Tips for Buying an SRO Building in New York

If you’re thinking about buying a building that has a single residency occupancy (SRO) designation in New York, there are a few things you should know:

SROs are multiple dwellings with units consisting of one or two rooms for occupancy by one or two people in New York.  Such multiple dwellings can be permanent residences or temporary housing (e.g. hotels).  If designated as an SRO, these dwellings are subject to legislatively imposed restrictions on alterations and tenants have unique rights, including regulated rent for most SRO units.

Tip #1: Be certain to double-check whether the building has SRO status before you enter negotiations.  You can confirm the SRO designation using the New York Department of Building’s BIS site and the New York Department of Housing Preservation and Development’s HPDonline site.

Tip #2: To receive a permit to make any structural changes to an SRO building, you must possess a Certificate of No Harassment.  A Certificate of No Harassment is issued by the New York Department of Housing and Development (HPD).  Upon receiving an application for the Certificate of No Harassment, the HPD will conduct an investigation to determine whether the owner of the SRO building has harassed lawful tenants of the SRO unit within the past three years with the intent or effect of causing the tenant to vacate the unit.  The HPD’s investigation can last six months to a year and the Certificate of No Harassment is effective for three years, so you should be certain to consider these time constraints as you determine whether to purchase and rehabilitate an SRO building.

Tip #3: You should endeavor to include a provision in your contract of sale requiring the current owner to provide a Certificate of No Harassment or provide assistance to you in obtaining it.  If the owner is unwilling or unable to acquire the certificate, you should proceed with caution!  If you decide to proceed anyway, be certain that your contract of sale has appropriate indemnification provisions and that your sale price has been adjusted for the risk of allegations of historical harassment by tenants.

Tip #4: If there are SRO tenants in the building, you must be aware that these tenants have unique rights.  For example, unlike typical apartment tenants, SRO tenants can remain in occupancy whether or not the building owner provides a renewal lease.  Tenants in temporary housing are also granted permanent tenancy in SRO units simply by remaining in occupancy for six months or requesting a lease of six months or more.  Additionally, certain services that the tenants currently receive (e.g. customary hotel services in SRO hotels, laundry and maintenance in permanent dwellings) may be required by law to be maintained by the new owner and rents cannot be increased above legislative guidelines.

If you have additional questions about buying an SRO building in New York feel free to contact us.