NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2619A
SPONSOR: Rosenthal TITLE OF BILL:
An act to amend the real property law, the emergency tenant protection
act of nineteen seventy-four, and the administrative code of the city of
New York, in relation to establishing certain rights upon expiration of
leases for ground lease residential cooperative apartment buildings
PURPOSE:
This bill would establish certain rights upon the expiration of leases
for residential ground lease cooperative apartment buildings.
SUMMARY OF SPECIFIC PROVISIONS:
Section one amends § 223-c of the real property law to provide basic
protections to residential ground lease cooperative buildings located on
privately owned land. The bill provides any resident entitled to occu-
pancy in the co-op where the ground lease is subject to termination of
expiration is deemed to be a tenant upon expiration or termination of
the ground lease. The ground lease owner would be required to offer such
tenants rental leases pursuant to the Emergency Tenant Protection Act,
the Rent Stabilization Law, or any regulations, rules, and polices
enacted pursuant thereto or the good cause eviction law, as applicable
to the building. Additionally, the bill provides the residential ground
lease cooperative building the right of first refusal if the landowner
chooses to sell or transfer the land underlying a building. The legis-
lation also grants residential cooperatives the ability to borrow money
when necessary to pay for repairs and capital improvements, unless the
subject ground lease owner denies consent for a reasonable cause within
15 days of receiving a written request. The provisions of this bill do
not apply to ground lease residential buildings located on land owned by
the federal, state, or city government or authority, any Indian nation
or tribe, or any registered charity which purchased land prior to Janu-
ary 1, 2024.
Sections two and three amend the Emergency Tenant Protection Act and the
Rent Stabilization Law to provide how the initial rent shall be set if a
deconversion occurs.
Section four contains a severability clause.
Section five establishes the effective date.
JUSTIFICATION:
There are dozens of residential cooperative buildings throughout New
York City containing thousands of homes that do not own the land under-
neath. Instead, private property owners lease the land to ground lease
cooperatives for set periods of time, and the buildings' residents make
rent payments to the landowner through their monthly maintenance fees.
When each building's lease is set to expire, an appraiser is tasked with
evaluating the land's fair market value, which is then used to negotiate
a rent increase between the landowner and the cooperative. Residential
cooperatives have extremely limited power in these negotiations since
the buildings cannot be physically moved, and existing laws do not
provide the right to lease renewal, limits on rent increases, or any
other protections. In this way, shareholders in ground lease cooper-
atives are in a similar position to manufactured home residents who own
their units but not the land on which they are located and cannot move
the structures.
In recent years, a growing number of owners of the land under ground
lease cooperatives have been demanding rent increases that are so exces-
sive that they put the financial viability of the residential cooper-
atives at risk. There are currently ground lease residential cooper-
atives that are facing rent increases as high as 1,000% from one year to
the next. While ground rent increases of this magnitude would be
extraordinarily difficult for any group of cooperative shareholders to
absorb, they threaten the very viability of the many residential cooper-
ative buildings which are occupied primarily by middle-income residents
on fixed incomes who have lived in their homes for decades. A number of
cooperative buildings with ground leases coming.up for renewal in.the
coming years face default due to the rent increases being demanded and
there is a lack of clarity about what happens if a cooperative building
defaults or the ground lease is terminated. There is the possibility
that this would leave longtime shareholders without their homes.
Many owners of the land under ground lease cooperatives have also
refused to allow buildings to borrow money required to perform critical
repairs and/or capital improvements. Numerous ground leases contain
language explicitly prohibiting cooperatives from taking on debt over
certain levels regardless of the circumstances. In some cases, property
owners have even prohibited ground lease cooperatives from borrowing
funds to perform repairs ordered by New York City agencies. Given the
high cost of maintaining aging buildings, along with the ongoing need to
make capital improvements to comply with changing laws, improve energy
efficiency and resiliency, and respond to emergencies, it is essential
for ground lease cooperatives to have the ability to borrow funds when
necessary.
As the housing crisis worsens, it is crucial that New York provide basic
protections to ground lease cooperative residents facing displacement
from their homes due to exorbitant rent increases and extremely limited
negotiating power in abnormal market conditions. This legislation
simply provides transparency to shareholders if their cooperative build-
ing defaults, and if the land under their homes is sold, by extends
protections comparable to established state laws for manufactured home
residents to ground lease residential cooperatives that similarly cannot
move their buildings from the land underneath.
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately, and shall apply to all existing
leases and all leases issued, renewed, modified, altered or amended on
or after such date; provided, however, that the amendments to section
26-512 of chapter 4 of title 26 of the administrative code of the city
of New York made by section three of this act shall expire on the same
date as such law expires and shall not affect the expiration of such law
as provided under section 26-520 of such law.
