Tips to Help Prepare REBNY Free Market Residential Leases

Let’s take an optimistic, the glass is not half empty but rather ¾ full approach to drafting residential leases in New York, by channeling the song “Feeling Good” and the lyrics “It’s a new dawn, it’s a new day, it’s a new life” by, among others, Anthony Newley, Traffic, Michael Bublé, John Coltrane, Nina Simone, George Michael and Lauryn Hill, as well as the Charles Darwin quote “adapt or die.” Notwithstanding the fact that most were comfortable with the old Real Estate Board of New York (REBNY) leases, many of which were created when Larry Haber (The Lease Guru) had a truly thick and semi-stylish head of hair, it was time to bring the leases screaming into the new millennium that is the 21st century, even at the risk of (1) a number of real estate pros potentially throwing a few darts our way as to how far we went, (2) possibly making attorneys semi-obsolete when it came to, at a bare minimum, preparing the initial drafts of a REBNY lease and (3) us having to channel the David Bowie classic song “Changes” and its lyrics “turn and face the strange,” knowing full well many would have to get over their initial uncomfortableness with the “ch-ch-ch-ch-changes” we made to the free market forms. Like many in our industry, there have been times that we have felt the need to face the strange in our careers, but nonetheless we feel compelled to remind you, along the lines of how Tom Hanks reminded the team that he managed in “A League of Their Own,” that there is no crying (or whining or kvetching for that matter) in real estate. We implore you to get over your initial uncomfortableness with the new and improved forms, because once you do, soon enough you very well may find yourself singing the classic Eagles song “Peaceful Easy Feeling” to any prospective client within earshot!

Long winded preface behind us, we’ll being taking a look at many of the changes to the updated free market REBNY lease forms, including the changes to comply with the New Law (once again better known to some as the Housing Stability and Tenant Protection Act of 2019), and how to go about preparing the updated REBNY lease forms.

By way of introduction, on July 29, 2019, REBNY released updated residential lease forms in light of the Housing Stability and Tenant Protection Act of 2019 (the “New Law”) passed on June 14, 2019, which made the old REBNY (and most, if not all, other) New York residential form leases obsolete due to the forms not being in compliance with the New Law.

 

The four (4) free market residential lease forms (the “Lease Forms”):

 

• Condominium Apartment Lease; 
• Cooperative Apartment Sublease; 
• Single Family/Townhouse Lease; and 
• Standard Form of Apartment Lease (For Apartments Not Subject to the Rent Stabilization Law)

 

We are proud to say that the Lease Forms were drafted by the law firm Abrams Garfinkel Margolis Bergson, LLP (“AGMB”), which project Larry Haber spearheaded along with partner Neil Garfinkel and Senior Associate Mitchell Dank. In addition to modifying the Lease Forms to comply with the New Law, AGMB completely revamped the language and functionality of the Lease Forms to essentially create an all-encompassing form that is both user-friendly, and more reflective of, the current residential leasing market. It is our belief that we have greatly reduced (if not eliminated in the majority of leases), the need for drafting of language ordinarily found in an attorney, landlord or broker prepared rider customarily required when using the old lease forms. Consequently, the Lease Forms are now more customizable, with the option to include a greater amount of deal specific terms that are commonly seen in riders to New York residential leases.

Before we start you out on your very own Leasing Intervention™, with the hope that once completed, you will not only be able to cope with the “Leasing REality” of the New Law but just as importantly, be in a position to “Master Your Leasing Domain,” please ponder a few thoughts from three individuals that may help you cope with the angst created by the Housing Stability and Tenant Protection Act of 2019. The first is from the well-known alternative medicine advocate, Deepak Chopra, who once said that “the highest levels of performance come to people who are centered, intuitive, creative, and reflective – people who know to see a problem as an opportunity.” The second from the deep thinking NBA legend Shaquille O’Neal, who said “I never worry about the problem. I worry about the solution.” The third thought is from the song title “No Problems Only Solutions” by reggae legend Jimmy Cliff.

Why did we bring the aforementioned legends in to help make our point? The answer is quite simple. Where there are problems, there are solutions, and where there is distress, there is opportunity. Consequently, if you are able to maintain a positive attitude as you go about acquiring and thereafter bringing your goal line-to-goal line, residential leasing “A” game to the table (with kudos out to Jimmy Cliff once more), “You Can Get It If You Really Want” when it comes to being successful and adding value for your clients.

Although AGMB stayed true to the structure of the old REBNY lease forms wherever possible, given the complete overhaul of the Lease Forms, the following is a fairly exhaustive list (in the order the items appear) of the important changes to the Lease Forms to be aware of, along with information as to how to prepare them.

Please refer to the Management Responsibilities for more detailed information as to changes in management responsibilities for landlords of free market residential leases in New York as a result of the New Law.

