A New York Times reader recently asked reporter Ronda Kaysen if it’s better to buy a vacant condo apartment, or a tenant-occupied one?
Unfortunately, the answer isn’t as easy as you might think. “It’s all a matter of risk tolerance and how badly you want the space,” explained Lucas A. Ferrara, senior partner at Newman Ferrara LLP and an adjunct professor at New York Law School.
Lucas was asked by Ms. Kaysen to respond to the following question:
We are considering buying a tenant-occupied apartment in a condo. The tenant has lived there since August 2019, and the market-rate lease will expire in four months. The seller’s agent said they could deliver the apartment vacant, but that we’d have more leverage on the sale price if we kept the tenant. We visited the apartment and the tenant has kept everything clean and in good shape. We’re not in a rush to occupy the apartment and it would be nice to have some income in the interim. What are the pitfalls we should be aware of before we make this decision?
The response, which appeared in Sunday’s Real Estate Section, analyzed the pros and cons of buying the unit “as is.” The advantages -- having a reliable tenant saves time, stress and costs associated with searching for a new occupant. That continued occupancy could also help offset some of the unit’s costs and provide the new owners with an income stream.
On the flip side, terminating a tenancy is often fraught with considerable uncertainty. According to New York State law, any tenant who has lived in an apartment for two years or more must be given 90 days’ notice (in writing) if the lease will not be renewed. And even if a proper notice has issued, it is possible that the tenant will refuse to timely vacate. If the tenant challenges the lease termination, and/or refuses to leave, that may mean many months of duking out the issue in court and could trigger considerable aggravation and attorneys’ fees. (In the worst-case scenario, eviction proceedings can run tens of thousands of dollars and last over a year.) “It can be quite costly,” Lucas noted.
So, whether condo buyers should assume a seller’s obligations as landlord will ultimately depend on whether the new owners seek to take occupancy of the unit at the end of the tenant’s current lease term. If timing is critical, given the uncertainties of any litigation, it may be best to relinquish any discounts and insist that the unit be delivered vacant.
Should you find yourself in a similar situation, or have other questions about your rights or obligations, please do not hesitate to reach out to one of our attorneys, by calling 212.619.5400.
Here’s a link to the New York Times column (subscription required) –