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New York's pro-tenant law snarls rentals for Hamptons mansions
NEW York State's sweeping tenant-protection law is causing headaches for Hamptons mansion owners who lease out their beachside spreads for the summer.
The new rules prohibit landlords from collecting more than a month's rent upfront. That is a problem in the Long Island resort towns, where home owners rely on three-month rental contracts in the hundreds of thousands of dollars, paid in full ahead of the season.
The law - aimed at keeping apartments affordable - took effect in June, but Hamptons home owners are only now catching up with its provisions as the peak leasing season gets under way. Landlords, faced with the notion of collecting rent from partying tenants every 30 days, are considering doing away with full summer leases, or hiking monthly asking prices to cover maintenance costs on their lavish estates, brokers say.
"The issue is you can get stuck with a tenant who pays for June, and once August comes around, doesn't pay," said Frank Bodenchak, a rental and sales broker with Sotheby's International Realty in the Hamptons. "The month of August through Labour Day might be worth as much as the other 11 months combined. These are big houses that require a lot of planning. You can't rent these things last minute."
Those properties can command princely sums. The owner of a 929-square-metre house in Sagaponack - with a pool, tennis court and six zones of outdoor entertainment space - is seeking US$790,000 for Memorial Day weekend through Labour Day, or US$375,000 for just the month of July.
On top of those rents, landlords also rely on additional upfront cash to cover things like utilities and pool care - also banned under the law.
When renting out her Southampton home the past two summers, Victoria Shtainer preferred taking a lesser amount for the entire season over having the onus of preparing for a new tenant each month.
This year, she is selling her house - with its saunas, tennis and basketball courts, movie theatre and saltwater pool - for US$9 million.
"I cannot rent it the way I used to," said Ms Shtainer, a Manhattan-based real estate agent with Compass. "I'm thinking about maybe becoming a tenant myself."
The area's brokerage community has appealed for a legislative fix, seeking an exemption for rentals of 120 days or shorter. A bill is up for review by the judiciary committees of both houses, said Lisa Lombardo, the legislative director for Assemblyman Fred Thiele, a sponsor of the measure whose district includes the Hamptons.
"Don't underestimate the need of most home owners to rent their homes during the summer months to offset the costs of owning and maintaining them," Judi Desiderio, chief executive officer of Hamptons brokerage Town & Country Real Estate wrote in a letter to lawmakers earlier this month.
Without a law tweak, expect some Hamptons rentals to be more costly this year - and for homeowners to demand extra assurances from seasonal tenants, like recommendations from previous landlords, Ms Shtainer said. BLOOMBERG