Dear tenant: Maybe we’re converting to condos?

Dear tenant: Maybe we’re converting to condos?

by The Real Deal

Renters across the city could soon become guinea pigs for landlords contemplating a condominium conversion.

A new memo from the New York Attorney General’s Real Estate Finance Bureau declares that landlords can now solicit interest and potential pricing for condo conversion projects at buildings which are currently occupied by renters, something they were previously barred from doing.

Developers could already submit so-called “test the market” applications for many condo conversion projects they weren’t yet sure they they wanted to pursue in earnest. Those applications, called CPS-1s, allow developers to distribute basic plans and pricing on a potential project in order to gauge demand. They could not, however, obtain something like a CPS-1 for buildings that were already occupied by renters—until now.

Under the new mechanism (called CPS-11), landlords can distribute these preliminary plans to both current tenants and outside buyers. Market-rate renters will be able to make reservation agreements for the right to buy their apartments once an official offering plan has been submitted for AG approval.

(Download the AG memo on TRData)

The AG’s move is likely to lead to a flurry of new “test the market” applications citywide, said Shaun Pappas, an attorney at Starr Associates, which has an extremely active condo offering plan practice.

“Because most of these rental buildings [that would be candidates for conversion] have a market-rate tenant base, there is a significant interest in the conversion process and creating sellable assets,” he said. Landlords pondering a rehab, he added, will be able to measure that interest before making the decision to transition the building to condos—a process that can take years.

Under the new rule, only current tenants in market-rate units will be allowed to reserve their apartments before an official offering plan is — outside buyers and rent-regulated tenants in the building are not given this option and rent-regulated units cannot be advertised. Excluding rent-regulated tenants from the rule is likely due to those tenants already having a 90-day first dibs period anyway, once the final plan is accepted, Pappas said.  Additionally, rent-regulated tenants are entitled to lease renewals, even if their landlord has moved forward with the conversion of market-rate units in the building, meaning their apartments cannot really be considered sellable in the first place.

But Pappas also mentioned that rent-regulated tenants are probably part of why landlords were never allowed to go condo-pamphleteering through the halls of their own buildings in the first place.

“I think because historically most rental buildings contained rent-regulated or stabilized tenants they [government] were wary of an uproar,” Pappas said. “Testing the market was historically frowned upon because it’s non-binding, and you’re stirring up a pot when you’re not necessarily planning on moving forward with it.”

Condo conversions of occupied rental buildings can lead to messy disputes. Two years ago, Macklowe Properties and CIM Group sued the former owner of 737 Park for allegedly not disclosing special lease agreements that allowed tenants at three occupied units to stay indefinitely. Despite these kinds of risks, condo conversions have become a top option for ambitious developers in a time where available development sites are scarce, even if it means dancing the tango with rent-regulated tenants. Typically, rent-regulated tenants have to be bought out when their landlord wants them out, although one does not have to look hard to see other “stir the pot” situations of a more nefarious persuasion.




  • 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.”