In 2014, several years before the 2019 rent laws were passed, our now client (we did not represent her at the time), as Landlord/Seller, entered into a long-term Lease, with an option to purchase, of a rent-stabilized property in Harlem. Purchase option price was $4.3mm. Although the purchase option had not been exercised at the outset, Tenant/Purchaser paid our client a downpayment of $1mm, which she desperately needed in order to avoid foreclosure on a family home.

The purchase option was to be either exercised or terminated December 2025. However, the value of rent-stabilized buildings had declined so severely, as a result of the Rent Laws, that there was no chance that the purchase option would be exercised. However, if the purchase option were cancelled, our client would be obligated to return the $1mm downpayment that she did not have. If she did not return the downpayment, Purchaser/Tenant would stop the lease payments of $100,000 per year and our client needed that money for her and her elderly parents to live.

Following extended negotiations, an agreement was reached whereby the purchase option date was deferred for a minimum of 10 years at a reduced Purchase Price so as to incentivize the Tenant/Purchaser to acquire the property. However, a key provision was added to prevent Purchaser from cancelling the Purchase Option and forcing our client to return a downpayment that she did not have. If Tenant did not purchase the Property at the end of the 10 years, Tenant’s only option was to continue to make the Lease payments while also keeping the purchase option alive.

The net result for our client is that she is guaranteed a minimum of an additional ten years of significant rent payments and, critically important, would not have to deal with a situation this December whereby she would be obligated to return a downpayment which she did not have, resulting in an abrupt cessation of Lease payments. These payments are the source of sustenance of for our client and her family.