The law simply says, “1. Every residential lease shall provide conspicuous notice in bold face type as to the existence or non-existence of a maintained and operative sprinkler system in the leased premises. 2. For purposes of this section, “sprinkler system” shall have the same meaning as defined in section one hundred fifty-five-a of the executive law. 3. If there is a maintained and operative sprinkler system in the leased premises, the residential lease agreement shall provide further notice as to the last date of maintenance and inspection.”
While most leases call themselves “leases,” some don’t. Even where the name is modified in some manner, common perception fails to recognize a lease. Thus, many cooperators under “proprietary leases” lose track of the fact that they are also conventional tenants in a landlord-tenant relationship.
The bylaws of the majority of cooperatives require that all proprietary leases be identical. Since this new law requires that all residential leases issued on or after December 3, 2014 contain the required language, to issue one proprietary lease to the new owner of an apartment in a cooperative, all the proprietary leases for that complex will have had to have been amended by December 2, 2014. Since the statute specifies that the new language has to be in bold print (without specifying just what the language is), it will not be good enough for the Co-op Board to pass a resolution that all of the leases in the complex are “deemed” or considered amended by adding this language. It must be real paper. No one knows the results if a shareholder refuses to sign the new lease. In some cooperative developments, this could mean issuing hundreds of leases.
Others go by the name “occupancy agreement,” but are leases. There is no legal requirement for what the parties call the agreement. Some leases deny that they are leases, such as some calling themselves licenses. While some really are licenses, licenses are difficult to draft correctly and the courts hold those to actually be leases. Thus, those parties could be surprised to find out that this statute applies. No one knows the consequences for such a document failing in good faith to include the required sprinkler language. If there is a license where one of the parties claims that it is really a lease and the document includes the mandatory sprinkler language, the party arguing that it is a license may be finding itself having accidentally conceded that it was a lease.
Required language in unregulated residential leases is exceedingly rare. Generally speaking, in New York, a landlord and a tenant could write on the back of a napkin, “The apartment at 123 Mockingbird Lane will be rented to the tenant to live in for X months at $Y rent per month” and, once they sign it, they have a “residential lease.” Now the law requires that cocktail napkin to state facts about whether or not there is a sprinkler system and what its recent maintenance history is and to do so “in bold face type.” While the rest of the cocktail napkin can be handwritten, the sprinkler language has to be machine generated. The law does not specify what happens if the cocktail napkin fails to obey the law. If it is not a valid lease, the courts will probably find that there is a valid month-to-month tenancy and will give both sides the minimal protections that kind of tenancy accords differently inside and outside New York City.
Inside NYC, subletters may be surprised by this statute. As sublessors, they have no control over any sprinkler system and neither any access to the maintenance records, nor the ability to demand such. If they are rent regulated tenants, their last renewal lease could have been two years earlier and even if it’s more, by the time they are subletting, that information could be nearly two years out of date.
With regard to rent regulated leases, the statute requires that the lease set forth “the last date of maintenance and inspection.” However, since the renewal could be offered as early as 150 days before the expiration, the landlord will be filling out “the last date of the maintenance and inspection” on a date some half year prior to effective date. The effective date of the lease may be after a maintenance and inspection that took place between the time of the lease offer and the time of its acceptance. Should the landlord be notifying the tenant of a different date of maintenance and inspection after the offer? Perhaps the landlord should notify the tenant of that, but under rent stabilization, the landlord cannot change the lease offer. The lease when signed by the tenant may have information that is no longer true. This problem could possibly be solved by the landlord mailing an update on the date the renewal lease is to take effect.
Also, this lease renewal would be different from the lease it renews, but while rent stabilization requires that the renewal of the lease be on the same terms and conditions as the expiring lease, this notification of the status of the sprinkler system is not a “term and condition”; it is merely a notification. So, rent stabilization should present no problem under the new statute.
Where this law can have a substantial anti-consumer effect is on the question of subletting. In residential rentals in buildings of three units or fewer, in co-ops, and in public housing or other housing where there are governmental qualifications for tenancy, there is no statutory right to sublet. However, in buildings of four or more units that are not in those special situations, New York law presents a statutory right to sublet, provided the tenant follows, to the letter, a statutory procedure. The first step in the procedure includes sending to the landlord a copy of the proposed sublease. Under this new statute, the landlord can drag the sublet-wanting tenant through the rest of the sublet procedure and then, at the very end of the procedure, deny the request because the sublease did not comply with this new statute. And two things are going to make it very likely that the sublease won’t comply with the new statute: The subletting tenant will have no warning in the sublet law that leases need to have any particular language; and the sublet-wanting tenant probably has no access to the maintenance history of the sprinkler system and no way to demand it.
This law will affect at least tens of thousands of dwelling arrangements where people will have no idea they are in violation of the law. In NYC, this includes sublets and apartments of all kinds in buildings with fewer than six residential units. The larger buildings will also be affected, but they are more likely to expect obscure laws to be ruling them. In the vast rural parts of the state, tens of thousands of rentals will be affected in places where people are living in a fool’s paradise that housing regulation is a New York City phenomenon alone.
And all of these places, in large buildings and small, inside New York City and outside it will all have the same question we can’t answer: How is this thing going to be enforced? Possible enforcement mechanisms include courts finding leases that lack the required language aren’t valid leases at all. Perhaps the New York State Attorney General’s Office will take the attitude that folks who rent to several or more different tenants with leases that lack this mandatory language are guilty of fraudulent business activities and are subject to fines and penalties. Perhaps fire insurers will deny coverage of fires in tenancies where the insureds failed to insist upon this language being present in the lease and are therefore, under the insurer’s theory, partially responsible for their own fire damage. Or perhaps they will deny coverage on the theory that the renter fraudulently claimed to have a lease.
We doubt that the Legislature really thought through any of the issues that are presented in this article. Private communications with legislators have informed us that the Legislature realizes that the statute is heavily flawed and they can be expected to be repairing it in the coming years. Until then, this law will serve as a stellar example of the law of unintended consequences. Whatever those consequences may be, these authors, as the drafters of all the Blumberg-Excelsior New York residential leases of the last decade have updated all of our lease forms to include the required language. We are advised that the new forms will be available in plenty of time for the December 3, 2014 effective date of the statute.
*Adam Leitman Bailey is the Founding Partner and Dov Treiman is the Landlord-Tenant Managing Partner of the New York City real estate firm, Adam Leitman Bailey, P.C.