What happens if your building goes condo? Tea building tenants in uproar; worry they’re being pushed out

If a property owner wants to turn an apartment complex into a condo building or co-op, can he or she kick the current tenants out?

According to state law, they can’t toss them out immediately, and not without following a detailed procedure.

The state’s Anti-Eviction Act protects all tenants from eviction due to condominium conversion for at least three years, and possibly for several more years. In Hudson County, the law also protects senior citizens and their spouses, handicapped tenants and their families, and lower-income residents against conversion-related eviction.

According to the law, an owner who plans to convert a building must first give each tenant two separate documents: a notice of intent to convert, and a full plan of conversion, which must be sent by certified mail.

An eviction conversion

The conversion can then follow two paths. The first is a non-eviction plan where current tenants can continue to rent indefinitely. This was a choice given to tenants of the Tea Building complex at 1500 Washington St. (see sidebar).

The second option is an eviction plan. Here, according to state law, the owner must give tenants a three-year notice to quit or vacate the rental unit because of the conversion.

According the state law, the full plan of conversion must contain a great deal of specific information. For example, the plan must contain a legal description of the property, the price of the apartment, terms of sale, and a copy of the deed to the apartment, if purchased.

After giving tenants the notice of intent to convert and the plan for conversion, the owner must then give tenants who choose not to buy ownership in a condo or co-op a three-year notice to vacate or quit the rental unit.

The owner cannot file a court action to evict the tenant because of the conversion until the end of the three-year notice period.

Comparable housing

Tenants that are issued the “notice to quit” can ask the landlord in writing for a reasonable opportunity to look at and rent comparable housing. This right to ask for comparable housing extends for 18 months after receipt of the notice to quit.

Comparable housing means that the building meets all local and state housing codes and is equivalent to the apartment in which the tenant then lives in size, number of rooms, major facilities and rent. The requirements for the owner to offer reasonable opportunities for comparable housing are detailed, and tenants should consult with a knowledgeable attorney for further advice.

What about rent increases?

According to state law, tenants are given some protection against unfair rent increases during the three-year notice period and for the entire time they remain in the apartment, including during any hardship stays of eviction. Tenants continue to be covered by rent control if rent control applies to the building. Also, owners who ask the Rent Control Board for a hardship increase cannot use any increases in costs resulting from the conversion to justify their claim of hardship. Tenants in towns without rent control can receive only reasonable rent increases. The owner cannot use any increases in costs resulting from the conversion to justify a rent increase. For example, an owner cannot raise rents because his taxes have risen in the conversion.


Controversy at the Tea Building

Recently, low interest rates have motivated one of the largest condominium conversion booms in the country’s history. Developers and property owners are paying top dollar to acquire and transform rental properties into condos.

Hoboken’s most high-profile condo conversion is taking place at the Hudson Tea Building, a former Lipton Tea Factory at the northern end of Washington Street. The luxury property is home to Governor-Elect Jon Corzine.

In November of 2004, Toll Brothers, a national residential developer, and Apollo Real Estate Advisors L.P., announced the formation of a joint venture to convert the 525-unit Hudson Tea apartments into condos.

Despite Toll Brothers’ assurances that the current tenants will not be evicted, many in the building believe the developer is trying to push them out via what they say are excessive rent increases.

Background on the building

The two main factory buildings in the complex were renovated and converted to rental apartments in 2000 by the previous owner, BDLJ development. According to Toll Brothers, at the time the condo conversion was announced in November of 2004, the building was 97 percent occupied.

In January of 2005, officials from Toll Brothers held an informational session for the tenants of the two finished Tea buildings, preparing them for the proposed condo conversion. Toll Brothers offered the current tenants a chance to buy their unit at what was described as a reduced “insider” price. According to the tenants, they were offered a price that was about 7 percent below the publicly offered price.

The renters were told that the conversion would follow a “non-eviction” plan, meaning that they can continue to rent indefinitely.

But soon after the announcement, the tenants say they were told that they would have to pay a substantial rent increase – 8 percent for the next year – to keep their apartment.

Frustrated, the renters formed the Hudson Tea Tenants Association, hired an attorney to challenge the rent increases, and created a Web-based message board where they could discuss the conversion.

Bill Kaplan, a real estate attorney and an active member of the Hudson Tea Tenants Association, said that Toll is skirting the law and intends to evict the tenants through “excessive” rent increases.

“They are trying to evict people and vacate the building by flouting the rent control law,” Kaplan said. “They’re a big company that has acted arrogantly.”

Officials for Toll Brothers did not return multiple phone calls and e-mails for comment.

What about rent control?

But is what Toll Brothers doing legal? That has been a point of contention.

Buildings in Hoboken constructed before 1987 fall under the city’s 1972 Rent Control Ordinance, which limits rent increases to a few percent each year (the amount of the Cost of Living Adjustment). There are exceptions, including for improvements to the building and for occasional vacancy decontrol.

Because the Tea Building complex was a near-complete gutting and rehabilitation, the Tea buildings’ former owner received a rent control exemption in the 1990s from the state, under a plan designed to attract rental housing. Therefore, their units would not fall under rent control. But a March, 2005 memo from the city’s rent control office to Toll Brothers said that converting the building to condos would void the exemption, and the building’s rental units would be placed back under rent control. If under rent control, rents could only increase by the percent of the Cost of Living Adjustment, around 3 percent annually.

According to Kaplan, based on this memo, many tenants stayed because they the believed that they would be covered by the city’s rent control laws.

In September of 2005, the first unit was officially sold as a condominium, which means the official transformation of the buildings into a condo complex.

Meanwhile, Kaplan said, Toll has issued new leases this year with 8 percent increases. This past Wednesday night, city Rent Control Board Attorney Daniel Ganz (not to be confused with Hoboken developer Daniel Gans) rendered an official opinion on the subject, in response to a request from both parties.

According to City Attorney Joe Sherman, Ganz’s report concluded that the exemption from rent control will remain in effect through the conversion process. Sherman said that the March, 2005 memo that the building would go back under rent control was made without the advice of counsel.

The tenants have said that they might consider appealing Ganz’s legal opinion in court. But if the building does not fall under rent control, can the landlord jack up rents to any amount they want?

According to state law, they can’t. The state’s Anti-Eviction Law opines that tenants during a condo conversion can “receive only reasonable rent increases.”

So is an 8 percent increase unreasonable?

According to Joseph Sherman, the matter could go back before the city’s Rent Control Board, and if that body deems the increases to be excessive, the board can require the owners to reduce their rents.

The tenants may next return to the board to get a ruling on the rent increases, or they can take the matter to court.

Why should you care?

Kaplan said that this case could impact every Hoboken resident because this is the first-large scale condo conversion in Hoboken during this development cycle. If Toll Brothers is successful, this strategy could become the blueprint for other area conversions.

Tom Jennemann can be reached at tjennemann@hudsonreporter.com


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