New York Real Estate Law: Closings, Leases, and Foreclosures

New York real estate law sits on a familiar foundation of contracts, deeds, and property rights, but layers on requirements that catch out-of-state buyers, sellers, and landlords off guard: attorneys run both sides of nearly every transaction, sellers must complete a disclosure form (the $500 buyout is gone), tenants enjoy some of the strongest protections in the country, foreclosures require a lawsuit, and transfer and mortgage recording taxes can add several percent to a closing bill. What follows is a working map of the rules that most often decide whether a deal closes cleanly, a rent increase sticks, or a foreclosure gets dismissed.

How Purchase Contracts Work

Every contract for the sale of real property in New York must be in writing and signed by the party being held to it. That comes from the Statute of Frauds. The writing has to identify the essential terms: property, purchase price, and closing date. Courts have thrown out agreements that leave those terms vague.

Residential contracts usually include contingencies for financing and inspection. The wording matters. A poorly drafted mortgage contingency can leave a buyer who gets denied financing on the hook for the deposit anyway. Commercial contracts add due diligence periods, tenant estoppels, and zoning representations.

Attorneys are a defining feature of the New York transaction. No statute strictly mandates it, but the standing practice is for lawyers to draft and review the contract for both buyer and seller and to run the closing. In most other states, agents handle contracts and title companies handle closings; here, attorneys do both. Co-op transactions especially reward that involvement, because board approval, proprietary lease review, and financial disclosures pile complexity on top of the sale itself. New developments come with offering plans that must be filed with and reviewed by the Attorney General’s office under the Martin Act before any units can be marketed or sold.¹

What Sellers Must Disclose

The Property Condition Disclosure Act requires every seller of a one- to four-family residence to complete and sign a Property Condition Disclosure Statement and deliver it to the buyer before the buyer signs a binding contract.² The form asks about what the seller actually knows: structural issues, environmental hazards, mechanical systems, and more. It is not a warranty, and the seller does not have to hire an inspector or investigate.

For years, most New York City–area sellers paid a $500 credit at closing instead of completing the form, on the view that many questions were traps. That option is gone. An amendment signed in September 2023 and effective March 20, 2024, eliminated the $500 credit.² Sellers now complete the disclosure, and a knowingly false or incomplete answer can support a claim by the buyer.

The same 2024 amendment added flood-risk questions: whether the property sits in a FEMA-designated floodplain, whether flood insurance is required, and whether the seller has ever received federal disaster assistance or filed a flood damage claim. An “as is” clause or a merger clause will generally not shield a seller from a fraud claim based on these disclosures. For one- and two-family homes, sellers must also provide an affidavit at closing confirming operable smoke and carbon monoxide alarms under Executive Law Section 378.

Taxes Sellers Pay at Closing

New York imposes several taxes on real estate transactions, and both sides need to plan for them.

State Transfer Tax and Mansion Tax

The state transfer tax applies to any conveyance where consideration exceeds $500, at $2 per $500 of purchase price (0.4%).³ The seller pays by default, though parties can negotiate.

An additional state mansion tax of one percent applies to residential properties selling for $1 million or more.³ In New York City, the combined state and city mansion tax escalates by price band: one percent from $1 million to $2 million, 1.25 percent from $2 million to $3 million, and rising to 3.9 percent at $25 million and above. New York City also charges its own Real Property Transfer Tax (RPTT) on all sales, with higher rates above $500,000 and an additional base tax on properties at $3 million or more.

Non-Resident Withholding

Sellers who live outside New York face estimated income tax withholding at closing. Non-resident sellers file Form IT-2663 with the county recording officer when the deed is recorded, along with estimated New York State income tax on the gain. The 2026 withholding rate is 10.90 percent of the taxable gain, matching the state’s top personal income tax bracket.⁴ A sale at a loss requires no payment but still requires the form. The form goes to the county clerk, not the Tax Department.

Foreign sellers face additional federal withholding under the Foreign Investment in Real Property Tax Act (FIRPTA). The buyer generally withholds 15 percent of the total sale price and sends it to the IRS.⁵ An exception applies when the buyer will use the property as a personal residence and the price is $300,000 or less. Above that, the full withholding applies, though the seller can apply for a withholding certificate to reduce it when the actual tax will be lower.

