When New York real estate developers acquire land for a project, they often need to demolish any existing buildings on the site before commencing construction. If the old structures include apartment buildings, they need to find a way to move tenants out of their homes. If the apartments are subject to New York’s rent regulation laws, this often means negotiating a buyout with the tenant. And in recent years some of these buyouts have soared to tens of millions of dollars.
When a developer purchased two parcels of land in order to put up an office tower as part of the Hudson Yards project, they ended up paying a total of $25 million to induce three tenants to move out of two apartments. In another project, a buyout of a single tenant at the Mayflower Hotel came to $17 million.
When an apartment is rent-controlled, as opposed to rent-stabilized, the legal rights of tenants make it next to impossible to terminate a lease or evict a tenant. Given the huge profits at stake for developers, and the costs of delaying construction for legal proceedings, a multi-million dollar buyout is often the most cost-effective alternative.
Building owners are not always above some ruthless tactics, however. Some developers hire private investigators to find rent violations by tenants. The landlords may then have legal grounds to bring holdover actions and evict those tenants.
Many tenants have benefitted from having lawyers negotiate buyouts on their behalf. Some lawyers say they won’t even talk to developers until they offer at least $10 million for a buyout.
Tenants of rent-controlled apartments have important legal rights that protect them from major rent increases and eviction. When a developer asks a tenant to give up their home, it is critical for the tenant to understand those rights in order to be fairly compensated.
Source: New York Times, “New York Builders Paying Huge Buyouts to Tenants in Their Way,” Mireya Navarro, Dec. 24, 2015