STATE OF NEW YORK ________________________________________________________________________ 5466 2023-2024 Regular Sessions IN SENATE March 6, 2023 ___________ Introduced by Sen. JACKSON -- read twice and ordered printed, and when printed to be committed to the Committee on Cities 1 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
S. 5466 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
S. 5466 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.
S. 5466 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.