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A02459 Summary:

BILL NOA02459
 
SAME ASSAME AS S05466
 
SPONSOREpstein
 
COSPNSRColton, Dinowitz
 
MLTSPNSR
 
Add Title 22 Chap 13 §§22-1301 - 22-1308, NYC Ad Cd
 
Relates to establishing commercial rent regulation; establishes a right to renew leases and authorizes the rent guidelines board to establish maximum rents.
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A02459 Actions:

BILL NOA02459
 
01/26/2023referred to cities
01/03/2024referred to cities
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A02459 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A2459
 
SPONSOR: Epstein
  TITLE OF BILL: An act to amend the administrative code of the city of New York, in relation to establishing commercial rent regulation   SUMMARY OF PROVISIONS: Section 1 amends Title 22 of the administrative code of the city of New York by adding a new chapter 12 entitled "Commercial Rent Regulation" which includes the following sections: 22-1201 Establishes the scope of the chapter and applicability of 22-1202 Sets forth applicable definitions 22-1203 Sets forth rental guidelines 22-1204 Addresses the role of the rent guidelines board 22-1205 Addresses security deposits 22-1206 Addresses retaliation provisions 22-1207 Prohibits waiver of rights pursuant to this chapter 22-1208 Addresses inconsistency with other laws Section 2 sets forth a severability clause Section 3 sets forth the effective date   JUSTIFICATION: Hundreds of thousands of small businesses call New York City home. They instill the neighborhoods across our city with the vibrant and unique culture that makes New York internationally known. Besides adding to the charm of the city, small businesses are engines of economic growth and pathways to economic self-sufficiency for their owners--many of whom are immigrants--and over half of the New York City workforce that is employed by small businesses. Small businesses contribute to the successes of the city's tourism and film industries by attracting visi- tors and film productions, and they generate millions for the state in sales tax revenue. Perhaps most importantly, small businesses like bode- gas, local supermarkets, barber shops, and nail salons provide essential goods and services for community members at affordable prices. Despite the high value that small businesses provide to their neighbor- hoods, current city and state regulations, or lack thereof, make operat- ing a small business incredibly challenging. Chief among the challenges faced by existing small business owners and entrepreneurs is rent and leasing. While residential tenants benefit from a number of rights under the law, commercial tenants are afforded practically zero, especially when it comes to the negotiation of leases, rent increases, and warranty of habitability. The status quo has resulted in the citywide devastation of many beloved small business and unrealized economic gains to the city and state due to entrepreneurs seeking out other locations to start or expand their businesses. When small businesses have the opportunity and stability scale up, their employees reap the benefits in the form of increased wages, subsidized health care, and paid time off. When rent is left to the whims of the market, small business owners lose out and landlords warehouse their storefronts, waiting for a chain who can afford to pay a higher rent. The Center for an Urban Future estimates over 7,300 chain stores exist in New York City, a figure that has increased for the past 10 years since the initial study. Creating the conditions small businesses owners need in order to provide for their communities and employees should be a top priority. Residen- tial rent regulation in the form of rent stabilized housing has been a boon to over 1 million tenants in New York City and a safeguard against sharp and sudden increases to rent. Every year the Rent Guidelines Board goes through a process to determine rent adjustments for stabilized apartments, lofts and hotels by holding public meetings to consider staff research and hear testimony from owners, tenants, industry experts, and advocates. This legislation would subject commercial leases to a similar process in order to offer commercial tenants a measure of predictability and impartiality when it comes to setting rents.   PRIOR LEGISLATIVE HISTORY: 2021-2022: A3110 (Epstein) / S 7571 (Jackson) - Assembly Cities / Senate Cities 1 2019-2020: A8051/No same as - referred to cities   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Undetermined.   EFFECTIVE DATE: 90 days after becoming law.
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A02459 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          2459
 
                               2023-2024 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 26, 2023
                                       ___________
 