STATE OF NEW YORK
________________________________________________________________________
2619--A
2025-2026 Regular Sessions
IN ASSEMBLY
January 21, 2025
___________
Introduced by M. of A. ROSENTHAL, DINOWITZ, SIMON, GLICK, SEAWRIGHT,
SIMONE, BORES, BERGER, SHIMSKY, BRAUNSTEIN, EPSTEIN, BURDICK, ROZIC,
KIM, DAVILA, WEPRIN, JACKSON, TAPIA, ANDERSON, CRUZ, PAULIN, GALLAGH-
ER, DAIS, CHANDLER-WATERMAN, MAMDANI, RIVERA, TAYLOR, REYES, RAGA,
MITAYNES, BROOK-KRASNY, LEVENBERG -- read once and referred to the
Committee on Housing -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the real property law, the emergency tenant protection
act of nineteen seventy-four, and the administrative code of the city
of New York, in relation to establishing certain rights upon expira-
tion of leases for ground lease residential cooperative apartment
buildings
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 233-c of the real property law is amended by adding
2 three new subdivisions 3, 4, and 5 to read as follows:
3 3. (a) Within ten days of the expiration or termination of a subject
4 residential cooperative ground lease, the ground lease residential coop-
5 erative shall initiate the process to dissolve the ground lease residen-
6 tial cooperative as prescribed by the applicable laws under which the
7 ground lease residential cooperative was formed.
8 (b) Upon deconversion, residents entitled to occupancy in such ground
9 lease residential cooperative immediately prior to the deconversion
10 shall be deemed to be tenants. The subject ground lease owners shall
11 offer such tenants rental leases pursuant to the emergency tenant
12 protection act of nineteen seventy-four, the rent stabilization law of
13 nineteen sixty-nine and any regulations, rules and policies enacted
14 pursuant thereto or the good cause eviction law of article six-A of this
15 chapter, as applicable to the building.
16 4. (a) If any subject residential cooperative ground lease does not
17 contain express provisions prohibiting a ground lease residential coop-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04667-06-5
A. 2619--A 2
1 erative from encumbering its interest in a subject residential cooper-
2 ative ground lease, a ground lease residential cooperative may encumber
3 up to and including its entire interest in such subject residential
4 cooperative ground lease. If such subject residential cooperative
5 ground lease contains provisions restricting the ground lease residen-
6 tial cooperative's ability to encumber its interest, the ground lease
7 residential cooperative shall obtain the subject ground lease owner's
8 written permission prior to such encumbrance.
9 (b) If the ground lease residential cooperative is required to obtain
10 the subject ground lease owner's permission to encumber the ground lease
11 residential cooperative's interest, the subject ground lease owner may
12 only refuse to grant such consent for reasonable cause and must provide
13 the ground lease residential cooperative with a written statement that
14 sets forth the basis of refusal within fifteen days of a written request
15 for permission from the ground lease residential cooperative. The fore-
16 going shall not apply to any mortgage or granting of a security interest
17 in the ground lease real property, other than the residential ground
18 lease cooperative apartment building itself so long as it is subordinate
19 to the rights of the subject ground lease owner under the subject resi-
20 dential cooperative ground lease.
21 5. (a) If any subject ground lease owner takes any action to market or
22 offer the ground lease real property for sale, or receives a bona fide
23 offer to purchase the ground lease real property that such subject
24 ground lease owner intends to accept or respond to with a counteroffer,
25 the subject ground lease owner shall include a notice stating that such
26 acceptance or counteroffer shall be subject to the right of the ground
27 lease residential cooperative to purchase the ground lease real property
28 pursuant to this subdivision. Notwithstanding any provision of law or
29 agreement to the contrary, every agreement to purchase a ground lease
30 real property by a prospective purchaser of a ground lease real property
31 shall be subject to the right of the ground lease residential cooper-
32 ative to purchase the ground lease real property pursuant to this subdi-
33 vision.
34 (b) (i) If a subject ground lease owner receives a bona fide offer to
35 purchase a ground lease real property that such subject ground lease
36 owner intends to accept or respond to with a counteroffer, such subject
37 ground lease owner shall notify the ground lease residential cooperative
38 and the commissioner of housing and community renewal.
39 (ii) The subject ground lease owner's written notification shall
40 state:
41 (A) the price;
42 (B) the material terms and conditions of sale upon which such subject
43 ground lease owner would sell the ground lease real property; and
44 (C) that the ground lease residential cooperative has one hundred
45 twenty days to exercise their right to purchase the ground lease real
46 property in accordance with this subdivision.
47 (iii) (A) The ground lease residential cooperative shall, within sixty
48 days of receipt of notice from the subject ground lease owner, deliver
49 to the subject ground lease owner a notice of intent to make an offer to
50 purchase the ground lease real property. If such notice is not delivered
51 within the sixty days, the subject ground lease owner has no further
52 obligation under this subdivision.
