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Bedbugs Crawling Into Co-op and Condo Sales and Rental Transactions

A New Law About Bedbugs Creates Confusion. Last summer, then Governor Patterson signed a bill into law requiring landlords to provide new residential tenants in New York City with a one-year bedbug infestation history.

The new section to the Administrative Code of the City of New York (§27-2018.1) requires owners to furnish “to each tenant signing a vacancy lease,” a notice approved by the state Division of Housing and Community Renewal (“DHCR”), setting forth the bedbug infestation history for the previous year regarding the premises rented by the tenant and the building.

Under the simple reading of the statute, the requirement that a landlord provide the bedbug notice would only be triggered where there is a “tenant signing a vacancy lease.”  The term “vacancy lease” is a term of art with a specific meaning under the rent stabilization law.  By definition, a “vacancy lease” is “[t]he first lease or rental agreement for a housing accommodation that is entered into between an owner and a tenant.” (9 NYCRR § 2520.6)

However, a question has arisen as to whether or not the new law applies to owners of cooperative apartments which operate under a “proprietary” lease where the individual unit owners are technically tenants.  When a co-op is sold, the seller returns his or her stock certificate and proprietary lease to the co-op corporation.  The co-op corporation then either assigns the lease to the purchaser or cancels the lease and issues a new lease to the buyer.   It is unclear if the owner of the co-op is required to present the buyer with the bedbug disclosure notice in the scenario when the co-op corporation is going to enter into a new lease with a purchaser.

The Real Estate Board of New York (“REBNY”) released a memorandum dated September 20, 2010 which describes the lack of clarity amongst the real estate community concerning this co-op issue and other issues like the applicability of the law to a co-op owner who sublets his/her apartment or a condo owner that who leases his/her apartment.  The memo indicated that REBNY was having “ongoing conversations” with the DHCR about these issues and would keep its members apprised of any further developments.

A month later, an industry publication called Habitat published an article detailing the current status of this issue.  According to Habitat, the bill was initially introduced by Assemblywoman Linda Rosenthal to address residents’ concerns over the increased presence of bedbugs in New York City.  The article said that Rosenthal herself did not intend for the law to apply to co-ops and condos.  However, in an informal communication, the DHCR announced that the new law did, in fact, apply to the sale and rental of co-ops and to the rental of condos (but not to the sale of condos).

If the new law is to apply to co-ops and condos, unit owners will need further clarification on how exactly they are supposed to make representations concerning the bed bug history for the entire buildings in which their units are located.  Furthermore, a cursory review of the “Notice of Bedbug Infestation” reveals that the form, as drafted, is entirely inappropriate for individual unit owners and requires extensive revisions before being distributed to potential purchasers.

Many real estate professionals are conflicted as to how to advise owners on this issue.  Some, believing that the law, based on the strict reading of the statute, does not apply to co-ops and condos, will stick with that position until the law is clarified.  The more prudent position may be to attempt to comply with the law and provide potential purchasers or renters with a one-year bedbug infestation history so as to avoid any post-closing claims from purchasers in the event there was a bed bug issue in the unit that went undisclosed.

By Nahum M. Palefski, Esq.

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