July 02, 2014
Considering purchasing commercial property in NYC? Watch out for “IMD” buildings, as they come with extremely restrictive—and very surprising—rules, including rent freezes that can last for decades. The most surprising thing: buildings are still being added to the IMD list.
IMD stands for “Interim Multiple Dwelling”. In 1982, the New York State Legislature enacted the New York City Loft Law and established the New York City Loft Board to regulate the legal conversion of certain lofts in the city from commercial/manufacturing use to residential use. Basically, the initial IMD buildings are manufacturing buildings used for residential purposes in 1981. It is critical to know, however, that the NYS Legislature recently updated the law to allow new buildings to be added to the IMD list. Commercial buildings used residentially in 2009 can be added to this list.
Why does IMD status matter? Basically, once a building is on the IMD list, rents are fixed. Rent increases are allowed only when the building owner makes substantial upgrades, which can be extremely expensive. It is common for rents to be frozen for years or decades while owners try to upgrade their buildings. Once the upgrade process is complete and the building obtains a new certificate of occupancy, the units enter the regular NYC rent stabilization program, which also limits rents. Rents often end up dramatically below market.
There are currently 326 buildings regulated by the Loft Board, constituting thousands of units in Manhattan, Brooklyn and Queens.