Just over a year ago, on Sept. 1, 2021, New York City and surrounding areas were severely affected by Hurricane Ida. In just a few hours that day, unprecedented flash flooding caused horrible death and devastation. The flooding caused by Ida took the lives of 29 people in New Jersey and 16 people in New York City. In New York City, 11 of the individuals died in illegal basement apartments. Sadly, it has been over a year, and very little has been done to address the problems so clearly made evident in the wake of Ida. While there has been no specific legislation introduced, there has been some movement.
On Aug. 30, 2022, the Office of the New York City Comptroller issued an extensive report entitled “Bringing Basement Apartments into the Light” [see https://on.nyc.gov/3L7HCRO] in an attempt to bring the focus back on this critical issue and move forward with the introduction of potential legislation at the city and statewide levels. New York City and the surrounding areas have long had problems with illegal basement apartments, which number in the tens of thousands. With the hurricane season upon us again, it is imperative that state and local leaders act quickly before another tragedy strikes. Findings in the New York City Basement Report estimate that there are between 300,000 and 500,000 individuals living in illegal apartments throughout New York. It is critical for homeowners, tenants, real estate agents, real estate attorneys, and other real estate professionals to be aware of the dangers and the potential liability that exists in connection with these illegal apartments. It is also important that they support legislation in this area.
Existing Restrictions Relating to Accessory Dwelling Units, Basements and Cellars
As explained in the press release issued by the New York State Comptroller’s Office [see https://on.nyc.gov/3TWfK7z], “an Accessory Dwelling Unit is a smaller, independent residential dwelling located on the same lot as another building, in which one of the units is the primary residence of the owner of the building.” An owner may apply for a legal ADU provided the appropriate zoning codes are followed and appropriate applications and permits are obtained.
The press release further explained that “a cellar is a story in which 50% or more of the height from finished floor to ceiling is below the street grade and a basement is a story in which 50% or more of the height from finished floor to ceiling is above the street grade.” Under New York State’s Multiple Dwelling Law apartments are strictly prohibited in “cellars,” however, provided all other regulations and zoning requirements are met, apartments in “basements” are permitted. Therefore, it is important that a regulatory framework be enacted to ensure a path for these illegal basements to become legal and safe for tenants.
The Potential Risk and Liability Faced by Real Estate Licensees
Real estate agents must be careful when listing apartments or properties for rental or sale. Liability could extend to real estate licensees who knowingly rent illegal apartments to tenants. Under Section 175.25(b)(9) all “advertisements shall include an honest and accurate description of the property to be sold or leased.” According to guidance (“DOS Guidance”) [see https://bit.ly/3tOBC83] issued by the New York State Department of State, Division of Licensing, licensees must make a reasonable effort to verify the legal status of the properties marketed and are required to disclose a property’s illegal status to potential purchasers or tenants.
According to the DOS Guidance, “where a broker has actual knowledge that a property lacks a permit or is otherwise illegal (i.e., illegal conversion), such information must be affirmatively disclosed. This requirement is found squarely within the department’s powers to discipline a licensee for: ‘dishonest or misleading advertising, or [where such licensee] has demonstrated untrustworthiness or incompetency.’ NY RPL § 441-c.” The DOS further stated that “it is a well-established rule that the department is ‘vested with broad discretion in imposing punishment on real estate licensees who have demonstrated untrustworthiness, and the exercise of that discretion will not be lightly disturbed.’” Ultimately, the DOS has broad powers to issue substantial fines and revoke real estate licenses if it found that licensees knowingly sold or rented properties containing illegal apartments.
The New York City Basement Report
The New York City Report is an important first step toward much needed action and legislation. One important issue highlighted by the New York City Basement Report is that the dangers affecting tenants are not solely limited to flooding, but also include fire, carbon monoxide and other similar dangerous events. The New York City Basement Report Executive Summary explains:
“While Ida’s heavy rainfall was unprecedented, and far beyond what the city’s sewer system was built to handle, climate change is accelerating the intensity and frequency of extreme weather events—so Ida will not be the last flash flood that puts the lives and homes of basement-dwellers at risk. Meanwhile, fires remain an even more frequent deadly risk for New Yorkers living in basement apartments. And the risk of eviction for basement-dwelling households, who have no tenant protections at all, presents its own potential disaster.”
