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Land Use Bulletin: City Council to Hold Hearings on Commercial Rent Control Legislation

Land Use Bulletin: City Council to Hold Hearings on Commercial Rent Control Legislation- Real Estate Industry Mounts Campaign in Opposition

Real Estate Industry Mounts Campaign in Opposition

The New York City Council Committee on Small Business has scheduled a hearing for Monday, October 22 at 1pm on its proposed Small Business Jobs Survival Act (Intro. 737-A). The legislation applies to all commercial lease renewals after January 1, 2019. According to the legislation, all commercial leases may be renewed at the option of a tenant for a minimum term of 10 years. At the tenant’s option and with the consent of the landlord, a shorter or longer lease period may be selected.

The legislation lays out procedures for lease renewals that require mediation over a period of 90 days to seek to resolve differences between the tenant and landlord. If the two sides cannot agree on renewal terms, then the tenant can request an arbitration hearing to occur over an additional 90 days. After the hearing, the arbiter would have the power to set the rent (to be considered final and binding) to be paid during the 10-year renewal period. The legislation also lays out conditions where a lease extension would not be required, and where an owner may refuse to renew a lease, such as persistently delayed rent payments. Read the full legislation here.

While the intent of the legislation is to protect small businesses from rising rents and displacement by chains and other retail stores, the legislation faces fierce opposition from the real estate industry, property owners, and condo and co-ops with commercial spaces. The Real Estate Board of New York argues that the legislation would eliminate the ability of all property owners to fairly negotiate, sign or end lease deals at their own commercial spaces. It notes that the legislation would apply to retail and all other commercial leases, and would create considerable uncertainty for property owners who would be unable to effectively manage the long-term financial health of their buildings, taking away the ability to effectively market their space, and set and negotiate commercial rents at fair market value.

In September, the Bar Association concluded that New York City has no legal power to enact commercial rent control under the City Charter, state Constitution or state law. The hearing on the 22nd will consider these and all other issues related to the legislation.

Capalino+Company will continue to keep abreast of updates and developments regarding this legislation. If you would like further information, or to learn how it may affect your commercial space, please contact Richard Barth at 212.616.5845 or richard@capalino.com.


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