        Introduced  by  M.  of  A.  EPSTEIN,  COLTON,  DINOWITZ -- read once and
          referred to the Committee on Cities
 
        AN ACT to amend the administrative code of the  city  of  New  York,  in
          relation to establishing commercial rent regulation
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Title 22 of the administrative code of the city of New York
     2  is amended by adding a new chapter 13 to read as follows:
 
     3                                 CHAPTER 13
     4                         COMMERCIAL RENT REGULATION
 
     5    § 22-1301 Scope. This chapter shall apply to all leases for commercial
     6  premises. On any occasion wherein a landlord and tenant are required  to
     7  negotiate  the  terms  of  a lease for commercial uses the provisions of
     8  this chapter shall apply. The provisions of this chapter shall apply  to
     9  any  commercial  lease entered into on or after October first, two thou-
    10  sand twenty-four.
    11    § 22-1302 Definitions. a. "Commercial premises" shall mean a  building
    12  or space occupied for non-residential purposes including, but not limit-
    13  ed  to,  manufacturing, retail, professional services, offices, assembl-
    14  ing, processing, cultural and not-for-profit entities that  are  present
    15  in the city of New York, who have a valid commercial lease.
    16    b.  "Landlord" shall mean any owner, lessor, sublessor or other person
    17  entitled to receive rent for the use  or  occupancy  of  any  commercial
    18  premises, or an agent thereof.
    19    c. "Negotiation" shall mean the process of conferring with one another
    20  through conferences, discussions and compromise, to arrive at a mutually
    21  agreeable settlement.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD06638-01-3

        A. 2459                             2
 
     1    d.  "Rent"  shall  mean  any  and all consideration, including but not
     2  limited to pass-alongs, received by the landlord in connection with  the
     3  use or occupancy of any commercial premises.
     4    e.  "Tenant"  shall  mean tenant, subtenant, lessee, sublessee, or any
     5  other persons lawfully entitled to use or occupancy  of  any  commercial
     6  premises.
     7    §  22-1303  Rental  guidelines.  a.  The  legal regulated rent for any
     8  vacancy lease of a commercial premises shall be established and  may  be
     9  increased by an amount promulgated by the rent guidelines board pursuant
    10  to  section  22-1304 of this chapter. Such leases shall be for a minimum
    11  term of ten years, provided however, that at the  tenant's  option,  and
    12  with  the written approval of the landlord, a lease of shorter or longer
    13  duration may be selected.
    14    b. All leases of a commercial premises may be renewed at the option of
    15  a tenant who did not lose the right to renew a lease under  the  grounds
    16  described  in subdivision d of this section. The legal regulated rent to
    17  be paid for any lease renewal of a commercial premises may be  increased
    18  by  an  amount  promulgated  by  the  rent  guidelines board pursuant to
    19  section 22-1304 of this chapter. Such lease  renewals  shall  be  for  a
    20  minimum  term  of  ten  years,  provided  however,  that at the tenant's
    21  option, and with the written approval of the landlord, a lease of short-
    22  er or longer duration may be selected.
    23    c. No period of lease extension required by this chapter shall  extend
    24  beyond the landlord's lawful ability to rent the premises to the tenant,
    25  where such ability is limited by:
    26    (1) the obligation to rent the premises to a third party pursuant to a
    27  bona  fide  lease entered into prior to the effective date of this chap-
    28  ter;
    29    (2) the exercise by a third party of a bona fide option  to  rent  the
    30  premises provided that such option was given prior to the effective date
    31  of this chapter; or
    32    (3) any other lawful reason arising prior to such effective date.
    33    d.  A tenant shall lose the right of renewal and a landlord may refuse
    34  to renew a lease only on the following grounds:
    35    (1) The tenant has persistently delayed rent payments  without  cause.
    36  For the purpose of this subdivision, "cause" is defined as the withhold-
    37  ing  of  rental  payments by the tenant due to the alleged violations of
    38  the rental agreement by the landlord. In order for the  landlord  to  be
    39  excused  from  renewal on this ground, the landlord must have served the
    40  tenant at least three prior notices during the term of the lease to  the
    41  tenant  for demand of payment within thirty days, and then show that the
    42  lessee has not paid within such thirty day period.  The  landlord  shall
    43  not serve such notice unless the rent payment was in arrears for a mini-
    44  mum of fifteen days;
    45    (2)  The tenant uses the commercial premises in a manner substantially
    46  different from that described in the lease;
    47    (3) The tenant conducts or permits any form of illegal activity on the
    48  premises;
    49    (4) The tenant has substantially breached any  substantive  obligation
    50  under the current lease and has failed to cure such breach within thirty
    51  days following written notice to cure by the landlord;
    52    (5) Upon the termination of the current tenancy, the landlord intends,
    53  in  good faith, to demolish or substantially reconstruct the premises or
    54  a substantial  part  thereof,  or  to  carry  out  substantial  work  or
    55  construction  on  the  commercial  premises  or substantial part thereof
    56  which he or she could not reasonably do without obtaining possession  of