It is imperative that the introduction of legislation be prioritized in order to limit the loss of life, as well as introduce additional critical protections. Inaction is unacceptable, especially where the lives of individuals are at risk.
The New York City Report points out that most of the tenants who inhabit these illegal apartments are minorities, immigrants, and those in the lower-income levels of society. The New York City Report further explains that illegal apartments “exist within an informal rental market due to regulatory and financial barriers, [and] currently house tens of thousands of New Yorkers, especially working-class immigrants and people of color.” Many of the homes containing illegal apartments are owned by lower income and minority owners who have limited access to the capital necessary to make improvements to these illegal apartments. The New York City Report’s Executive Summary emphasizes that as “the housing crisis has grown, New York City and State have struggled—and mostly failed—to ensure tenant safety, to navigate conflicts between owners and basement-dwellers, or to provide a predictable system that could attract capital for improvements.”
Summary of the Newly Proposed ‘Basement Resident Protection Law’
The New York City Report proposes that New York State adopt statewide legislation creating the new “Basement Resident Protection Law.” The proposed law would provide “immediate physical and tenant protections to New Yorkers living in basement units, with clear rights and responsibilities for basement owners and dwellers, as part of a more comprehensive approach to legalizing and expanding accessory dwelling units.” As outlined in the New York City Report, the proposed law will address the following:
- Create a Basement Board reflective of the diverse constituencies affected to administer the program and financial support, develop inspection regimes and enforce the provision of services and tenant protections;
- Require owners to register all currently occupied basement and cellar units with the Basement Board (resident protections would not be contingent on registration);
- Ensure robust, language accessible outreach to occupants in basement and cellar units to promote awareness of the new program;
- Mandate and provide funding to owners for the installation of basic safety measures, including carbon monoxide and smoke detectors and backflow preventers, to mitigate flooding risks during severe rain events like Hurricane Ida;
- Establish basic rights and responsibilities for basement-dwellers and owners, including the requirement to provide basic services and the legal right to collect rent;
- Immediately protect basement-dwellers from harassment, eviction, and the denial of essential services, and create new pathways for proactive enforcement and better occupancy data for the implementation of early flood warning systems;
- Provide a registration framework that supports and is coordinated with ongoing safety inspections and legalization efforts; and
- Require the city and state to provide affordable housing to New Yorkers living in units deemed to be so unfit for living due to egregious fire safety, habitability and flood risks that they must be vacated.
The proposed law focuses on the protection and safety of both tenants and owners. It is important that any legislation must not only prioritize the safety of the tenants inhabiting these illegal basement apartments, but it must also provide homeowners with support and funding to bring these illegal apartments into compliance. Such legislation will allow homeowners, who do not currently rent their basement apartments, to bring those apartments into compliance and to offer them for rent, which will ultimately alleviate some of the existing housing shortages.
Creation of a ;Basement Board’
As part of the proposed law, the New York City Report recommends that a new “Basement Board” (similar to New York City’s Loft Law) be created where “Owners of buildings with occupied basement and cellar apartments would be legally obligated to register their units by a certain date and all occupants living in a basement or cellar apartment, regardless of whether the owner had properly registered the unit, would receive certain rights.” The New York City Report recommends that the new legislation and Basement Board be patterned after New York City’s Loft law and Loft Board.
The proposed legislation would provide owners with a temporary legal status for basement and cellar apartments for five years. The legislation would also include “Community outreach, technical assistance support and financial benefits…” and the Basement Board “would notify and create incentives for owners to register their units while deadlines for compliance and ability to levy fines would provide enforcement power to the city, if necessary.” Some of the areas that would be the focus of the proposed law and administered by the Basement Board are: (1) Outreach; (2) Safety Inspections; (3) Rights and Responsibilities of Owners and Occupants; and (4) Technical and Financial Assistance for Owners.