Costs and Steps for Buyers at Closing

Closings in New York take several hours and pull in attorneys, lenders, title companies, and county recording offices.

Down Payment Escrow

When the buyer signs the contract, the down payment (typically ten percent) goes into escrow with the seller’s attorney or another designated escrow agent. Under General Business Law Section 778-a, that agent has a fiduciary duty to segregate the funds in a special bank account and cannot commingle them with personal or business money.⁶ When the agent is an attorney, funds usually sit in an Interest on Lawyer Account (IOLA). Unless the contract says otherwise, the agent is not required to place the deposit in an interest-bearing account.

Title Insurance and Recording

Title insurance protects the buyer and lender against ownership disputes, liens, or defects a title search missed. Lenders almost always require a lender’s policy; an owner’s policy is optional but widely recommended. Rates are regulated by the Department of Financial Services, with the Title Insurance Rate Service Association proposing rates on behalf of member insurers.⁷

Recording the deed with the county clerk requires two state forms alongside the deed. Form TP-584 is the combined real estate transfer tax return that calculates and remits transfer tax. Form RP-5217 documents the transfer for the state’s real property records. Without both, the clerk will not accept the filing.

Mortgage Recording Tax

Taking out a mortgage in New York triggers a separate tax that surprises many buyers. The basic mortgage recording tax is 50 cents per $100 of mortgage debt, plus a special additional tax of 25 cents per $100. Counties in the Metropolitan Commuter Transportation District pay a further 30 cents per $100 (25 cents elsewhere), and many counties or cities add a local mortgage tax of 25 to 50 cents per $100.⁸ For a one- or two-family home, the first $10,000 of principal is deducted when calculating the additional tax. The total on a typical residential purchase in the New York City metro area runs close to two percent of the loan amount.

Landlord and Tenant Rules

New York has some of the strongest tenant protections in the country. The Housing Stability and Tenant Protection Act of 2019 (HSTPA) expanded them, and the Good Cause Eviction Law of 2024 added another layer for tenants in non-regulated apartments. Which rules apply depends on the building’s age, size, and location.

Rent Stabilization

Rent stabilization limits annual increases and gives tenants the right to renew. In New York City, it generally applies to buildings with six or more apartments built between February 1, 1947, and December 31, 1973. Outside the city, it applies in municipalities that have adopted the Emergency Tenant Protection Act, including parts of Nassau, Westchester, and Rockland counties, and the cities of Kingston, Poughkeepsie, and Newburgh.⁹ The Division of Housing and Community Renewal (DHCR) sets annual rent increase guidelines.

Before the HSTPA, landlords could remove apartments from stabilization once the legal rent crossed a dollar threshold after a vacancy. The HSTPA eliminated that vacancy decontrol, so stabilized units stay stabilized regardless of rent level.¹⁰ The law also capped pass-throughs for major capital improvements and individual apartment improvements. Tenants who suspect overcharges can file with DHCR; landlords found to have overcharged may owe refunds with interest or treble damages.

Good Cause Eviction

The Good Cause Eviction Law, codified as Real Property Law Article 6-A, protects many tenants whose apartments are not covered by rent stabilization. It applies in New York City and a growing list of municipalities that have opted in. In covered areas, landlords cannot evict or refuse to renew without a legally recognized reason such as nonpayment or a lease violation.¹¹

It also caps rent increases. An increase is presumptively unreasonable if it exceeds five percent plus the annual change in the consumer price index, and total increases are capped at ten percent regardless. A landlord who wants more must persuade a court by pointing to rising property taxes or major repair costs.¹¹ The law does not cover units with rents above thresholds published annually by DHCR, condos or co-ops, buildings with certificates of occupancy issued after January 1, 2009, owner-occupied buildings with ten or fewer units, or properties owned by small landlords as defined locally. It is currently set to expire on June 15, 2034.

Security Deposits

Security deposits are strictly regulated. In buildings with six or more apartments, landlords must hold deposits in a separate interest-bearing account and give tenants written notice of the bank’s name and address. The landlord may retain one percent of the balance annually as an administrative fee; the rest of the interest belongs to the tenant.¹²

The HSTPA capped deposits at one month’s rent and requires return within 14 days after the tenant vacates. Deductions must be itemized, and normal wear and tear cannot be deducted. Tenants who do not receive the deposit or a written explanation within 14 days can bring a small claims case.

