Challenges for Rental Conversions in NY and NJ

Challenges for Rental Conversions in NY and NJ

by Cooperator News - A.J. Sidransky, Shaun Pappas Quoted

Despite the acute recent rise in interest rates, the tristate condominium and co-op market continues to show strength; a decline doesn’t seem to be imminent – at least not in the foreseeable future. For many seeking home ownership in a more urban environment, condominium and co-op units remain the model of choice.

That being said, recent changes in the laws governing the conversion of existing properties to condominium ownership in both New York and New Jersey have thrown some curveballs into the market and the conversion process.

A Game of Ping Pong

In New York State, the conversion of existing rental apartments to co-op or condo ownership came under direct threat with the passage of the Housing Stability and Tenant Protection Act in June of 2019, by which the state legislature turned back the clock on rules governing such conversions to something resembling the landscape of the early 1980s.

Changes included increasing the required percentage of bona fide purchases by occupants from 15% to 51%, “Which was the requirement under the former law,” explains Shaun Pappas, a partner at Starr Associates, a law firm based in Manhattan. “Under the 2019 law, the sponsor has to sell 50% of the offered units to current tenants – which is impossible. In the past three years, despite the strength of the market and despite covid, this requirement has had a terrible effect on conversions, and has seriously affected the value of assets appropriate for conversion.”

“It’s hard to know how Governor Hochul was convinced to change the law,” Pappas continues, “but she is a fairly moderate person and understands the value of real estate, and the real estate industry in New York. She recognized how the 2019 law affected the industry, and was open to a discussion and a repair of the law.  These changes are designed to address those problems.”

The changes to the law, while modest, start with smaller buildings with five units or less. An owner can convert based on the old 15% rule instead of the new 51% requirement. “The wrinkle in the new law,” explains Pappas, “is that the sponsor must live in the building. At this time, we have put questions to the Attorney General’s office to clarify the new rules. Specifically, what if the sponsor isn’t necessarily a person? What if the sponsor is an entity with many partners behind the curtain? Under this new law, it appears the investor would have to put someone in ownership into the building for two years to qualify for conversion. Overall, this looks like ice in the winter.”

For owners who also occupy a unit in their building containing five units or less, the change in the law is helpful – but Pappas reports that he has seen this situation exactly once in the past decade.

Protection, or Housing Shortage?

In New Jersey, the situation is not very different. While there’s no onerous state law dictating the percentage of existing rental tenants who must buy in order to convert a rental property to condominium ownership, a state statute was passed in 2022 to exempt “affordable housing units” from conversion in an overheated and highly priced condominium market.

Scott Piekarsky, an attorney with Hackensack-based law firm Phillips Nizer explains: “There isn’t a distinction in conversions between large and small buildings in New Jersey, but there is a lot of regulation. There must be a three-year notice to the tenants, for starters. There’s also a requirement of a notice to evict, because in fact, it’s an eviction. Tenants must have adequate time to find someplace else to live, if they choose not to buy. Also, there’s a requirement of a notice of intent to convert, and an offering plan to convert the property. Extra protection is provided for seniors and people with disabilities as well. Legislation was passed to block the conversion of affordable rental units last year. Advocates wanted a five-year moratorium, but it never passed.”

‘Affordable’ housing units, explains Piekarsky, means units where renters have lower income, “Certainly five-figure incomes in most cases, and they have to qualify according to the terms of the law. If they do, there’s a designation of their unit as an affordable unit. This legislation was passed so that units like these couldn’t be removed from the market just to sell buildings. We haven’t seen much repercussion from the change though. There were relatively few affordable units as opposed to market units to begin with.


For now, it’s clear that there is a growing conflict between the interests of those who rent, and those who desire to own – or put another way, between the rights of those who cannot afford to enter the overheated owned housing market, and the market’s own tendency to dictate the highest and best use of existing housing stock.


  • Arthur Stern
    Cogswell Realty

    Our team has had the pleasure of working with Starr Associates on our project at 150 Rivington Street.  The entire Starr team was a tremendous asset to the success of our project.   Through very challenging times, Starr Associates came through time and time again.  It is an honor to work with everyone at Starr!