 

1. The Legend 

“The Eric Clapton ‘Key to the Highway’ Road Map”

 

To ensure that the Lease Forms are user friendly, AGMB inserted a legend at the top of the Lease Forms (the “Legend”), with detailed directions within the lease language to signal to the person filling out the lease form which clauses require:

• a selection amongst alternative wording; 
• deletions if inapplicable; or 
• the insertion of deal specific business terms (if applicable).

 

Gathering the Necessary Information; Lease Form Checklist

“The Toby Keith-Killers Lease 411 Bucket List”

 

As a result of the myriad of customizable options within the Lease Forms, the attorney, broker, landlord or managing agent preparing the Lease Form will need to first gather the necessary information. To help with doing so, we have created a Lease Form Checklist for each of the REBNY free market lease forms that prompt the user to provide the required information to prepare the applicable form. Note that each of the Lease Forms has its own unique Checklist with coinciding clause numbers to assist the person preparing the lease to know where in the Lease Form the provided answers are needed.

 

2. Rent

 

• Rent at Lease Signing: In compliance with Part M, §25 of the New Law, landlords can no longer accept greater than one (1) months’ rent at lease signing.
• Limitation on Fees: In compliance with Part M, §10 of the New Law, the landlord is prohibited from charging any fee before the tenancy except for reimbursement for a background or credit check, which amount is capped at the lesser of (i) the actual cost of the background or credit check, or (ii) $20.00.
• If the Lease Begins After the First of the Month: If the Lease begins after the first of the month, the Lease Forms provide, as required by the New Laws, for the tenant to pay only one (1) full months’ rent at lease signing, and on the first day of the next full calendar month, for the tenant to pay a prorated rent. 

 

Example: If the rent is $10,000/month and the commencement date of the Lease is September 15, the tenant would pay $10,000 at Lease execution, and $5,000 on October 1 (which $5,000 payment would cover the rent through the end of October).

 

• Form of Payment: Landlords can specify if the rent and additional rent is payable via check or direct deposit only. If by direct deposit, landlords will need to provide the tenant the necessary wiring instructions.
• Late Fees: In compliance with Part M, §10 of the New Law, there is a five (5) day grace period for the payment of rent or additional rent with a late fee of the lesser of (i) $50.00, or (ii) five (5%) percent of the unpaid amount.

Please refer to the Management Responsibilities for more detailed information.

 

3. Memorandum Confirming Term

 

For situations where possession of the Premises is provided to the tenant after the date stated as the lease commencement date in the lease, or if for purposes of clarity the landlord or tenant prefers the exact start and end dates to be confirmed after lease execution, the Lease Forms contain a Memorandum Confirming Term (the “Memo”) attached as an exhibit to the lease to confirm between the parties (i) the lease commencement date, (ii) expiration date, (iii) the date the rent commences under the lease, and (iv) certifying that the tenant has accepted delivery of the premises and that the premises was delivered in the condition required under the lease. 

How to Use the Memo: It should be stressed that the Memo should not be filled out or signed when the lease is executed. The Memo should be filled out by the landlord (with the appropriate dates) and then sent to the tenant for the tenant to sign and return to the landlord, after the landlord delivers possession of the premises to the tenant.

If the landlord requests, the tenant is obligated to return the signed Memo, or respond as to their objections with the information in the Memo, within five (5) business days of landlord’s request. Although the tenant will be considered in material default of the Lease for failing to return (or reply to) the request to sign the Memo within the five (5) business day period, tenant’s failure will not affect the validity or terms of the lease.

 

4. Security Deposit

 

In compliance with Part M, §25 of the New Law, the amount of the security deposit cannot exceed one (1) months’ rent.

Return of the Security Deposit: Pursuant to the New Law, the landlord is required to return the security deposit within fourteen (14) days of the date (i) the lease ends, or (ii) the tenant vacates the premises. If the landlord intends to keep any of the security deposit, the landlord must provide the tenant an itemized statement indicating the basis for the amount of the tenant’s security deposit being retained (if any), and must return any remaining portion of tenant’s security deposit to the tenant within the fourteen (14) day period.

See also, Pre-Occupancy Inspection and Post-Tenancy Inspection

Please refer to the Management Responsibilities for more detailed information.

 

5. Care of Apartment; End of Lease/Moving Out

“The Usher ‘I Care for U’ – Kayne West ‘We Don’t Care’ – Bachman Turner Overdrive ‘Takin’ Care of Business’ Requirement”

 

In compliance with Part M, §3 of the New Law, in the event that (i) the landlord intends to offer to renew the Lease with a rent increase equal to or greater than five (5%) percent above the then current rent, or (ii) the landlord does not intend to renew the Lease, the landlord must provide the tenant 30, 60 or 90 days’ notice (depending on the length of the lease term and the length of time the tenant has occupied the premises).