As detailed in the New York City Report, the Proposed Law would require New York City and New York State “to fund local community-based organizations to conduct language accessible outreach to both owners and occupants living in buildings with basement and cellar apartments to inform them of their obligations and rights.” New York City and New York State would also be responsible for and fund “widespread outreach and notification, such as advertising in subway lines that serve the neighborhoods in which the majority of the ADUs are located, television, radio and print ads, participation in Community and Borough Board meetings, among other forms of outreach.”
Required Safety Inspections
New York State and New York City would also be required to commence widespread inspection efforts and determine whether there are dangerous conditions and whether any existing illegal basement apartments need to be vacated immediately. The Basement Board would begin to immediately develop “flood and fire risk profiles, both for the prioritization of inspections and for the determination of habitability following the physical inspection of the unit.” The New York City Report recommends that those areas that are subject to flooding concerns be inspected first. If it is found that a basement or cellar apartment is not habitable and an immediate vacate order is issued, the tenant would then be provided with housing vouchers and assistance to locate replacement affordable housing. A homeowner, under the proposed legislation, would also receive assistance such as “referrals to trained homeownership counselors who would provide financial counseling and work to secure financial assistance for the homeowner, if needed after the loss of rental income.” Assistance to both the tenant and owner is critical.
Rights and Responsibilities of Owners and Occupants
An important element of the proposed legislation would require owners to register with the Basement Board. If an owner fails to register, the owner would be subject to fines and enforcement actions. According to the New York City Report, owners would be required to install and/or provide the following services:
A smoke and carbon monoxide detector: Fire safety was the primary concern for basement and cellar ADUs prior to Hurricane Ida, so it is essential that these units have these minimum protections put into place.
A backwater protection valve (also known as a back flow preventer valve): A backwater valve can help prevent sewer water from rising from the city sewer into basement and cellar ADUs. The back water protection valve closes and blocks sewer water from entering the unit.
Essential services: Provision of heat, hot water, and electricity to tenants on an ongoing basis.
There will also be financial assistance made available to owners from New York City and New York State in connection with the above services. The report provides that the “Basement Board could also require additional safety measures, such as flood sensors or fire suppression technology, especially as new or improved technology is developed.”
Another important component of the legislation is that registration of an illegal apartment by the owner “would confer the owner the right to collect rent, and the right to legally pursue an eviction for non-payment of rent or other nuisance behavior in violation of the terms of the lease.” Further, tenants would be entitled to a lease and would receive all of the protections afforded a tenant under the law and in connection with applicable eviction proceedings. Tenants would also have the right to report owners for lack of heat, water, electricity and other essential services.
Technical and Financial Assistance for Owners
Owners would receive important technical and financial assistance under the Proposed Law. When owners register an illegal apartment, they “would be eligible for fine forgiveness related to penalties for past illegal use of a basement or cellar should they exist, and first access to funding and technical assistance for the installation of the emergency safety measures.” Owners who register and apply for financial assistance first, will receive priority standing for financial support. Further, the proposed law would provide that “any low-income homeowners, regardless of the timing of their registration, would be entitled to technical assistance and financial support from the city, state, and/or community-based partners.” A critical focus of the legislation will be to assist homeowners in legalizing their apartments within the five-year period.
The Industry Must Push for Legislation That Protects and Supports Tenants and Owners
It is important that all real estate professionals and the real estate community come together and support legislation that protects tenants and supports homeowners in making these illegal apartments safe, habitable, and legal. It is important for real estate agents to inform both landlord and tenant clients of the dangers of renting illegal apartments. Owners who rent these illegal apartments must be made aware of the extensive problems they could face when it is time to sell their properties. Illegal apartments could potentially cause extensive delays in the closing process, as well as termination of the contract due to these issues. Exposure to liability is great and this should be stressed to owners who rent and market real property for sale or lease.