New Rochelle eases on EPTA

Real Estate Weekly, Feb 10, 1993 by Lois Weiss

New Rochelle has become the first Westchester community to exempt vacant sponsor-owned co-ops and condominiums from the Emergency Tenant Protection Act, effectively opening hundreds of apartments for rent.

Additionally, tenants in place will not have to be offered a renewal lease.

The Emergency Protection Act puts a cap-on the maximum rent permitted and mandates renewals.

New Rochelle Mayor Timothy C. Idoni said, owners would now be able to release the tenant. He cited the high vacancy rate from units being kept off the market and the precarious financial situations of unit owners as reasons for his city council's move.

Albert A. Annunziata, director of the Cooperative and Condominium Advisory Council of the Building & Realty Institute of Westchester said, "Since all unit owners are covered it provides the maximum relief, the owner gets better rents and nobody's in trouble. It's a matter of economics and equity."

The interpretation was news to Joseph Fernandez, deputy district rent administrator with the Division of Housing and Community Renewal in Westchester, who did not realize the language in the measure gave sponsors control over their vacant apartments and did not entitle tenants to renewals.

"This is a shock to me that will send a ripple through the county.' he said. "We have not had this interpretation."

Fernandez said this law will have an impact on tenant protection laws in other places where the ETPA is in force or is being modified.

He was most concerned, however, that the loss of ETPA control would open the tenants up to rent gouging. "Until our legal department decides how we are going to handle complaints we really won't be able to do much with them," he added.

John J. Gilbert III, president of the Rent. Stabilization Association, hailed New Rochelle's move, calling it incredible. "It shows that communities that need to enhance their tax base acknowledge that rent control prevents buildings from paying their fair share of taxes," he said. "What this action says is that deregulation is the right way to go and deregulation will expand tax bases."

Controlled rent buildings carry lower assessments than those at market rents because they are worth less. Additionally, many suburban unit owners and sponsors have been unwilling to accept harsh rent regulations and have kept units vacant because once a tenant comes in, they are a tenant for life.

Sponsors with deep pockets might weigh the economic risks of vacancy versus rental until the sales market improves but in fact, some have been wiped out financially trying to keep their units. Single-unit owners are sometimes faced with changing residences and have been unable to sell their units or make an educated choice.

When units have been rented in the hopes of merely covering the mortgage and maintenance, owners have found they are no longer entitled to possession until the tenant decides to leave. Savvy tenants have received roll backs from market rents and often pay sums below actual maintenance charges.

There are estimates that as many as 3,500 units in Westchester county are kept vacant to ensure they are not trapped into what experts call a "taking' of the property.

The ETPA is effective in parts of Rockland, Nassau and Westchester Counties except where communities decide to opt out. In 1986, a Yonkers court decision upheld the inclusion of co-op and condominium units in the ETPA. In New York City, a city law exempts these units from the ETPA.

In Westchester the communities of Eastchester, Mt. Vernon, Greenburgh, Larchmont, Mamaroneck Village, Tarrytown and White Plains have exempted single unit owners from ETPA rule.

P. Gilbert Mercurio, executive vice president of the Westchester County Board of Realtors said every one of the communities has exempted individual owners but only New Rochelle included sponsor- and investor-owned units in the exemption.

Most communities have permitted tenants already in place to continue under the ETPA, although White Plains provides for a means test. Under the New Rochelle law, only tenants who were original occupants during the conversion can remain indefinitely.

Annunziata said the industry has been very careful to educate its members and to let owners know that any tenants in place prior to the Jan. 12 resolution are entitled to remain until the end of the lease.

Roy A. Stillman, president of Stillman Management Group, said because of the ETPA factor, he didn't even rent his units. Since the law went into effect, however, he has rented two. "I hope that no one acts irresponsibly," he added, echoing Fernandez' concern. But he said he did not believe there were many tenants, if any, in place that would be affected because if owners rented, they would have been subject to the ETPA regulations.

With 3,320 units in New Rochelle covered by the ETPA, the city estimates 300 were vacant and may enter the rental market.

Port Chester was scheduled to holt a hearing on changes this past Monday while Yonkers is also contemplating some action that would free up 1,275 apartments that are vacant or owner occupied. One proposal would exempt sponsor and investor owned units.