Is a Form of Rent Control Coming To New York City’s Commercial Spaces?
Commercial landlords and tenants should be aware of a bill that could significantly impact the commercial leasing landscape in New York City. This proposal, named the Small Business Jobs Survival Act (“Act”), would require all commercial landlords to negotiate a new 10-year lease with a tenant whose lease expires on or after January 1, 2019. Although there are limited exceptions, such as where the tenant is performing an illegal activity on the premises or has failed to pay rent three times after written notice and a 30-day period to cure, this essentially means that all commercial tenants will have the right to renew their leases even if the lease does not give them the express right to do so. Such a requirement means that landlords lose their ability to free themselves of tenants who, for example, may pay their rent and may not be breaking any laws, but who have otherwise been an undesirable tenant.
In its present form, the bill would require a landlord to notify the tenant at least 180 days prior to the expiration of the lease of the landlord’s willingness to renegotiate a renewal. The first 90 days is allotted for negotiation, and either party may compel the other to use mediation during that time. If unsuccessful, the matter is then referred to the American Arbitration Association which then determines the rent. In addition to the added costs involved in the mediation/arbitration process and losing the ability to fix their own rent, landlords also lose their flexibility in lining up new tenants for the space while they await that process to unfold.
The bill also prevents landlords from retaliating against tenants who exercise their rights under the Act, and could subject landlords to actual and punitive damages, injunctive relief and attorney’s fees.
Finally, the bill caps a commercial security deposit at two months’ rent, once again limiting one of the significant ways in which a landlord can protect itself.
A public hearing is scheduled for October 22, 2018. Whether the bill is signed into law in this form, or some other form, remains to be seen.