S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   2459
 
                        2023-2024 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             January 26, 2023
                                ___________
 
 Introduced  by  M.  of  A.  EPSTEIN,  COLTON,  DINOWITZ -- read once and
   referred to the Committee on Cities
 
 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:
 
   Section 1. Title 22 of the administrative code of the city of New York
 is amended by adding a new chapter 13 to read as follows:
 
                                CHAPTER 13
                        COMMERCIAL RENT REGULATION
 
   § 22-1301 SCOPE. THIS CHAPTER SHALL APPLY TO ALL LEASES FOR COMMERCIAL
 PREMISES. ON ANY OCCASION WHEREIN A LANDLORD AND TENANT ARE REQUIRED  TO
 NEGOTIATE  THE  TERMS  OF  A LEASE FOR COMMERCIAL USES THE PROVISIONS OF
 THIS CHAPTER SHALL APPLY. THE PROVISIONS OF THIS CHAPTER SHALL APPLY  TO
 ANY  COMMERCIAL  LEASE ENTERED INTO ON OR AFTER OCTOBER FIRST, TWO THOU-
 SAND TWENTY-FOUR.
   § 22-1302 DEFINITIONS. A. "COMMERCIAL PREMISES" SHALL MEAN A  BUILDING
 OR SPACE OCCUPIED FOR NON-RESIDENTIAL PURPOSES INCLUDING, BUT NOT LIMIT-
 ED  TO,  MANUFACTURING, RETAIL, PROFESSIONAL SERVICES, OFFICES, ASSEMBL-
 ING, PROCESSING, CULTURAL AND NOT-FOR-PROFIT ENTITIES THAT  ARE  PRESENT
 IN THE CITY OF NEW YORK, WHO HAVE A VALID COMMERCIAL LEASE.
   B.  "LANDLORD" SHALL MEAN ANY OWNER, LESSOR, SUBLESSOR OR OTHER PERSON
 ENTITLED TO RECEIVE RENT FOR THE USE  OR  OCCUPANCY  OF  ANY  COMMERCIAL
 PREMISES, OR AN AGENT THEREOF.
   C. "NEGOTIATION" SHALL MEAN THE PROCESS OF CONFERRING WITH ONE ANOTHER
 THROUGH CONFERENCES, DISCUSSIONS AND COMPROMISE, TO ARRIVE AT A MUTUALLY
 AGREEABLE SETTLEMENT.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD06638-01-3
 A. 2459                             2
 
              