Post-Tenancy Inspection: In compliance with Part M, §25 of the New Law, within a reasonable time after notification of either party’s intention to terminate the lease, unless the tenant provides less than two (2) weeks’ notice of tenant’s intention to terminate, the landlord must notify the tenant in writing of tenant’s right to request an inspection before vacating the premises.

• After the inspection, the landlord must provide the tenant with an itemized statement specifying repairs, cleaning or other deficiencies that are proposed to be the basis of any deductions from the tenant’s security deposit.

Please refer to the Management Responsibilities for more detailed information.

 

For those of you who actually know Paul Newman for his truly amazing and diverse acting career, and not just for his even more amazing Newman’s Own food and beverage products, which carries on Paul’s commitment to use all the royalties and profits it receives for charitable purposes, we feel that a line from his performance in the legendary movie “Cool Hand Luke” should set the stage for what should be one of a real estate pro’s primary goals when it comes to seeing a leasing transaction through to what will hopefully be a successful conclusion. “What we’ve got here is failure to communicate,” rated as number 11 on the American Film Institute’s list of the 100 most memorable movie lines ever, was uttered not by Paul’s character but by the “Captain” played by Strother Martin. The point of bringing up the line in the context of the Housing Stability and Tenant Protection Act, is to hammer home the point that as professionals, you need to make it your mission to effectively communicate the New Law’s leasing and management impact to your clients, so that, with props out to Motown legends The Temptations, they are able to simultaneously cope with and understand the “Ball of Confusion” that the HSTPA truly is.

 

6. Changes and Alterations to Premises (Approved Alterations)

“The Miley Cyrus ‘Wrecking Ball’ – Pete Seeger ‘If I Had a Hammer’ – The Foundations ‘Build Me Up Buttercup’ Alteration Requirements”

 

A description of any alterations that the landlord pre-approves the tenant to make (at the tenant’s sole cost and expense) can be listed in the lease. If there are no pre-approved tenant alterations, the Approved Alterations clause can be deleted.

 

7. Services and Facilities

 

• Appliances: Landlords have the option to insert that the tenant is responsible for the initial $____ in cost of any repairs or replacements to appliances (in addition to the tenant being responsible for repairs or replacements caused by their or their agent’s, contractor’s, invitee’s, licensee’s, guest’s or servant’s negligence or misuse).
• Facilities and Amenities:
  • The language is updated to reflect modern amenities (e.g., fitness centers, resident lounges, roof decks, golf simulators, movie theaters, etc.); and
  • Language is included to make clear that the landlord has no obligation to provide any of the facilities, and may discontinue same without being liable to the tenant therefor or without in any way affecting the lease or the liability of the tenant under the lease or causing a diminution of rent.

 

8. Assigning; Subletting; Abandonment

 

The language is updated so that if (i) the tenant assigns or sublets without landlord’s consent, or (ii) the landlord wants to allow an assignment or sublet, the necessary landlord protections are included (e.g., landlord’s right to terminate the lease for an assignment or sublet without landlord’s consent; tenant remaining liable under the lease; recapture language; and landlord receiving 100% of any profits therefrom).

 

9. Default

 

• 5 Day Notice for Failure to Pay Rent: In compliance with Part M, §9 of the New Law, if a landlord, or agent of landlord authorized to receive the rent, fails to receive a base rent or additional rent payment within five (5) days of the due date, the landlord (or landlord’s agent) is obligated to send the tenant a written notice, via certified mail, notifying the tenant of landlord’s failure to receive the rent.
• 14 Day Rent Demand: In compliance with Part M, §11 of the New Law, separate and in addition to the requirement to send the 5 day notice for failure to pay rent, the landlord must provide the tenant a written demand for any unpaid rent or additional rent with at least fourteen (14) days’ notice before the landlord can commence an action or summary proceeding seeking the payment of the unpaid rent or additional rent.

Please refer to the Management Responsibilities for more detailed information.

 

10. Remedies of Owner and Tenant’s Liability (Duty to Mitigate Damages)

 

In compliance with Part M, §4 of the New Law, if the tenant vacates the premises in violation of the lease, the landlord is required to take “reasonable and customary” actions to rent the premises at the lower of (i) the fair market value, (ii) or the monthly rent under the lease.

 

11. Bills and Notices; Electronic Signatures

 

• There is an option to allow for email notices.
• The Lease Forms can now be signed via electronic signature.

