Offering Buyouts After NYC's Anti-Buyout Legislation

Effective Dec. 2, 2015, there will be several amendments to the NYC Administrative Code with respect to landlords making buyout offers. Some of these amendments will call for changed practices. Others will call for the development of a form. No matter what, landlords are going to have to change their practices and proceed with extreme caution.

Under the new laws, buyouts are not illegal. What is illegal is using threatening, intimidating, or obscene language; initiating buyout talks too frequently; talking to the tenant at work; lying to the tenant; contacting a tenant before six months have passed since the tenant asked in writing that the owner make no such contact; and failing to give the tenant a written statement of the tenant’s rights.  

Not only are owners disallowed from contacting the tenants except as permitted by the law, but so too does the new law prohibit contacting “relatives” of the “person lawfully entitled to occupancy of such dwelling unit.” Both of those terms create a nightmare of ambiguity for owners. By using the loose term “relative,” not only does the owner have to guess what the relationship of the parties may be—brother, sister, mother, mother-in-law, aunt, cousin, for example, or mere friend—but the law is unclear as to whether domestic partners are on this forbidden list as well and, if so, how one proves both such domestic partnership and that the landlord would be particularly aware of the domestic partnership. While much of the nation celebrated the extension of marriage equality to the entire nation this past summer, the plain truth is that a lot of single gender couples pretend to be mere roommates. There is a whole spectrum in this regard, ranging from legally married couples to those who behave as spouses, but secretly and only in the privacy of their home. While the law on its face would clearly prohibit communication with a spouse, even one the landlord does not realize is a spouse, how the law will treat these other people is completely unclear.

Also the six-month period during which communication cannot be initiated by the owner has no known exceptions. Thus, under the law as written, an owner who happens to be suing the tenant within that six-month period cannot mention settling the case with a buyout or even with a rent waiver in exchange for the tenant moving out. The idea would have to come from the tenant. However, the law also states that the landlord can ask the judge who is presiding over the case for permission to make such an offer. The law requires neither that the request to the court be in writing nor that the judge’s permission be in writing.

The new laws describe a document that the owner must give a tenant when opening buyout discussions and every six months thereafter. It does not provide a form for such, but we recommend that the owner use a form letter as follows, stating:

Dear Tenant:

I am contacting you for the purpose of arranging with you a deal to buy you out of your apartment.

You may reject any offer I make and you may continue to occupy the apartment even though you have rejected my offer.

You may seek advice from a lawyer about any offer I make.

For information on getting a lawyer, you may visit http://www1.nyc.gov/assets/hpd/downloads/pdf/ABCs-housing-singlepg.pdf.

I am making this contact with you on behalf of the ownership of the building where your apartment is located.

You may, in writing, refuse any such contact. If you refuse contact in writing, it will prohibit your landlord’s representatives and your landlord from contacting you again with a buyout offer for 180 days from your giving such writing to your landlord. However, if the landlord gets permission from an appropriate court, the landlord could contact you with another buyout offer sooner than those 180 days have passed.

Very truly yours,

Owner’s Agent

Although there is a technical starting date for the legislation, owners should not rely on their staff to suddenly change how they conduct business on the deadline date. There are actually three new laws that were all signed into law on the same date. They are all in the “harassment” section of the New York City Administrative Code and therefore find enforcement in the NYC Civil Court by way of an HP proceeding. Although the kind of conduct regulated in this would normally call for an expensive State Supreme Court suit, the Council wrote the law in such a way as to allow tenants to enforce it in Civil Court.

However, the law has a number of provisions that are extremely vague and will therefore require that owners say as little as possible to their tenant and write as much as possible when it comes to buyouts. For that very reason, lawyers will debate whether the law is even constitutional, but if there is such a challenge, the courts will probably uphold it.

While the laws specify the tenant’s job as a place where the owner can’t without prior permission, contact the tenant for buyout conversations, the laws do not set forth a place where the conversations are safe or, for that matter, who may safely speak on behalf of the landlord. Therefore, there is every reason to believe that the restrictions of this law will also apply or that there will be attempts to apply it to landlords’ lawyers even when they are speaking to tenants’ lawyers in a court room. Under the terms of the law, therefore, we can expect to see attempts to enforce it even when a landlord’s lawyer says to the tenant’s lawyer, “We are prepared to settle this case by buying your client out instead of evicting him.”

While some of the provisions of the new laws clearly do not apply if one lawyer is speaking to another (unless the lawyer in question is either the tenant herself or the tenant’s relative), others are probably applicable even if the conversation is between lawyers, both of them unrelated to the tenant. In any of these buyout conversations, the lawyer speaking directly to a tenant is best advised simply to say, “Your landlord would like to discuss the future of your tenancy. Please have your lawyer contact me.” Since tenants may feel intimidated by the mere fact that the landlord has a lawyer and may claim that the contact was not as bland as here indicated, the landlord’s lawyer may be better advised, even as to that innocuous contact, to keep it in writing.

With the stakes running that high when a professional is speaking to another professional, one can well imagine how risky it is for a landlord to be speaking on his or her own behalf. The problem here is that the law outlaws “threatening” language and does not on its face make any exception for the landlord “threatening” to do something that the landlord is completely legally entitled to do.

Another problem with lack of clarity in the law is its outlawing, “initiating communication with such frequency, at such unusual hours or in such a manner as can reasonably be expected to abuse or harass such person.” While “unusual hours” probably means something like after 9 p.m. and before 8:a.m., “such frequency” is impossible to define. Thirty times in a single week is probably pretty easy to define as abusive or harassing, but what about three? The phrase “reasonably expected” leads to the obvious question “by whom” and the equally obvious answer “by judges.” Anyone who has been about the courts knows that “reasonably” has unreasonably disparate definitions, depending on which judge is hearing the case.

The next problem with the new law requiring examination is the prohibition against “knowingly falsifying or misrepresenting any information provided to such person.” This is much broader than traditional legal ways of dealing with falsity. Under traditional views of the law, several kinds of inaccuracy are allowed. For example, the doctrine of “puffery” allows somebody to exaggerate the qualities of a product when making a sales pitch. The law has never allowed puffery to be considered “fraud” and therefore a reason to undo the deal, as long as the puffery is in reasonable limits.

Also, the law does not allow predictions of the future, even if not believed by the person making the prediction, to be considered a lie that the person hearing the prediction can do anything about. For example, if someone says (even though he or she believes the exact opposite), “You should buy this apartment because I believe six months from now prices are going to go through the roof,” the fact that the person believes the opposite is irrelevant. The law doesn’t allow anybody to do anything about it. However, the way these new anti-buyout laws are written, “misrepresenting any information” may not include these traditional legal exceptions to the concept of fraud. While we don’t advocate lying, we know that human beings get kind of enthused when they speak and, sometimes impulsively, say things that simply aren’t true. But under this law, it seems that if an owner’s representative does that, the consequences can be very serious. Violations of these provisions are Class C violations that can run $10,000 in penalties, plus the other consequences that attach to having housing code violations of any kind posted in the building.

The new laws are clearly intended to be as pro-tenant as possible. However, in the City Council’s enthusiasm to provide tenants with new protections, owners may find that they are so hamstrung by the new regulations that tenants who actually want to be bought out may find themselves facing completely unanticipated hurdles. Under these new regulations, owners will proceed at their peril without attorneys’ advice at every stage in a buyout offer.