   D.  "RENT"  SHALL  MEAN  ANY  AND ALL CONSIDERATION, INCLUDING BUT NOT
 LIMITED TO PASS-ALONGS, RECEIVED BY THE LANDLORD IN CONNECTION WITH  THE
 USE OR OCCUPANCY OF ANY COMMERCIAL PREMISES.
   E.  "TENANT"  SHALL  MEAN TENANT, SUBTENANT, LESSEE, SUBLESSEE, OR ANY
 OTHER PERSONS LAWFULLY ENTITLED TO USE OR OCCUPANCY  OF  ANY  COMMERCIAL
 PREMISES.
   §  22-1303  RENTAL  GUIDELINES.  A.  THE  LEGAL REGULATED RENT FOR ANY
 VACANCY LEASE OF A COMMERCIAL PREMISES SHALL BE ESTABLISHED AND  MAY  BE
 INCREASED BY AN AMOUNT PROMULGATED BY THE RENT GUIDELINES BOARD PURSUANT
 TO  SECTION  22-1304 OF THIS CHAPTER. SUCH LEASES SHALL BE FOR A MINIMUM
 TERM OF TEN YEARS, PROVIDED HOWEVER, THAT AT THE  TENANT'S  OPTION,  AND
 WITH  THE WRITTEN APPROVAL OF THE LANDLORD, A LEASE OF SHORTER OR LONGER
 DURATION MAY BE SELECTED.
   B. ALL LEASES OF A COMMERCIAL PREMISES MAY BE RENEWED AT THE OPTION OF
 A TENANT WHO DID NOT LOSE THE RIGHT TO RENEW A LEASE UNDER  THE  GROUNDS
 DESCRIBED  IN SUBDIVISION D OF THIS SECTION. THE LEGAL REGULATED RENT TO
 BE PAID FOR ANY LEASE RENEWAL OF A COMMERCIAL PREMISES MAY BE  INCREASED
 BY  AN  AMOUNT  PROMULGATED  BY  THE  RENT  GUIDELINES BOARD PURSUANT TO
 SECTION 22-1304 OF THIS CHAPTER. SUCH LEASE  RENEWALS  SHALL  BE  FOR  A
 MINIMUM  TERM  OF  TEN  YEARS,  PROVIDED  HOWEVER,  THAT AT THE TENANT'S
 OPTION, AND WITH THE WRITTEN APPROVAL OF THE LANDLORD, A LEASE OF SHORT-
 ER OR LONGER DURATION MAY BE SELECTED.
   C. NO PERIOD OF LEASE EXTENSION REQUIRED BY THIS CHAPTER SHALL  EXTEND
 BEYOND THE LANDLORD'S LAWFUL ABILITY TO RENT THE PREMISES TO THE TENANT,
 WHERE SUCH ABILITY IS LIMITED BY:
   (1) THE OBLIGATION TO RENT THE PREMISES TO A THIRD PARTY PURSUANT TO A
 BONA  FIDE  LEASE ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF THIS CHAP-
 TER;
   (2) THE EXERCISE BY A THIRD PARTY OF A BONA FIDE OPTION  TO  RENT  THE
 PREMISES PROVIDED THAT SUCH OPTION WAS GIVEN PRIOR TO THE EFFECTIVE DATE
 OF THIS CHAPTER; OR
   (3) ANY OTHER LAWFUL REASON ARISING PRIOR TO SUCH EFFECTIVE DATE.
   D.  A TENANT SHALL LOSE THE RIGHT OF RENEWAL AND A LANDLORD MAY REFUSE
 TO RENEW A LEASE ONLY ON THE FOLLOWING GROUNDS:
   (1) THE TENANT HAS PERSISTENTLY DELAYED RENT PAYMENTS  WITHOUT  CAUSE.
 FOR THE PURPOSE OF THIS SUBDIVISION, "CAUSE" IS DEFINED AS THE WITHHOLD-
 ING  OF  RENTAL  PAYMENTS BY THE TENANT DUE TO THE ALLEGED VIOLATIONS OF
 THE RENTAL AGREEMENT BY THE LANDLORD. IN ORDER FOR THE  LANDLORD  TO  BE
 EXCUSED  FROM  RENEWAL ON THIS GROUND, THE LANDLORD MUST HAVE SERVED THE
 TENANT AT LEAST THREE PRIOR NOTICES DURING THE TERM OF THE LEASE TO  THE
 TENANT  FOR DEMAND OF PAYMENT WITHIN THIRTY DAYS, AND THEN SHOW THAT THE
 LESSEE HAS NOT PAID WITHIN SUCH THIRTY DAY PERIOD.  THE  LANDLORD  SHALL
 NOT SERVE SUCH NOTICE UNLESS THE RENT PAYMENT WAS IN ARREARS FOR A MINI-
 MUM OF FIFTEEN DAYS;
   (2)  THE TENANT USES THE COMMERCIAL PREMISES IN A MANNER SUBSTANTIALLY
 DIFFERENT FROM THAT DESCRIBED IN THE LEASE;
   (3) THE TENANT CONDUCTS OR PERMITS ANY FORM OF ILLEGAL ACTIVITY ON THE
 PREMISES;
   (4) THE TENANT HAS SUBSTANTIALLY BREACHED ANY  SUBSTANTIVE  OBLIGATION
 UNDER THE CURRENT LEASE AND HAS FAILED TO CURE SUCH BREACH WITHIN THIRTY
 DAYS FOLLOWING WRITTEN NOTICE TO CURE BY THE LANDLORD;
   (5) UPON THE TERMINATION OF THE CURRENT TENANCY, THE LANDLORD INTENDS,
 IN  GOOD FAITH, TO DEMOLISH OR SUBSTANTIALLY RECONSTRUCT THE PREMISES OR
 A SUBSTANTIAL  PART  THEREOF,  OR  TO  CARRY  OUT  SUBSTANTIAL  WORK  OR
 CONSTRUCTION  ON  THE  COMMERCIAL  PREMISES  OR SUBSTANTIAL PART THEREOF
 WHICH HE OR SHE COULD NOT REASONABLY DO WITHOUT OBTAINING POSSESSION  OF
 A. 2459                             3
 
