Is the Small Landlord Exemption Really 10 Units in New York?
As a real estate agent specialised in small multifamily properties across upstate New York, I've encountered a pervasive misconception that often muddies conversations with buyers, sellers, and landlords alike: the so-called “ten unit exemption” myth. Many mistakenly believe that owning fewer than 10 rental units exempts them from New York's rent regulations and tenant protections. But the reality? It’s far more complex—especially with recent legal shifts around Good Cause Eviction and local municipal opt-ins.
In this post, I’ll break down what this exemption actually means, why owners often misread it, the math behind rent caps and CPI ceilings, and how the buyer pool is shifting in these uncertain waters.
The Myth of the “Ten Unit Exemption” Explained
Let's start by setting the record straight. The myth goes like this: if you own fewer than 10 rental units in New York State, you're exempt from laws like the Rent Stabilization Law and others that protect tenants from sharp rent increases and evictions without cause. Sounds straightforward, right? But it’s not.
Here’s why:
- One Unit Anywhere NYS: The law applies to buildings with 6 or more units—or even fewer in some local jurisdictions. There is no blanket state “10 unit” exemption.
- Local Ordinances Can Be Stricter: Municipalities can implement Good Cause Eviction laws and stricter rent controls affecting buildings with even fewer units or regardless of building size, completely overriding state provisions.
- Owner-Occupied Buildings: While sometimes exempted, owner-occupied rentals still may fall under certain rules depending on the city and county.
So why does the “10 units” figure get tossed around so often? Because the 2019 statewide Housing Stability and Tenant Protection Act (HSTPA) significantly tightened rent laws on buildings with six or more rent-regulated units. Properties with fewer than six units are mostly exempt from state rent stabilization rules, but local laws can step in.
Resource check: NYSAR Tenant Protections Overview
The New York State Association of Realtors (NYSAR) maintains an excellent estoppel certificate real estate resource explaining these protections and exemptions for owners and agents. Worth bookmarking if you work here.
Good Cause Eviction and Municipal Opt-In Reality
Another game-changer in local rental regulation is the adoption of Good Cause Eviction (GCE) laws.
Unlike traditional “no-fault” eviction allowances, GCE requires landlords to demonstrate valid reasons—such as non-payment of rent, tenant violations, or owner’s intent to personally occupy—to evict tenants legally. Once thought to affect only large https://smoothdecorator.com/what-is-the-biggest-surprise-for-first-time-landlords-selling-with-tenants-in-place/ rent-stabilised buildings, many New York municipalities now apply GCE ordinances to small landlords too.
Examples include (but are not limited to):
- Albany
- Schenectady
- Troy
These cities have chosen to opt in voluntarily, imposing eviction protections on tenant-occupied properties regardless of size.
Think about it: so, even if you own a 3-unit building in troy, the gce ordinance applies. If you try a pretext eviction—or evict “just because”—the law steps in to protect tenants.
Many owners I speak to struggle with this shift, mistakenly believing owning fewer units equals free rein. It doesn’t.
Exemptions and Why Owners Misread Them
The confusion arises because the rent laws are a patchwork of state legislation and municipal ordinances layered on top.
Common Misreads Include:
- Lumping state and local rules together: Assuming the “state” exemption applies everywhere without checking local codes.
- Counting units incorrectly: For example, ignoring owner-occupied units or separately titled apartments as part of the total “rent-regulated” units number.
- Misunderstanding the difference between rent control and rent stabilization: They are different programs with different eligibility and restrictions.
On top of that, the CPI-Based Rent Caps introduced in recent rent laws add complexity. Rents can increase only by a small, annual percentage tied to the landlord checklist for sale Consumer Price Index, which varies year to year.
Why It Matters:
When sellers advertise buildings bragging about granite counters but fail to provide updated, accurate rent rolls showing capped rents, I roll my eyes—and fire up the calculator. The “deal killer” list in my head instantly updates, reminding me that delays and surprises kill deals faster than missing deposit records.
Rent Cap Math and CPI-Based Ceilings
People often forget that while certain buildings might be exempt from rent stabilization, they might still confront rent cap limits tied to broader rent laws.
In practice, even if your building is exempt from strict rent stabilization registration, your annual rent increases might still be capped by:
- The statewide rent increase cap (typically CPI + 1%), or
- Limits spelled out in local ordinances
Let’s break down an example:
Year Previous Rent CPI Increase Permitted Rent Increase New Legal Rent 2023 $1,000 3% 4% (CPI 3% + 1%) $1,040 2024 $1,040 2.5% 3.5% $1,076.40 2025 $1,076.40 4% 5% $1,130.22
You can see how these caps provide a predictable ceiling, which tenants rely on—and potential buyers scrutinise when evaluating property income.
The Buyer Pool Shift: Owner-Occupants and Flippers Exit
One of the most significant market impacts is the shifting buyer pool for tenant-occupied multifamily properties in New York.
Two decades ago, many owner-occupants and flippers actively purchased small rental buildings under ten units: ideal for first-time investors or those seeking supplemental income.
Post-HSTPA and with newer GCE ordinances, that’s changed:
- Owner-occupants: More cautious or discouraged by stronger tenant protections, eviction hurdles, and complex compliance.
- Flippers: Less willing to buy and “improve” tenant-occupied buildings without the ability to reset rents to market highs.
- Institutional investors: Focusing on portfolios larger than six or ten units where rent regulation rules are clearer and more uniform.
This squeeze leaves a narrower, more informed buyer segment—often those with long-term rental business plans and patience for compliance work.
How to Stay Ahead as an Agent or Small Landlord
Here’s my frank advice for agents, landlords, and buyers navigating these complexities:
- Verify building unit counts carefully. Include all separately rented units, owner-occupied or not.
- Check local municipal codes. Don’t assume state exceptions apply locally—cities might have stricter ordinances.
- Always sanity-check rent caps with a calculator. Never rely on anecdotes or Facebook posts claiming “market is soft” without actual math.
- Demand complete rent rolls and deposit records. Remember, listings that brag about granite counters but skip rent rolls are red flags.
- Prepare buyers for longer closing timelines. Legal verification and attorney calls on tenant-occupied sales can blow up deals if pretext eviction issues arise or records are incomplete.
Conclusion: The “Ten Unit Exemption” Is More Myth Than Fact
While the idea of a simple “ten unit exemption” is comforting to some landlords, the reality across New York State—especially in upstate municipalities—is far more nuanced. With Good Cause Eviction laws expanding, municipal opt-ins overriding state laws, and rent caps tethered to CPI calculations, small landlords need to understand that owning “under ten units” doesn’t grant you a free pass.
For agents and landlords, cutting through the hype and confusion isn’t just professional prudence—it’s the key to safeguarding deals and avoiding those dreaded “deal killers” that spring up when tenant protections collide with seller expectations.
For more detailed guidance, I always recommend consulting trusted resources like the McDonald Real Estate Company and the New York State Association of Realtors website.
Stay informed, keep the calculator handy, and remember: when it comes to New York rent laws, the devil is in the details.