Notice Before Non-Renewal or a Big Rent Increase

Under Real Property Law Section 226-c, landlords must give written notice before terminating a tenancy or imposing a rent increase of five percent or more. The period depends on occupancy length:¹³

Less than one year: at least 30 days.
One to two years: at least 60 days.
More than two years: at least 90 days.

The required period is based on the cumulative time the tenant has occupied the unit or the length of the lease term, whichever is longer.¹³

Evictions Must Go Through Court

Every eviction in New York goes through court. For nonpayment, the landlord must first send a certified letter when rent is at least five days late, then serve a written demand giving the tenant at least 14 days to pay before filing in Housing Court.¹⁴ Tenants can appear, raise defenses, and request stays in hardship cases.

Illegal evictions (lockouts, shutting off utilities, removing belongings) are Class A misdemeanors under the Real Property Actions and Proceedings Law. Each violation is a separate offense, and landlords who resort to self-help face criminal penalties and civil liability.¹⁵

How Foreclosures Work

New York is a judicial foreclosure state. A lender cannot take a home without filing suit and obtaining a court order. Before starting, the lender must mail a 90-day pre-foreclosure notice by both regular and certified mail. The notice must state how many days the borrower is in default, the amount needed to cure, and provide a list of at least five nonprofit foreclosure counseling agencies in the area.¹⁶ The lender must also file information with DFS within three business days of mailing.¹⁷

Borrowers can challenge foreclosures on grounds that include improper service, lender procedural violations, or predatory lending claims. Courts take the 90-day notice seriously; a missing or defective notice alone can support dismissal.

The Foreclosure Abuse Prevention Act of 2022 closed a tactic where lenders voluntarily discontinued a foreclosure and refiled to restart the six-year statute of limitations. The act amended provisions of the Real Property Actions and Proceedings Law and the CPLR so that voluntary discontinuance no longer resets the clock, and once time has expired on one action, another on the same debt is barred.¹⁸ Courts have also sanctioned lenders for bad-faith conduct during mandatory settlement conferences. In U.S. Bank N.A. v. Sarmiento, the court imposed sanctions after finding repeated delays, inconsistent denials, and lost documentation during the loan modification process.¹⁹

Mortgage lenders operating in New York must comply with state and federal disclosure rules. DFS regulates mortgage lending and enforces anti-predatory rules. High-cost home loans face additional restrictions including limits on prepayment penalties and mandatory borrower counseling.

Co-Ops, Condos, and HOAs

The three main forms of multi-unit ownership operate under different legal frameworks, and the differences matter more than most buyers realize.

Cooperatives

In a co-op, you do not own real property. You buy shares of a corporation that owns the building, and the shares come with a proprietary lease entitling you to occupy a specific unit.²⁰ Co-op boards have broad authority over buyer approvals and routinely require extensive financial disclosures, interviews, and references. Courts have consistently upheld that discretion under the business judgment rule: so long as the board acts within its authority and in good faith, courts will not second-guess. The Court of Appeals set the standard in Levandusky v. One Fifth Avenue Apartment Corp.²¹

Many co-ops also charge a “flip tax” when a shareholder sells. These fees must be expressly authorized by the proprietary lease or bylaws. Since a 1986 amendment to the Business Corporation Law, flip taxes need not be proportional to share ownership, but they still require proper authorization in governing documents. Buyers should read the lease and bylaws before purchase.

Condominiums

Condominium ownership means direct ownership of a unit plus an undivided interest in the building’s common areas, governed by the Condominium Act in Real Property Law Article 9-B.²² Condo boards have less power than co-op boards to reject buyers but typically hold a right of first refusal. They control common areas, building rules, and assessments. Disputes over special assessments and maintenance fees are common and can produce litigation or liens against individual units.

Homeowners’ Associations

HOAs govern planned communities and townhouse developments, setting maintenance fees, architectural standards, and use restrictions. Disputes commonly arise over assessment increases, board elections, and enforcement of rules. Unlike co-op shareholders, HOA members own their property outright, so the legal framework draws from both property law and corporate governance.

