A recent newspaper article reports that between 2009 and 2012, a total of 117 rental buildings in Manhattan and Brooklyn were converted to cooperative or condominium ownership.1 Many of the units contained therein were deregulated. This article explores what rights tenants of these units have vis-à-vis rent-regulated tenants when a building is being converted, if and how fair-market tenants can obtain benefits similar to those enjoyed by rent-regulated tenants upon a conversion, and the effect of leasing units at fair-market rents both before and after a conversion.
The Statutory Scheme
The Martin Act2 governs the conversion of rental buildings to cooperative or condominium ownership. Substantively, the statute allows for an “eviction plan” to be declared effective if 51 percent of the tenants enter into agreements to purchase their units.3 However, the much more common practice now is for sponsors to offer a non-eviction plan which may be declared effective after sponsors enter into contracts for at least 15 percent of the units in the building with either bona fide tenants in occupancy or purchasers who represent that either they or members of their immediate family will occupy the apartment when it becomes vacant.4 Once the plan is declared effective, the sponsor can file a declaration and the condominium is officially created. The sponsor will then close on sales of the units to individual purchasers.
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