senate Bill S5245A

2013-2014 Legislative Session

Relates to ground leases

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to judiciary
Jun 11, 2013 print number 5245a
amend and recommit to judiciary
May 15, 2013 referred to judiciary

Bill Amendments

Original
A (Active)
Original
A (Active)

S5245 - Bill Details

See Assembly Version of this Bill:
A7269A
Current Committee:
Law Section:
Real Property Law
Laws Affected:
Add §220-a, RP L

S5245 - Bill Texts

view summary

Relates to ground leases.

view sponsor memo
BILL NUMBER:S5245

TITLE OF BILL: An act to amend the real property law, in relation to
ground leases

PURPOSE OR GENERAL IDEA OF BILL: Relates to ground leases.

SUMMARY OF SPECIFIC PROVISIONS:

Section 1 defines ground lease for the purpose of this section as a
rental agreement that has a term of at least ten years; is for the use
of real property, which may or may not include any improvements or
structures; and allows a tenant to construct or substantially improve,
renovate, or rehabilitate structures or improvements upon such real
property.

Section 2 concerns the ability of holders of ground leases to
refinance their property, and includes guidelines for lessors. For
example, absent an express provision prohibiting a lessee from
encumbering its interest, a lessee may encumber up to and including
its entire interest in such ground lease If a ground lease does
contain provisions restricting the lessee's ability to encumber its
interest, the lessee must obtain the lessor's written permission prior
to such encumbrance.

Additionally, if the lessee is must receive the lessor's permission to
encumber the lessee's interest, the lessor may only refuse to grant
such permission for reasonable cause and must provide the lessee with
a written statement that sets forth the basis for the refusal within
fifteen days of a written request for permission from the lessee.

Finally, any ground lease provision that limits the amount a lessee
could encumber its interest, up to and including its entire interest
in such ground lease, shall also adjust such amount annually on the
first day of October of each year by the change in the regional
consumer price index for all urban consumers, New York-Northern New
Jersey-Long Island NY-NJ-CT-PA, as established the preceding August.
If lessee has encumbered its interest in a ground lease, no adjustment
that reduces the amount such lessee could receive shall be considered
a breach of the ground lease.

Any agreement by a lessee waiving or modifying the provisions as set
forth in this paragraph shall be void as contrary to public policy.

JUSTIFICATION: Some co-ops in New York City are constructed on land
owned by a holding company. The holding company leases the land to
co-ops for a stated term sometimes as long as 99-years. Under the
terms of the lease, some holding, companies may place restrictions on
the lessee's ability to encumber its interest by refinancing.

In recent times, many co-ops have sought to take advantage of
favorable interest rates to refinance and modernize in order to meet
mandated requirements of the City of New York. Despite the fact that
it is financially prudent for a co-op to undergo refinancing, there
have been instances where the landlord exercises their contractual
right to deny new borrowing, This bill would require that when
rejecting a request to refinance, the landlord mast give a reason for


such a denial. Requiring the landlord to offer a justification for
denial of refinancing would ensure that both parties are negotiating
in good faith, as intended under the contract,

This bill would also adjust the amount that the encumbrance placed on
the property in accordance with the regional consumer price index.
The limits placed on many leases may have been appropriate at the time
the lease was conveyed, but as a result of inflation, the maximum
allowable encumbrance on many leases are likely out of date and must
keep up with the current economic climate.

PRIOR LEGISLATIVE HISTORY: None.

FISCAL IMPLICATIONS: None to state.