 

12. Condition of the Apartment; Apartment Rented “As Is”

 

• Pre-Occupancy Inspection: In compliance with Part M, §25 of the New Law, after initial lease signing but before the tenant begins occupancy, the landlord is required to offer the tenant an opportunity to inspect the premises with the landlord or landlord’s agent to determine its condition.
• Owner’s Work (See Exhibit B): If the landlord has agreed to perform any work prior to the lease commencement date, it can be listed in the Owner’s Work Exhibit attached to the lease. If the landlord has not agreed to perform any work at the premises, Exhibit B can be deleted.

Please refer to the Management Responsibilities for more detailed information.

 

13. Holdover 

“The Jackson 5 ‘Never Can Say Goodbye’ – Drake ‘Hold On, We’re Going Home’ – Bruce Springsteen ‘No Retreat, Baby, No Surrender’ Nesting Provision”

 

Holdover language was added to the Lease Forms that provides for a tenant holding over at the premises subsequent to lease expiration or earlier termination to (i) indemnify the landlord for any damages, and (ii) pay two (2) times the rent plus any items of additional rent during the holdover.

 

14. Insurance

 

The tenant is required to obtain (i) general liability insurance (for an amount to be filled in); and (ii) renter’s insurance.

 

15. Furniture (See Exhibit C)

  

In the event the premises are being leased fully or partially furnished, there’s an Exhibit attached to the lease to list landlord’s furniture and furnishings remaining in the premises (and their condition).

 

16. Broker

 

There’s an option to select which party is paying the brokerage commission (if any).

 

17. Terraces and Balconies

 

There’s an option to include language in the event there is a terrace, balcony and/or backyard (for a single family/townhouse lease).

 

18. Pets

 

There’s an option to list any pre-approved pet(s) (if any).

 

We like to refer to tip #19 below as “The Beatles ‘Ticket to Ride’ – Rihanna ‘We Ride’ – on a Beastie Boys ‘Slow Ride’ and Grateful Dead ‘I Know You Rider’.”

 

19. Statutorily Required Riders/Disclosure Forms

 

The following statutorily required riders/disclosure forms are now attached to the Lease Forms. While the following are not all required by law in every situation, for free market residential leases in New York, the forms and disclosures that should be included (except as indicated below) are the:

• Sprinkler Disclosure;
• Lead Paint Notice;
• Bed Bug Disclosure;
• Window Guard Notice;
• Stove Knob Covers Rider (not required for Condo Leases or Co-op Subleases);
• Occupancy Notice for Indoor Allergen Hazards; and
• Building Smoking Policy.

 

20. No Short Term Rental

 

Language was added so that no Airbnb or other short term rentals are allowed. If the tenant lists the premises for a short term rental or uses the premises for same, the landlord has the right to terminate the lease.

 

21. Bicycles

 

The landlord has the option to forbid bicycles from being stored in the premises.

 

22. Alarm System

 

There is a choice to include language in the event there is an alarm system installed at the premises.

 

23. “Standard” Landlord Protective Clauses

 

The following “standard” landlord protective clauses were added:

• Indemnification: Providing that the landlord is indemnified by the tenant for any claims against the landlord as a result of any act, omission or negligence of tenant or tenant’s agent, contractor, invitee, licensee, guest or servant.
• Noise: Providing that tenant shall not create any unreasonable noise or interfere with the quiet enjoyment of other tenants.
• Waiver of Liability: Restricting the landlord’s liability to their interest in the premises.
• Owner’s Approval: Restricting the tenant’s damages for the landlord’s failure or refusal to grant consent.
• Controlling Law: Specifying New York as the jurisdiction for any dispute.
• No Smoking: Prohibiting smoking in the premises, along with a forfeiture of 1/3 of tenant’s security deposit if they do smoke in the premises.
• Garbage Refuse and Recycling: Requiring the tenant to comply with the rules and regulations of the building regarding garbage and recycling, including compliance with any garbage and recycling laws.
• Toilets/Plumbing Fixtures: Requiring the tenant to only use the toilets and plumbing for their proper purposes and to not discard inappropriate items down the toilet.
• Moving In, Vacating Apartment and Termination: Requiring the tenant’s movers to have adequate insurance, and for the tenant to be liable for any damage to the premises or the building while moving in or out of the premises.
• Owner Unable to Perform: Providing that landlord and tenant are not liable for failure to perform due to causes beyond their control (force majeure), except for the tenant’s obligation to pay rent.

 

24. Guaranty 

 

The Guaranty language was strengthened with necessary landlord protections. 

Note: Given the restrictions on the security deposit and advanced rent that can be collected at lease signing, it may become more common practice to require a guarantor(s) for the tenant.

 

Until our next E-book chapter (Part 4) covering New York State’s lease preparation broker buzzkill provisions, with kudos out to the band Journey, please remain as positive as possible when it comes to the impact of the Housing Stability and Tenant Protection Act, and most of all, “Don’t Stop Believin’” in all of the good that a career in real estate has to offer.