 THE COMMERCIAL PREMISES.  THE LANDLORD SHALL NOTIFY THE TENANT OF HIS OR
 HER DECISION TO REOCCUPY THE COMMERCIAL PREMISES AT LEAST ONE YEAR PRIOR
 TO  THE  TERMINATION  OF THE LEASE. IN THE EVENT THAT THE LESSOR FRAUDU-
 LENTLY  INVOKES  THIS  JUSTIFICATION FOR A REFUSAL TO RENEW A COMMERCIAL
 LEASE, THE DEFRAUDED TENANT MAY COLLECT  TREBLE  DAMAGES  FOR  ANY  LOSS
 SUFFERED AS A RESULT OF SUCH ACTION;
   (6) THE CURRENT TENANCY WAS CREATED BY THE SUBLETTING OF THE PROPERTY,
 WHEREBY  THE  PRIME TENANT DID NOT NOTIFY THE LANDLORD BY CERTIFIED MAIL
 OF THE SUBTENANT'S EXISTENCE AND DID NOT OBTAIN THE WRITTEN  CONSENT  OF
 THE  LANDLORD. THIS GROUND IS VOID IF THE LANDLORD AND TENANT HAD AGREED
 IN THE LEASE TO ALLOW SUBLEASING RIGHTS WITHOUT THE CONSENT OF THE LAND-
 LORD AND ALL OBLIGATIONS OF THE  PRIME  TENANT  ON  THE  ISSUE  WERE  IN
 COMPLIANCE;
   (7)  IT  HAS  BEEN  DETERMINED  BY AN AGENCY WITH JURISDICTION OR BY A
 CIVIL COURT OF COMPETENT JURISDICTION THAT THE TENANT  IS  A  GROSS  AND
 PERSISTENT  VIOLATOR  OF  NEW  YORK  CITY TAX LAWS, OF ANY LICENSE OBLI-
 GATIONS RELATED TO THE USE OF THE PREMISES OR OF ANY LAWS OF THE CITY OF
 NEW YORK;
   (8) UPON THE TERMINATION OF THE CURRENT TENANCY, THE LANDLORD  INTENDS
 TO  OCCUPY  THE  RETAIL PREMISES IN ORDER TO CARRY OUT ITS OWN BUSINESS,
 WHICH CANNOT BE THE SAME TYPE OF BUSINESS THAT  THE  CURRENT  TENANT  IS
 OPERATING,  UNLESS  THE  LANDLORD  COMPENSATES THE TENANT AT FAIR MARKET
 VALUE. THE LANDLORD SHALL NOTIFY THE TENANT OF HIS OR  HER  DECISION  TO
 REOCCUPY  THE  PREMISES  AT  LEAST  ONE HUNDRED EIGHTY DAYS PRIOR TO THE
 TERMINATION OF THE LEASE. IN THE EVENT THAT  THE  LANDLORD  FRAUDULENTLY
 INVOKES  THIS  JUSTIFICATION  FOR A REFUSAL TO RENEW A COMMERCIAL LEASE,
 THE DEFRAUDED TENANT MAY COLLECT TREBLE DAMAGES FOR ANY LOSS SUFFERED AS
 A RESULT OF SUCH ACTION.
   E. WHERE THE LANDLORD AGREES TO RENEW THE LEASE OF THE CURRENT TENANT,
