New York Good Cause Eviction Exemptions: How Investors Can Structure Around the Law

New York's Good Cause Eviction law, enacted in April 2024, fundamentally changed the landlord-tenant relationship by giving tenants a presumptive right to lease renewal and capping annual rent increases at 5% plus CPI (or 10%, whichever is lower). But the law contains five specific structural exemptions that, if you qualify, restore full traditional landlord authority — the ability to non-renew leases, set market rents, and manage tenant turnover without court-mandated justification.

Understanding these exemptions isn't just academic. For small-scale and mid-size investors, the difference between being covered and exempt determines whether your property operates under a quasi-rent-control regime or traditional market dynamics.

The Five Exemptions

1. Small Landlord (≤10 Units Statewide)

If you own 10 or fewer residential units across all of New York State, your properties are entirely exempt from Good Cause Eviction. This is the most commonly applicable exemption for individual investors.

The critical trap is the aggregation rule. The law counts every unit owned by every natural person behind every LLC in your portfolio. If a property is held in an LLC, the law looks through the entity structure to identify all individual members, then counts their total statewide holdings.

Example: You own 4 units in your personal name and 3 units through an LLC where you hold 50% membership. Your partner in that LLC owns 5 units through a separate entity. Your count: 4 + 3 = 7 (you're exempt). Your partner's count: 5 + 3 = 8 (also exempt, but barely). If either of you acquires one more unit anywhere in New York State, you cross the threshold and all shared properties lose their exemption.

How to maintain it:

• Track your total unit count meticulously, including units held through any entity where you're a member
• Before acquiring new units, calculate the impact on all co-investors in shared LLCs
• Consider whether a new acquisition pushes any entity partner over the 10-unit threshold

2. Owner-Occupied Buildings (≤10 Units)

If you live in the building and it contains 10 or fewer units, the entire building is exempt. This is the classic Brooklyn/Queens brownstone exemption — live in one unit of a two-to-four family and rent out the rest with full landlord autonomy.

This exemption operates independently of the small landlord exemption. You can own 50 units across New York State, but if you physically reside in a 4-unit building, that building is exempt.

The requirement is genuine occupancy. Using a unit as a mailing address while living elsewhere won't satisfy the statutory requirement. Courts will examine utility bills, voter registration, and other residency indicators if a tenant challenges your exemption claim.

3. New Construction (Certificate of Occupancy After January 1, 2009)

Buildings with a Certificate of Occupancy issued on or after January 1, 2009 are exempt from Good Cause Eviction for 30 years from the date of issuance. This incentivizes new development by guaranteeing market-rate operations for three decades.

What to verify: The relevant date is the Certificate of Occupancy issuance date, not the construction start date or the building permit date. For gut renovations that result in a new C of O, the 30-year clock starts from the new certificate.

What this covers: Full market-rate operation — no rent increase caps, no mandatory lease renewal, no good cause requirement for non-renewal. After the 30-year exemption expires, the building becomes subject to whatever tenant protection laws exist at that time.

4. High-Rent Threshold (245% of Fair Market Rent)

Units where the monthly rent exceeds 245% of the applicable HUD Fair Market Rent (FMR) are excluded from Good Cause Eviction. This exemption targets luxury apartments where tenants have substantially higher bargaining power and regulatory protection is less justified.

For 2025, the NYC FMR thresholds (and corresponding GCE exemption levels at 245%) are approximately:

• Studio: FMR ~$2,386, exemption at ~$5,846
• One-bedroom: FMR ~$2,451, exemption at ~$6,005
• Two-bedroom: FMR ~$2,802, exemption at ~$6,865

FMR values are updated annually by HUD, so the exemption threshold shifts each year. If rent falls below the threshold — even due to a negotiated reduction — the unit becomes covered by GCE.

5. Certain Regulated Units

Units already subject to other rent regulation systems — rent control, rent stabilization, Mitchell-Lama, Section 8 project-based, or other government-regulated programs — are excluded from Good Cause Eviction because they already have their own tenant protection frameworks.

This exemption doesn't help investors since these units are already more restrictively regulated than GCE. But it prevents double-regulation conflicts.

The Disclosure Requirement

Qualifying for an exemption is necessary but not sufficient. Landlords claiming any exemption must proactively append a specific written disclosure notice — as prescribed by Real Property Law Section 231-C — to every lease, lease renewal, and court petition.

The notice must state:

• That the premises are not subject to Good Cause Eviction protections
• The specific exemption being claimed
• That the tenant does not have the rights provided under Article 6-A

Failing to include this disclosure doesn't automatically void your exemption, but it substantially weakens your position in Housing Court. Judges reviewing an eviction petition without the RPL 231-C notice may default to applying GCE protections until the landlord proves exemption — adding months to an already glacial process.

Structuring Your Portfolio for Exemption

Strategy 1: Stay under 10 units. For small-scale investors focused on cash flow, this is the simplest approach. Ten units is enough to build meaningful rental income while maintaining full operational flexibility. The constraint is real — you can't scale past 10 without losing GCE exemption statewide.

Strategy 2: Owner-occupy one building. If you want to scale past 10 units, owner-occupying a primary residence building (≤10 units) keeps that specific building exempt. Your other properties lose the small landlord exemption but the owner-occupied building retains its autonomy.

Strategy 3: Target new construction. Buildings with post-2009 Certificates of Occupancy offer 30 years of exemption regardless of your portfolio size. This limits your property universe but eliminates GCE concerns entirely.

Strategy 4: Target high-rent markets. If you're investing in Manhattan luxury or premium Brooklyn, units naturally exceeding the 245% FMR threshold are exempt. This only works at the top of the market.

Who This Is For

• Investors building a New York portfolio who want to maintain full landlord authority
• Existing landlords who aren't sure whether their properties qualify for exemptions
• LLC-structured investors who need to understand the unit aggregation rules before acquiring more properties
• Out-of-state investors structuring their first New York entity

Who This Is NOT For

• Large institutional investors with 100+ units (GCE coverage is unavoidable at scale, underwrite accordingly)
• Investors targeting only rent-stabilized buildings (stabilization already imposes stricter controls than GCE)

Frequently Asked Questions

What happens if I go over 10 units — does GCE apply retroactively?

Yes. The moment your statewide unit count exceeds 10, all your non-exempt properties become subject to GCE immediately. There is no grace period. This means existing tenants gain presumptive lease renewal rights and the rent increase cap applies starting from the next renewal.

Can I split units across family members to stay under 10?

Technically, each individual's unit count is assessed separately. But the LLC look-through rule means you can't hide units behind shared entities. If you and your spouse each own 5 units independently — not through any shared LLC — you're each under 10. If you hold units through a joint LLC, both portfolios are aggregated.

Does the small landlord exemption apply upstate?

Yes, statewide — but GCE only applies in NYC automatically and in upstate municipalities that have opted in (Albany, Ithaca, Kingston, Rochester as of 2026). If your upstate property is in a non-opted-in municipality, GCE doesn't apply regardless of your unit count.

Can a tenant challenge my exemption claim?

Yes. Tenants can raise GCE coverage as a defense in any eviction proceeding. The burden then falls on the landlord to prove the exemption applies. Having the RPL 231-C disclosure on the lease, documentation of your unit count, and proof of owner-occupancy (if applicable) are essential.

The New York Investment Property Guide covers GCE exemption structuring in depth, including the exact RPL 231-C disclosure language, unit aggregation analysis worksheets, and portfolio planning strategies for staying under the 10-unit threshold while maximizing returns.

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