Types of Leases

To a newcomer or even a longtime New York City resident, the numerous types of leases and their legal implications can be confusing and at some points, even intimidating. The following summary is presented to familiarize people with the different types of legal rentals agreements that are common in the New York City rental market.

Rent-Control

Rent control is a type of consumer protection against price fluctuations. This regulation was implemented as a result of the postwar housing emergency. It regulated lease terms, rents, services and such, for qualified buildings. Actually, the rent control system is no longer in effect in Manhattan, with the exception of those apartments which where continuously occupied since 1971. Nevertheless, the rent control system terminates gradually when tenants move out from their “controlled” apartments. It is impossible to create a new lease in New York City under the rent-control regulations.

Rent-Stabilization

The majority of the apartments in the rent-controlled buildings that where occupied after mid-1971 where converted to rent stabilization, a more relaxed version of the rent control regulations. More than one million apartments in NYC area are under these regulations. Rent-stabilization enables the government to control the lease terms, rent increases, rent renewals, required utilities, services, and more terms. Rent increases are controlled by the negotiations between tenant groups and the Rent Stabilization Board. The Board selects the standard growth rate of the monthly payments for one-year and two-year leases renewing that year. Tenants under rent-stabilization have an automatic lease renewal option. Which means that the landlord cannot terminate the lease unless the tenant defaults, violates the lease terms, causes damage or other disturbances to the property. Tenants have the right to sublet an apartment for a specified limit of time with a written notice to and approval from the landlord.

Rent-stabilization is no longer in effect when the rent exceeds $2,000 per month. At that point, the lease becomes destabilized and the rent increases are at the landlord’s own discretion. All the terms and rights, available under the rent-stabilization, are no longer applicable.

The landlord may destabilize the apartment if tenant is in occupancy since 1994 and earns an annual income exceeding $240,000 for two years in a row. A tenant in occupancy since 1997 may get his/her apartment destabilized if the annual income exceeds $175,000.

If the rent-stabilized building is converted to a co-op, tenants may be evicted after three years if they choose not to purchase their apartment.

The majority of the rent-stabilized buildings in New York City are generally walkups, some do have elevators. Nevertheless, there are some luxury doorman buildings with several rent-stabilized apartments found in them. There are also a few new constructions that have adopted rent-stabilization because of the tax benefits, they fully enjoy the benefits of regulated increases, guaranteed renewals and more, even if they cost more than $2,000 per month.

Non-Stabilized Prime Lease

This is the open rental market, which applies to non-rent stabilized rental buildings, privately owned homes, co-ops, and condos. A lease is given to you as the primary tenant or primary leaseholder.

Sublet

Unlike the prime lease, a sublet is a secondary lease. The primary tenant is still responsible for monthly payments and fulfillment of the lease terms. In the case where a rent-stabilized tenant decides to sublease an apartment, he has a legal right to do it with written notice to and approval from the landlord. The term of the sublet is cannot exceed two years within each four-year period. A non-stabilized tenant must obtain permission to sublet an apartment at the discretion of the landlord.

Co-op and Condo Leases

A rental in a condo has many similarities with a prime lease. That is when you rent in a condo you are granted a prime lease just as you would get in a non-stabilized rental building. Subleases have to be permitted by the landlord and is done at his/her discretion.

When you rent in a co-op, your landlord is a shareholder in the corporation that owns the building. In fact the landlord is a prime tenant and your lease is technically a sublet. The majority of corporations that own co-ops require the directors to approve all sublets, so in this case you won’t be able to rent an apartment without approval from both the landlord and the director’s board.