 SUCH LANDLORD SHALL NOTIFY THE TENANT AT LEAST ONE HUNDRED  EIGHTY  DAYS
 PRIOR  TO THE EXPIRATION OF THE LEASE OF HIS OR HER WILLINGNESS TO NEGO-
 TIATE THE RENEWAL OF THE COMMERCIAL LEASE AGREEMENT. IF THE LANDLORD AND
 TENANT AGREE, THEY MAY AT ANY TIME RENEGOTIATE A  NEW  LEASE,  WITH  ANY
 AGREED  TO TERMS AND CONDITIONS, NOT INCONSISTENT WITH THE PROVISIONS OF
 THIS CHAPTER.
   § 22-1304 RENT GUIDELINES BOARD. A. THE RENT GUIDELINES BOARD,  ESTAB-
 LISHED  PURSUANT  TO SECTION 26-510 OF THIS CODE, SHALL ESTABLISH ANNUAL
 GUIDELINES FOR LEGAL REGULATED RENT FOR VACANCY AND RENEWAL LEASES,  AND
 IN  DETERMINING  SUCH AMOUNTS SHALL CONSIDER, AMONG OTHER THINGS (1) THE
 ECONOMIC CONDITION  OF  THE  COMMERCIAL  REAL  ESTATE  INDUSTRY  IN  THE
 AFFECTED AREA INCLUDING SUCH FACTORS AS THE PREVAILING AND PROJECTED (I)
 REAL  ESTATE TAXES AND SEWER AND WATER RATES, (II) GROSS OPERATING MAIN-
 TENANCE COSTS (INCLUDING INSURANCE RATES,  GOVERNMENTAL  FEES,  COST  OF
 FUEL  AND  LABOR  COSTS),  (III)  COSTS  AND  AVAILABILITY  OF FINANCING
 (INCLUDING EFFECTIVE RATES OF INTEREST), (IV) OVER-ALL SUPPLY OF COMMER-
 CIAL PREMISES AND OVER-ALL VACANCY RATES, (2)  RELEVANT  DATA  FROM  THE
 CURRENT  AND  PROJECTED  COST OF LEASING FOR THE AFFECTED AREA, (3) SUCH
 OTHER DATA AS MAY BE MADE AVAILABLE TO IT.
   B. BEGINNING JULY FIRST, TWO THOUSAND TWENTY-FOUR, AND ANNUALLY THERE-
 AFTER, THE RENT GUIDELINES BOARD SHALL FILE  WITH  THE  CITY  CLERK  ITS
 FINDINGS FOR THE PRECEDING CALENDAR YEAR, AND SHALL ACCOMPANY SUCH FIND-
 INGS  WITH  A STATEMENT OF THE MAXIMUM RATE OR RATES OF RENT FOR COMMER-
 CIAL PREMISES SUBJECT TO THIS LAW, AUTHORIZED FOR LEASES  OR  COMMENCING
 ON  THE NEXT SUCCEEDING OCTOBER FIRST OR WITHIN THE TWELVE MONTHS THERE-
 AFTER. SUCH FINDINGS AND  STATEMENT  SHALL  BE  PUBLISHED  IN  THE  CITY
 RECORD.
 A. 2459                             4
 
