DHCR diligence is stalling transactions
When purchasing multifamily real estate, rent stabilization laws in New York are exposing landlords to overcharge claims from previous owners. These contingent risks are causing friction for real estate transaction diligence.
Buyers can’t be certain previous owners have followed new regulations correctly, and are concerned about their liabilities and getting hit by unexpected costs.
While sellers are under pressure to reduce the price of their assets to cover them.
Mitigate the risks with a Varney market-first
Working with leading L&T attorneys, insurers, investors and commercial real estate brokers, we’ve created a market-first solution that helps real estate buyers and sellers insure against the risk of overcharge claims.
IT'S WIN WIN FOR BUYERS AND SELLERS
Buyers can remove contingencies and boost their offer.
Overcharge claims can quickly get into the millions. With our solution, you’re covered – for cost of the claim, the penalty, and your litigation fees. Plus, you’re taking a contingent risk out of the seller’s hands, which can strengthen your offer when negotiating.
Sellers can protect the value of their assets
Buyers can use these contingent risks to drive down the price of the asset. But our solution lets you take back control. For the cost of an insurance policy, you can protect the value of your assets and get a better return on your investments.
Both sides can accelerate deals. And get more of them done.
Our solution is finally letting buyers and sellers manage NY rent regulation risks. It allows them to take control of a big transaction obstacle, speed up the due diligence process, and move their next deal ahead with confidence.
New York rent stabilization laws and risks explained
New York rent stabilization laws and risks explained
2019 act from DHCR put NY landlords in jeopardy
Rent stabilization regulations changed in 2019, when the New York State Division of Housing and Community Renewal (DHCR) introduced the Housing Stability and Tenant Protection Act 2019.
The act ordered landlords to increase their due diligence around paperwork when destabilizing rental units. It also increased the period where the courts and the DHCR could investigate rent history and determine overcharges to six years.
The act opened up big transactional risks in the real estate sector. Any landlord who owned a building, where they or a previous owner hadn’t destabilized units properly, could be liable for rent overcharge claims. Even when units were destabilized before the DHCR introduced the new act and the new rules didn’t apply.
NY legislature’s new bill could create more exposures
The legislature and the Governor’s office tabled a new bill – s2980C – in 2023. While it didn’t pass in 2023, this type of legislative action will redefine the definition of fraud under the DHCR’s rules. And potentially unleash a tidal wave of new litigation in the rent stability world.
The term ‘fraud’ usually suggests advantage through deceit or trickery – the new definition looks to include oversights, mistakes or even just following what the rules used to be a few short years ago.
“Varney have eliminated the uncertainty. Real estate investors will be able to sleep better at night knowing that, if they missed a detail, it won’t come back to bite them.”
Bob Knakal, JLL
Head – New York Private Sales Group
We’re here to get your deals done
We always work with a pragmatic approach to transactional insurance – we won’t try and sell you a policy if you don’t need it. But our team knows rent regulation risks inside out and we’re ready to help you manage them.
If you’re buying or selling a building with regulated or de-regulated units, we can evaluate whether it qualifies for our Rent Destabilization Protection. If it does, you can mitigate up to $2m in exposures.
Patrick Yannotta
SVP – Real Estate
Pat has a decade of New York commercial real estate and development site sales experience. He has a unique perspective having closed 72 commercial real estate transactions with an aggregate value of over $3.3 bn during his career. His understanding of the challenges and priorities of investors and developers in today’s world positions him well to deliver insurance solutions that are tailored and fully comprehensive.
973-896-0468
Jack Cowie IV
SVP – Real Estate
With over 10 years of experience, Jack has developed an in-depth understanding of the risks associated with real estate development and ownership. He’s known to challenge underwriters and negotiate with lenders to get the best deal for his clients. Above all he is trusted – in just the last two years, Jack has placed over $2 bn in coverage for our commercial real estate clients.
207-951-2862
Robert Desrosiers
Managing Director – Equity
Bob’s been in Private Equity for over 20 years. Known for his strategic thinking and problem-solving IQ, he’s brought to the team a proven track record guiding complex mergers and acquisitions, structuring, diligence, and documenting transactions. He’s also managed negotiations for distressed and non-distressed assets, sales of developed properties, and overseen compliance in multiple industries. Now, at Varney, with a focus on building long-term relationships and delivering exceptional results, he’s providing risk management guidance for our clients right across the business cycle.
+1 (603) 540-6785
GET IN TOUCH
To find out more about the various insurance and risk solutions we have to help you protect what’s important to you, contact us today.
Contact