience by working for a building owner or management company,” Brooklyn landlord Chris Athineos told The Real Deal when the bill was introduced in 2020. “You have to know so much, not just about finance and underwriting, but about plumbing and electrical. It’s not just collecting rent.”

For that matter, “just collecting rent” is no easy task. A month after Athineos spoke, the pandemic slammed the city. Socialists’ “cancel rent” campaign, along with the state’s eviction moratorium and rental assistance program, persuaded many folks to withhold rent. Well over $1 billion in rent went unpaid just by rent-stabilized tenants.

Landlords wonder what tenants-cum-owners would do when fellow residents begin living for free. Would they shell out thousands of dollars for a lawyer and spend two years trying to evict Mr. Smith from apartment 4B? What about the Lopez family with the two cute kids in 7F? They haven’t paid since last summer. Mr. Smith has been in the building for 20 years, and everyone likes the Lopezes, but the property taxes went up again and they are overdue.

These would be wrenching decisions for people in “democratic resident-controlled housing,” as Brooklyn Assembly member Marcela Mitaynes’ bill calls it.

Would the new owners know to pursue former neighbors for arrears? Would they garnish their wages? Sell their debt to a collection agency? Ding their credit scores for the next seven years? Reporting a default makes it hard for someone to find another apartment, but deters delinquency.

Even if residents pay on time, they can plague a building in other ways.

On the top floor, Mrs. Jones, now in her late 80s, left her sink running again, adding $1,500 to the building’s water bill. Last time she forgot, the city granted amnesty but won’t do it again. The bill must be paid, because the mayor just announced he would cut off water service to delinquents.

At least Mrs. Jones didn’t flush a dirty towel down the toilet like Mr. Miller did in 6C, getting it stuck so deep that plumbers had to rip open 5C’s wall to expose the pipe. The bill came to $10,000. Insurance covered most of it but then jacked up the premium by 30 percent.

A lot of what goes wrong in a building is not anyone’s fault. The thermocouple on the boiler goes bad every year, which kills the pilot light and cuts off the heat — usually on the coldest day of the year. The old landlord’s son knew how to replace it — it’s an $8 part — but now no one in the building can even diagnose the problem, let alone repair it. Gotta call a plumber.

Instead of just installing a new thermocouple in 15 minutes, the plumber and his assistant drain the whole system, fill it back up and go unit-to-unit bleeding all the radiators. The bill comes to $1,600. Next year, they’ll do it again.

No one scheduled the annual boiler inspection, a $500 violation, and when an inspector finally came, he noticed the chimney lacked a clean-out door. That was not an issue until 2022, when the city added the requirement for metal-lined chimneys and buried it in a regulation that few noticed. That’ll be $1,800 to Acme Chimney Service.

The headaches never end. Sanitation keeps levying fines for sidewalk litter — not to the litterbugs, but to the building. The city’s new gas line inspection mandate is a simple check, but under Local Law 152, only a licensed master plumber can perform it. That’s $600.

Does anyone know what a parapet is? In January the city imposed a new inspection requirement. And who can file the bedbug form and the property registration with HPD? What about the prevailing wage affidavit? Why must that be notarized? Is anyone in the building a notary?

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In theory, converting a rental building into a limited-equity co-op can work. In practice, it is almost always unrealistic. The chances of all renters in a building being ready for homeownership at the same time are slim.

It makes no sense to hold up every building sale to give tenants a chance to make a collective purchase that will never happen, and if by some miracle it does, will make life harder for residents in all the ways mentioned and more.

The Tenant Opportunity for Purchase Act has been stuck in committee for four years, so it doesn’t stress out owners the way it did initially. After the Housing Stability and Tenant Protection Act of 2019 passed, it looked like anything might happen. 

Since then, legislators have seemed to realize that TOPA is not a silver bullet, but a shot in the foot.