53 (B) If the ground lease residential cooperative delivers such intent
54 to the subject ground lease owner as required by clause (A) of this
55 subparagraph, the ground lease residential cooperative shall have the
56 right to purchase the ground lease real property; provided that the
A. 2619--A 3
1 ground lease residential cooperative shall have delivered to the subject
2 ground lease owner an executed offer to purchase which meets the identi-
3 cal price, terms, and conditions of the offer or counteroffer provided
4 in the notice of the subject ground lease owner within one hundred twen-
5 ty days of receipt of notice from the subject ground lease owner, unless
6 otherwise agreed to in writing. During this time period, the subject
7 ground lease owner shall not accept a final unconditional offer to
8 purchase the ground lease real property.
9 (c) If an offer to purchase by the ground lease residential cooper-
10 ative is not delivered within such one hundred twenty day period, then,
11 unless the subject ground lease owner thereafter elects to offer to sell
12 the ground lease real property at a price lower than the price specified
13 in the notice to the ground lease residential cooperative or on terms
14 substantially different from those presented to the ground lease resi-
15 dential cooperative, the subject ground lease owner has no further obli-
16 gations under this subdivision.
17 (d) If the subject ground lease owner, after such one hundred twenty
18 day period, elects to offer to sell the ground lease real property at a
19 price lower than the price specified in the notice given or at terms
20 substantially different from those presented to the ground lease resi-
21 dential cooperative, then the ground lease residential cooperative shall
22 be entitled to notice thereof and shall have an additional thirty days
23 after receipt of notice of the revised terms to deliver to the subject
24 ground lease owner an executed offer to purchase which meets the revised
25 price, terms, and conditions as presented by the subject ground lease
26 owner.
27 (e) This subdivision does not apply to:
28 (i) Any conveyance of an interest in a ground lease real property
29 incidental to the financing of such ground lease real property.
30 (ii) The purchase of a ground lease real property by a governmental
31 entity under its powers of eminent domain.
32 (f) Nothing in this subdivision shall be construed to compel the
33 subject ground lease owner to divide the land and sell it to individual
34 shareholders of the ground lease residential cooperative.
35 § 2. Section 6 of section 4 of chapter 576 of the laws of 1974,
36 constituting the emergency tenant protection act of nineteen seventy-
37 four, is amended by adding a new subdivision h to read as follows:
38 h. Notwithstanding any contrary provisions of this act, on and after
39 the effective date of this subdivision, where cooperative or condominium
40 ownership of a housing accommodation no longer exists (deconversion),
41 pursuant to subdivision three of section 233-c of the real property law,
42 the initial rent shall be the most recent legal regulated rent for the
43 housing accommodation adjusted by all lawful annual guideline amounts
44 for one-year leases established by the rent guidelines board that would
45 have been permitted had the housing accommodation been continuously
46 subject to this act, but if the documentation necessary to reliably
47 identify the most recent legal regulated rent for the housing accommo-
48 dation is not available or is inappropriate, such initial amount shall
49 be determined by the division of housing and community renewal based on
50 data, compiled by and using sampling methods determined by the division
51 of housing and community renewal, for regulated housing accommodations.
52 § 3. Section 26-512 of the administrative code of the city of New York
53 is amended by adding a new subdivision h to read as follows:
54 h. Notwithstanding any contrary provisions of this law, on and after
55 the effective date of this subdivision, where cooperative or condominium
56 ownership of a housing accommodation no longer exists (deconversion),
A. 2619--A 4
1 pursuant to subdivision three of section 233-c of the real property law,
2 the initial rent shall be the most recent legal regulated rent for the
3 housing accommodation adjusted by all lawful annual guideline amounts
4 for one-year leases established by the rent guidelines board that would
5 have been permitted had the housing accommodation been continuously
6 subject to this law, but if the documentation necessary to reliably
7 identify the most recent legal regulated rent for the housing accommo-
8 dation is not available or is inappropriate, such initial amount shall
9 be determined by the division of housing and community renewal based on
10 data, compiled by and using sampling methods determined by the division
11 of housing and community renewal, for regulated housing accommodations.
12 § 4. Severability clause. If any clause, sentence, paragraph, subdi-
13 vision, section or part of this act shall be adjudged by any court of
14 competent jurisdiction to be invalid, such judgment shall not affect,
15 impair, or invalidate the remainder thereof, but shall be confined in
16 its operation to the clause, sentence, paragraph, subdivision, section
17 or part thereof directly involved in the controversy in which such judg-
18 ment shall have been rendered. It is hereby declared to be the intent of
19 the legislature that this act would have been enacted even if such
20 invalid provisions had not been included herein.
21 § 5. This act shall take effect immediately, and shall apply to all
22 existing leases and all leases issued, renewed, modified, altered or
23 amended on or after such date; provided, however, that the amendments to
24 section 26-512 of chapter 4 of title 26 of the administrative code of
25 the city of New York made by section three of this act shall expire on
26 the same date as such law expires and shall not affect the expiration of
27 such law as provided under section 26-520 of such law.