        A. 2459                             3
 
     1  the commercial premises.  The landlord shall notify the tenant of his or
     2  her decision to reoccupy the commercial premises at least one year prior
     3  to  the  termination  of the lease. In the event that the lessor fraudu-
     4  lently  invokes  this  justification for a refusal to renew a commercial
     5  lease, the defrauded tenant may collect  treble  damages  for  any  loss
     6  suffered as a result of such action;
     7    (6) The current tenancy was created by the subletting of the property,
     8  whereby  the  prime tenant did not notify the landlord by certified mail
     9  of the subtenant's existence and did not obtain the written  consent  of
    10  the  landlord. This ground is void if the landlord and tenant had agreed
    11  in the lease to allow subleasing rights without the consent of the land-
    12  lord and all obligations of the  prime  tenant  on  the  issue  were  in
    13  compliance;
    14    (7)  It  has  been  determined  by an agency with jurisdiction or by a
    15  civil court of competent jurisdiction that the tenant  is  a  gross  and
    16  persistent  violator  of  New  York  city tax laws, of any license obli-
    17  gations related to the use of the premises or of any laws of the city of
    18  New York;
    19    (8) Upon the termination of the current tenancy, the landlord  intends
    20  to  occupy  the  retail premises in order to carry out its own business,
    21  which cannot be the same type of business that  the  current  tenant  is
    22  operating,  unless  the  landlord  compensates the tenant at fair market
    23  value. The landlord shall notify the tenant of his or  her  decision  to
    24  reoccupy  the  premises  at  least  one hundred eighty days prior to the
    25  termination of the lease. In the event that  the  landlord  fraudulently
    26  invokes  this  justification  for a refusal to renew a commercial lease,
    27  the defrauded tenant may collect treble damages for any loss suffered as
    28  a result of such action.
    29    e. Where the landlord agrees to renew the lease of the current tenant,
    30  such landlord shall notify the tenant at least one hundred  eighty  days
    31  prior  to the expiration of the lease of his or her willingness to nego-
    32  tiate the renewal of the commercial lease agreement. If the landlord and
    33  tenant agree, they may at any time renegotiate a  new  lease,  with  any
    34  agreed  to terms and conditions, not inconsistent with the provisions of
    35  this chapter.
    36    § 22-1304 Rent guidelines board. a. The rent guidelines board,  estab-
    37  lished  pursuant  to section 26-510 of this code, shall establish annual
    38  guidelines for legal regulated rent for vacancy and renewal leases,  and
    39  in  determining  such amounts shall consider, among other things (1) the
    40  economic condition  of  the  commercial  real  estate  industry  in  the
    41  affected area including such factors as the prevailing and projected (i)
    42  real  estate taxes and sewer and water rates, (ii) gross operating main-
    43  tenance costs (including insurance rates,  governmental  fees,  cost  of
    44  fuel  and  labor  costs),  (iii)  costs  and  availability  of financing
    45  (including effective rates of interest), (iv) over-all supply of commer-
    46  cial premises and over-all vacancy rates, (2)  relevant  data  from  the
    47  current  and  projected  cost of leasing for the affected area, (3) such
    48  other data as may be made available to it.
    49    b. Beginning July first, two thousand twenty-four, and annually there-
    50  after, the rent guidelines board shall file  with  the  city  clerk  its
    51  findings for the preceding calendar year, and shall accompany such find-
    52  ings  with  a statement of the maximum rate or rates of rent for commer-
    53  cial premises subject to this law, authorized for leases  or  commencing
    54  on  the next succeeding October first or within the twelve months there-
    55  after. Such findings and  statement  shall  be  published  in  the  City
    56  Record.