Zoning and Variances

Zoning is a local matter. Municipalities adopt zoning ordinances under the Municipal Home Rule Law and the General City Law, dividing territory into districts that control what you can build and how you can use property. New York City’s Zoning Resolution is the most detailed example, but every city, town, and village outside the city maintains its own zoning code.

If your plans do not fit the zoning district, you need a variance from the local zoning board of appeals. New York law recognizes two types:

Area variances modify dimensional requirements such as setbacks, lot coverage, or building height. The standard is flexible, balancing benefit to the applicant against detriment to the neighborhood.
Use variances allow a use the code otherwise prohibits. The standard is much harder. The applicant must prove “unnecessary hardship”: no permitted use yields a reasonable return, the hardship is unique to the property, the proposed use will not alter the neighborhood’s character, and the hardship is not self-created.²³

Larger projects also face environmental review under the State Environmental Quality Review Act, in Article 8 of the Environmental Conservation Law, which requires agencies to assess environmental impact before issuing permits. In New York City, the Landmarks Preservation Commission separately regulates exterior modifications to designated landmarks and properties in historic districts.

Broker Licensing

New York regulates real estate brokers under Article 12-A of the Real Property Law, with the Department of State overseeing licensing and enforcement.²⁴ Broker applicants must complete 152 hours of approved coursework (including fair housing) and have two years of experience as a licensed salesperson or three years in a related real estate field.²⁵ Candidates must pass a qualifying examination administered by the Department of State covering real estate law, fiduciary duties, and the legal effect of deeds, mortgages, and leases.²⁶ Brokers who violate licensing or ethical requirements face Department of State discipline, up to license revocation.

Challenging a Property Tax Assessment

Property taxation is governed by the Real Property Tax Law, which requires municipalities to assess real property at a uniform percentage of market value.²⁷ If your property has been overvalued, you can challenge the assessment through an administrative grievance with the local board of assessment review. If that fails, you can bring a tax certiorari proceeding in court under Article 7 of the Real Property Tax Law. Successful challenges usually require a professional appraisal showing the assessed value materially exceeds market value.

1
New York State Senate. New York General Business Law Section 352-E – Real Estate Syndication Offerings
2
New York State Senate. New York Real Property Law RPP Section 462
3
Department of Taxation and Finance. Real Estate Transfer Tax
4
Department of Taxation and Finance. Nonresident Real Property Estimated Income Tax Payment Form
5
Internal Revenue Service. FIRPTA Withholding
6
New York State Senate. New York General Business Law Section 778-a – Contracts Requiring Down Payments in Escrow
7
Department of Financial Services. Title Insurance
8
Department of Taxation and Finance. Mortgage Recording Tax
9
Homes and Community Renewal. Rent Stabilization and Emergency Tenant Protection Act
10
Mayor’s Office to Protect Tenants. Protections for Rent-Regulated Tenants
11
New York State Attorney General. New York State Good Cause Eviction Law
12
New York State Attorney General. Recovering Rent Security Deposits and Interest
13
New York State Senate. New York Real Property Law Section 226-c – Notice of Rent Increase or Non-Renewal
14
New York State Unified Court System. Tenant’s Guide: Nonpayment Eviction Case
15
FindLaw. New York Real Property Actions and Proceedings Law RPA Section 768 – Unlawful Eviction
16
NY CourtHelp – Unified Court System. 90 Day Pre-Foreclosure Notice
17
Department of Financial Services. Pre-Foreclosure Notice Filing Information – Instructions
18
New York State Senate. New York Real Property Actions and Proceedings Law Section 1304 – Required Prior Notices
19
Appellate Division of the Supreme Court of the State of New York. US Bank National Ass’n v. Sarmiento
20
New York State Senate. New York Cooperative Corporations Law Section 14 – General Powers
21
Unified Court System. Levandusky v. One Fifth Avenue Apartment Corp.
22
New York State Attorney General. Condominiums
23
New York State Senate. New York General City Law GCT Section 81-b
24
Justia. New York Real Property Law Article 12-A – Real Estate Brokers and Real Estate Salespersons
25
New York State Senate. New York Real Property Law Section 441 – Application for License
26
Department of State. Real Estate Broker – Frequently Asked Questions
27
New York State Senate. New York Real Property Tax Law RPT Section 305 – Assessment Methods and Standard