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Rent Stabilization and Regulatory Due Diligence for Multi-Family Properties

When you buy a multifamily building, you hire an engineer to make sure that the building is not going to fall down. However, a multifamily building is so much more than bricks and mortar. A multifamily building is tenancies.

Michelle Itkowitz can look at a building and see it in a way that an engineer, architect, transactional lawyer, or non-lawyer consultant simply cannot – she sees the tenancies at the heart of the building and any problems that come with them. Therefore, she offers her singular Rent Stabilization Due Diligence product.

  1. What, exactly, do you look at in a Rent Stabilization Due Diligence Analysis?

    There are four broad categories of things that Michelle looks at in a RSDD.

    1. Are there any general problems that would stymie a landlord and tenant proceeding, should one be necessary? Or that would give rise to liability of the landlord to tenant? If so, how can the landlord fix the problem?
    2. Are there any problems with the Rent Stabilized tenancies? Is the leasing correct? Are the registrations correct? Are there overcharges?
    3. Are the free-market tenancies really free market, or are they really Rent Stabilized? Illegal deregulations are everywhere.
    4. Is the owner (or prospective owner or lender) making any wrong assumptions? A big part of Michelle’s work in RSDD is testing a client’s assumptions about the property.
  2. When does a Rent Stabilization Due Diligence Analysis get performed?

    We refer to the process as "Due Diligence", but we can perform the analysis before a contract is entered into, during a due diligence period, or long after a property is purchased.

    I often get hired for these gigs when a property is being handed from one generation to another.

  3. Who hires you for Rent Stabilization Due Diligence Analysis?

    We have performed this service for purchasers, sellers, owners, and lenders.

    We also frequently work closely with corporate counsel, real estate transactional counsel, and trusts and estate counsel who bring us in to consult on the rent regulatory aspects of their matters.

  4. What material do you need in order to conduct a Rent Stabilization Due Diligence?

    I have a list of approximately nineteen items I prefer to have in order to conduct the analysis. The more information you give me, the better the analysis will be. If you hire me, I will assign you a paralegal to help you marshal the items.

    But let us be very clear about one thing – I do NOT travel to seller’s conference room to review dusty files. It’s 2018 people – have the secretary accurately scan everything and put it in a secure online box.

    And as long as we are at it, let’s get this out of the way as well – do not even THINK about just sending me only the most recent lease for each unit if you have access to all the leases. I want every lease from the beginning of time forward, ever rider, every renewal. If you don’t care enough about the project to get me the complete leases, the most basic thing, then we are not a good fit. You don’t need to pay me to guess; anyone can guess for you. I want data.

  5. What kind of report do I get? How long is it? What does it look like? Can I ask follow up questions for no extra charge?

    Your Itkowitz PLLC Rent Stabilization Due Diligence report will be written in plain language.

    I seldom do a RSDD under thirty pages. I have never gone over fifty.

    The RSDD Report will contain a detailed fact section. There will also be sections devoted to educating you on the law. Then there will be analysis sections, which apply the law to the facts. There will be a table of contents and an executive summary.

    The process is interactive and iterative. After I issue the report, I expect you to have questions.

    I like to say that, after every engagement with me, the client is a better real estate professional. You grow with me. You can’t help but learn, when we engage in the due diligence process

  6. Will the Rent Stabilization Due Diligence Report tell me what to do next? Will it contain just findings, or will it also contain some sort of recommendation?

    That is up to you. I have sophisticated clients who are not interested in my recommendations, they just want findings. I have other clients who are asking for guidance and options on certain issues, which I am happy to provide if I can. I need to know the client’s GOAL, which should include time frames and budgets. Once I understand your goal, I can help you examine your options. For each option I provide, I include the option’s pros, cons, costs, time frames, risks, and likelihood to advance the client’s goals for the asset.

  7. Will your conclusions be guaranteed?

    No. Due diligence is not insurance; it is due diligence. I will be assigning a numerical percentage of likelihood to my conclusions, which will never be 100% (because laws change and documents can be incorrect, etc.). I not a partner in your building, and the risk remains yours.

  8. What do you charge for Rent Stabilization Due Diligence?

    I generally charge a flat rate of $5k for 10 units or under. After that, I charge $500 per additional unit up to 20 units. After that, I charge $250/unit.

    You need me to look at the allegedly empty and/or free market apartments.

    The largest project I ever did had 160 units. That gets priced a little differently.

  9. There are services out there run by non-lawyers who claim to perform “due diligence” on the Rent Stabilized tenancies and they are WAY cheaper than this. Why shouldn’t I use them?

    Go ahead.

  10. I need something a little different – can you look at my building and make sure that I have properly done Substantial Rehabilitation? Or will you guide me through the Substantial Rehabilitation process?

    Sure. We analyze buildings to see whether they qualify as Substantial Rehabilitation, which we will explain to you in detail. If a building doesn’t qualify and is still vacant, we will then be able, hopefully, to tell you what else to do to make sure that it does.