New Bill Could Mandate Retail Lease Renewals in New York City

high rise buildings in new yorkThe termination date for many commercial leases in NYC could soon become more flexible. On April 29, 2021, Councilwoman Helen Rosenthal introduced a City Council bill (Int. No. 2299) which, if passed, would allow, amongst other things, for certain commercial tenants to exercise a one-time option to extend their lease up to an additional 12 months. Under the “Storefront Business Bill of Rights,” affected Landlords would be required to grant the lease extension with a 10% maximum rent increase for the duration of the extension.

The purpose of this Bill is to provide commercial tenants, especially small businesses, with additional protections during the lease renewal process. Similar legislation has been attempted before. In 1986 (and again in 2008, 2014 and 2018) the Small Business Jobs Survival Act (SBJSA) was introduced. The SBJSA afforded commercial tenants the right to a minimum 10-year lease renewal and restricted landlords from passing property taxes onto small business owners. The legislation never made it past the committee.

Councilwoman Rosenthal’s proposal may have an easier path to success with the support of small businesses and provisions that accomplish a similar goal to the SBJSA while changing the most contested provisions (i.e., lowering the 10-year lease renewal to one year).

Requirements to Extend a Lease Under Int. No. 2299

Under the legislation, the tenant must satisfy the following requirements: (1) the tenant has made timely rental payments; (2) the tenant has not materially breached the lease; (3) the tenant has not previously notified the tenant that they do not wish to renew the lease; (4) the tenant must notify the landlord within 20 days before the expiration of the original lease that they are exercising this option; and (5) the landlord/owner has not previously notified the tenant 30 days prior to the expiration date of the lease that they have obtained another tenant to lease the premises after the expiration of the original lease. If the landlord/owner has obtained another tenant, but the other conditions are met, the original tenant may still exercise the option, but only for a 90-day renewal. The Bill would apply to only “storefront” commercial tenants, meaning businesses located on the ground floor or second floor of a building that is directly accessible to the public from the street or the interior of the building.

The penalties for non-compliance include a civil penalty in the amount of up to 3% of the assessed value of the property, an order forcing the landlord/owner into compliance, or “other relief as the court deems appropriate.”

Although it faces an uphill battle, this Bill, along with the re-introduction of the SBJSA in 2018, foreshadows the City Council’s desire to continue to support small businesses in the aftermath of an exceptionally difficult two years.

We will closely monitor this Bill and provide updates on any material developments.

-BFK

Bergstein Flynn & Knowlton PLLC
At Bergstein Flynn & Knowlton, we pride ourselves on being a different kind of law firm. We are not just your attorneys, we are your partners.
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