   C.  THE  RENT  GUIDELINES  BOARD PRIOR TO THE ANNUAL ADJUSTMENT OF THE
 LEVEL OF FAIR RENTS PROVIDED FOR UNDER THIS SECTION FOR COMMERCIAL PREM-
 ISES COVERED BY THIS LAW, SHALL HOLD A PUBLIC HEARING  OR  HEARINGS  FOR
 THE  PURPOSE OF COLLECTING INFORMATION RELATING TO ALL FACTORS SET FORTH
 IN  SUBDIVISION  A  OF THIS SECTION.  NOTICE OF THE DATE, TIME, LOCATION
 AND SUMMARY OF SUBJECT MATTER FOR THE PUBLIC HEARING OR  HEARINGS  SHALL
 BE  PUBLISHED  IN  THE  CITY  RECORD DAILY FOR A PERIOD OF NOT LESS THAN
 EIGHT DAYS AND AT LEAST ONCE IN ONE OR MORE NEWSPAPERS OF GENERAL CIRCU-
 LATION AT LEAST EIGHT DAYS IMMEDIATELY PRECEDING EACH HEARING  DATE,  AT
 THE  EXPENSE  OF THE CITY OF NEW YORK, AND THE HEARING SHALL BE OPEN FOR
 TESTIMONY FROM ANY  INDIVIDUAL,  GROUP,  ASSOCIATION  OR  REPRESENTATIVE
 THEREOF WHO WANTS TO TESTIFY.
   D. MAXIMUM RATES OF RENT SHALL NOT BE ESTABLISHED MORE THAN ONCE ANNU-
 ALLY  FOR  ANY COMMERCIAL PREMISES WITHIN THE BOARD'S JURISDICTION. ONCE
 ESTABLISHED, NO SUCH RATE SHALL, WITHIN THE ONE-YEAR PERIOD, BE ADJUSTED
 BY ANY SURCHARGE, SUPPLEMENTARY ADJUSTMENT OR OTHER MODIFICATION.
   § 22-1305 SECURITY DEPOSITS. SECURITY DEPOSITS  SHALL  NOT  EXCEED  AN
 AMOUNT  EQUAL  TO TWO MONTHS RENT. ALL SECURITY DEPOSITS SHALL BE PLACED
 IN ESCROW IN AN INTEREST-BEARING ACCOUNT AT  A  FEDERALLY  INSURED  BANK
 LOCATED  IN  NEW  YORK STATE. THE TENANT SHALL BE NOTIFIED IN WRITING OF
 THE LOCATION OF SUCH ESCROW ACCOUNT. INTEREST PAID ON THE ACCOUNT  SHALL
 BE PAID IN FULL TO THE TENANT UPON TERMINATION OF THE LEASE.  THE AMOUNT
 OF  INTEREST  PAID  TO  THE TENANT SHALL EQUAL THE INTEREST PAID BY SUCH
 FEDERALLY INSURED BANK LESS ONE PERCENT FOR THE  LANDLORD'S  ADMINISTRA-
 TIVE COSTS.
   §  22-1306 RETALIATION. NO LANDLORD SHALL IN ANY WAY RETALIATE AGAINST
 ANY TENANT FOR THE TENANT'S ASSERTION OR EXERCISE OF  ANY  RIGHTS  UNDER
 THIS  CHAPTER.  ANY  SUCH RETALIATION MAY SUBJECT THE LANDLORD TO A SUIT
 FOR ACTUAL AND PUNITIVE DAMAGES, INJUNCTIVE RELIEF, AND ATTORNEY'S FEES.
   § 22-1307 WAIVER. NO PROVISION IN  ANY  LEASE,  RENTAL  AGREEMENT,  OR
 AGREEMENT  MADE  IN  CONNECTION THEREWITH WHICH WAIVES OR DIMINISHES ANY
 RIGHT OF TENANT UNDER THIS CHAPTER IS VALID.
   § 22-1308 INCONSISTENCY WITH OTHER LAWS. IN THE EVENT  OF  ANY  INCON-
 SISTENCY  WITH  ANY  OTHER  LAWS OF THE CITY OF NEW YORK, THIS LAW SHALL
 TAKE PRECEDENCE.
   § 2. Severability. If any clause, sentence, paragraph, section or part
 of this act shall be adjudged by any court of competent jurisdiction  to
 be  invalid  and  after  exhaustion  of all further judicial review, the
 judgment shall not affect, impair or invalidate the  remainder  thereof,
 but  shall  be  confined in its operation to the clause, sentence, para-
 graph, section or part of this act directly involved in the  controversy
 in which the judgment shall have been rendered.
   §  3.  This  act shall take effect on the ninetieth day after it shall
 have become a law. Effective immediately the addition, amendment  and/or
 repeal  of  any  rule  or regulation necessary for the implementation of
 this act on its effective date are authorized to be made  and  completed
 on or before such effective date.