BILL NUMBER: S2433A
SPONSOR: KRUEGER
 
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 residents to ground lease residential cooper-
atives that similarly cannot move their buildings from the land under-
neath.
 
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.

Statutes affected:
S2433: 233-c real property law
S2433A: 233-c real property law