        A. 2459                             4
 
     1    c.  The  rent  guidelines  board prior to the annual adjustment of the
     2  level of fair rents provided for under this section for commercial prem-
     3  ises covered by this law, shall hold a public hearing  or  hearings  for
     4  the  purpose of collecting information relating to all factors set forth
     5  in  subdivision  a  of this section.  Notice of the date, time, location
     6  and summary of subject matter for the public hearing or  hearings  shall
     7  be  published  in  the  City  Record daily for a period of not less than
     8  eight days and at least once in one or more newspapers of general circu-
     9  lation at least eight days immediately preceding each hearing  date,  at
    10  the  expense  of the city of New York, and the hearing shall be open for
    11  testimony from any  individual,  group,  association  or  representative
    12  thereof who wants to testify.
    13    d. Maximum rates of rent shall not be established more than once annu-
    14  ally  for  any commercial premises within the board's jurisdiction. Once
    15  established, no such rate shall, within the one-year period, be adjusted
    16  by any surcharge, supplementary adjustment or other modification.
    17    § 22-1305 Security deposits. Security deposits  shall  not  exceed  an
    18  amount  equal  to two months rent. All security deposits shall be placed
    19  in escrow in an interest-bearing account at  a  federally  insured  bank
    20  located  in  New  York state. The tenant shall be notified in writing of
    21  the location of such escrow account. Interest paid on the account  shall
    22  be paid in full to the tenant upon termination of the lease.  The amount
    23  of  interest  paid  to  the tenant shall equal the interest paid by such
    24  federally insured bank less one percent for the  landlord's  administra-
    25  tive costs.
    26    §  22-1306 Retaliation. No landlord shall in any way retaliate against
    27  any tenant for the tenant's assertion or exercise of  any  rights  under
    28  this  chapter.  Any  such retaliation may subject the landlord to a suit
    29  for actual and punitive damages, injunctive relief, and attorney's fees.
    30    § 22-1307 Waiver. No provision in  any  lease,  rental  agreement,  or
    31  agreement  made  in  connection therewith which waives or diminishes any
    32  right of tenant under this chapter is valid.
    33    § 22-1308 Inconsistency with other laws. In the event  of  any  incon-
    34  sistency  with  any  other  laws of the city of New York, this law shall
    35  take precedence.
    36    § 2. Severability. If any clause, sentence, paragraph, section or part
    37  of this act shall be adjudged by any court of competent jurisdiction  to
    38  be  invalid  and  after  exhaustion  of all further judicial review, the
    39  judgment shall not affect, impair or invalidate the  remainder  thereof,
    40  but  shall  be  confined in its operation to the clause, sentence, para-
    41  graph, section or part of this act directly involved in the  controversy
    42  in which the judgment shall have been rendered.
    43    §  3.  This  act shall take effect on the ninetieth day after it shall
    44  have become a law. Effective immediately the addition, amendment  and/or
    45  repeal  of  any  rule  or regulation necessary for the implementation of
    46  this act on its effective date are authorized to be made  and  completed
    47  on or before such effective date.
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