  • Ian Schrager
    Ian Schrager Company

    I have known Allan Starr for many years and worked with him on many projects.  He has always exceeded my expectations.  He not only knows the ins and outs of the law, but knows how to make the whole process easy and quick.   I’ve found him to possess an incredibly astute legal mind, combined with a common sense approach that always accomplishes my goals.  He’s not only a gentleman and a friend, but a brilliant lawyer.


  • Emily Beare

    It has been an absolute pleasure working with Allan Starr and Samantha Sheeber over the past twelve years. They are not only the utmost professionals, but also wonderful people who I have grown to love like family. I trust them with all of my new development projects and private clients, and we support each other in our business and personal lives. Starr Associates LLP has always been there for me and my clients and I would recommend them as highly as I recommend anyone.

  • Andrew Berkman, Counsel
    Milstein Properties

    Allan and I have worked together for decades; along the way, I have worked with Samantha Sheeber, Andrea Roschelle, John Rodriguez and Erica Starr and have always been pleased with their quick and accurate responses. They have worked with us on closings (with great and efficient results), restatements of stale plans, amendments and other assorted AG requirements, always on a timely and cost-effective basis.

  • David Penick, Vice President

    “Working with Starr has been great on three condo projects in Manhattan to date.  The accessibility and direct attention of the partners is unsurpassed.  Allan and Sam have the interests of the owner at heart and make every effort to protect our interests in a responsible and defensible manner.  Their practical approach and deep knowledge of the offering plan process and requirements of the AG office combine to make a highly effective and efficient package.  At the associate level they have good support as well.  The closing office has to be the best in NY – never a failed closing in 15 years.  We are repeat customers and will be going forward.”

  • James Lansill, Senior Managing Director
    Corcoran Sunshine Marketing Group

    “Samantha Sheeber is a partner in making transactions successful. She’s resourceful, respected, smart, funny as hell, and is swift to constantly embarrass us (and clients) because she sees the end while we all muddle in the middle. She saves time. She is selfless and fast and conscientious. She’s loyal to the notion of selflessly getting stuff done. She cultivates great talent. And she makes the process fun, even when she is mad at us for asking the same impossible question 11 times hoping for a new result (a solution for which — by the way — she often discovers).”

  • Ben Shaoul
    President, Magnum Real Estate Group

    “As an active developer in New York City, Magnum Real Estate Group is proud to have partnered with Starr Associates, LLP as our legal counsel in 5 significant projects valued at approximately $800 million.  Over the last 5 years, Starr has provided us with exceptional advice on condominium Offering Plans and related transactions. Partner Samantha Sheeber, Esq. and her team have professionally guided us, and provided creative and effective solutions when needed.”

  • Susan DeFranca, President & CEO
    Douglas Elliman Development Marketing

    “I have had the fortunate opportunity, over the past 16 years, to work with Allan Starr and Samantha Sheeber who I consider to be experts in the field of real estate law.  They, together with their team, have a deep understanding of Attorney General Offering Plan registrations and continually seek to identify creative solutions to complicated issues.  Their level of integrity and commitment are unwavering no matter how large or small a project. I completely endorse Starr Associates LLP and look forward to our mutual continued success.”

  • Michael Rudder
    Rudder Property Group

    “Starr Associates’ specialty in the creation and representation of condominiums is unmatched. Their knowledge, experience and professionalism in the office condominium sector is best-in-class. Starr Associates’ hard work and expertise has been critical to the success of our firm’s office condominium projects.”

  • Charles Bendit
    Co-CEO Taconic Investment Partners LLC

    “Starr Associates have been our condominium attorneys for many years. Their counsel goes well beyond just drafting the condominium documents, which of course they do extremely well. They also represent us and our brand with condominium unit purchasers, and with our lenders and partners on condominium related matters. We have always found Starr’s attorneys to be professional, responsive and cost-conscious.”