If rents were set too low for a building to be operated profitably upon deconversion, lenders claim that this would force them to make smaller loans at higher rates. When the DHCR sets rents, those rent levels will be used in all future appraisals of cooperatives. Mr. Nardi has been trying to convince DHCR of the need for a fair system of post-foreclosure rents. We want to have it set at fair market rents, but the real point we have tried to get across is for the DHCR to go slowly, to listen to as many people as they can, because this potentially can hurt all co-ops. CNYC acknowledges the need for a reasonable rent that reflects the cost of operating the unit.
Maintenance is the unit's proportional share of the cost of operating the building at break-even.
Some have suggested that DHCR opt for a complex formula that takes the stabilized or controlled rent of the unit at the time that it was purchased and increases that rent by the percentages permitted in the intervening years. Since rent stabilized rents bear no relationship to the cost of operating an apartment, but are rather a reflection of how long a person has lived in the unit and how many times the unit turned over prior to that tenant's occupancy, the resulting rents will be diverse. We continue to await the determination of the DHCR on these issues, and, as we wait, we note with some relief that foreclosures are very few, and that lenders tend to cooperate as much as they possibly can in working out impossible situations and enabling the cooperatives to recover and then to thrive. When foreclosures do occur, the DHCR is advising that reasonable rents be fairly negotiated to enable former shareholders to remain in place. A far more common impact of rental issues on cooperatives and condominiums, the panel agreed, was that of a subletting situation.