EFFECTIVE DATE: This act shall take effect immediately.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5245

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                              May 15, 2013
                               ___________

Introduced  by Sen. STAVISKY -- read twice and ordered printed, and when
  printed to be committed to the Committee on Judiciary

AN ACT to amend the real property law, in relation to ground leases

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  The  real property law is amended by adding a new section
220-a to read as follows:
  S 220-A. GROUND LEASES. 1.  DEFINITIONS.  FOR  THE  PURPOSES  OF  THIS
SECTION A "GROUND LEASE" SHALL BE DEFINED AS A RENTAL AGREEMENT THAT:
  (A) HAS A TERM OF AT LEAST TEN YEARS;
  (B)  IS FOR THE USE OF REAL PROPERTY, WHICH MAY OR MAY NOT INCLUDE ANY
IMPROVEMENTS OR STRUCTURES; AND
  (C) ALLOWS A TENANT TO CONSTRUCT OR SUBSTANTIALLY  IMPROVE,  RENOVATE,
OR REHABILITATE STRUCTURES OR IMPROVEMENTS UPON SUCH REAL PROPERTY.
  2.  REFINANCING.  (A)  IF  ANY  GROUND  LEASE DOES NOT CONTAIN EXPRESS
PROVISIONS PROHIBITING A LESSEE  FROM  ENCUMBERING  ITS  INTEREST  IN  A
GROUND  LEASE,  A  LESSEE  MAY  ENCUMBER  UP TO AND INCLUDING ITS ENTIRE
INTEREST IN SUCH GROUND LEASE. IF SUCH GROUND LEASE CONTAINS  PROVISIONS
RESTRICTING  THE  LESSEE'S  ABILITY TO ENCUMBER ITS INTEREST, THE LESSEE
MUST OBTAIN THE LESSOR'S WRITTEN PERMISSION PRIOR TO SUCH ENCUMBRANCE.
  (B) IF THE LESSEE IS REQUIRED TO OBTAIN  THE  LESSOR'S  PERMISSION  TO
ENCUMBER THE LESSEE'S INTEREST, THE LESSOR MAY ONLY REFUSE TO GRANT SUCH
PERMISSION FOR REASONABLE CAUSE AND MUST PROVIDE THE LESSEE WITH A WRIT-
TEN  STATEMENT  THAT SETS FORTH THE BASIS FOR THE REFUSAL WITHIN FIFTEEN
DAYS OF A WRITTEN REQUEST FOR PERMISSION FROM THE LESSEE.
  (C) ANY GROUND LEASE PROVISION THAT LIMITS THE AMOUNT A  LESSEE  COULD
ENCUMBER  ITS  INTEREST, UP TO AND INCLUDING ITS ENTIRE INTEREST IN SUCH
GROUND LEASE, SHALL ALSO ADJUST SUCH AMOUNT ANNUALLY ON THE FIRST DAY OF
OCTOBER OF EACH YEAR BY THE CHANGE IN THE REGIONAL CONSUMER PRICE  INDEX
FOR  ALL  URBAN  CONSUMERS,  NEW  YORK-NORTHERN  NEW JERSEY-LONG ISLAND,
NY-NJ-CT-PA, AS ESTABLISHED THE PRECEDING AUGUST.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10836-01-3

S. 5245                             2

  IF A LESSEE HAS ENCUMBERED ITS INTEREST IN A GROUND LEASE, NO  ADJUST-
MENT  PURSUANT  TO  THIS  PARAGRAPH  THAT REDUCES THE AMOUNT SUCH LESSEE
COULD RECEIVE SHALL BE CONSIDERED A BREACH OF THE  GROUND  LEASE.    ANY
AGREEMENT  BY  A LESSEE WAIVING OR MODIFYING THE PROVISIONS AS SET FORTH
IN THIS PARAGRAPH SHALL BE VOID AS CONTRARY TO PUBLIC POLICY.
  S 2. This act shall take effect immediately.

S5245A (ACTIVE) - Bill Details

See Assembly Version of this Bill:
A7269A
Current Committee:
Law Section:
Real Property Law
Laws Affected:
Add §220-a, RP L

S5245A (ACTIVE) - Bill Texts

view summary

Relates to ground leases.

view sponsor memo
BILL NUMBER:S5245A

TITLE OF BILL: An act to amend the real property law, in relation to
ground leases

PURPOSE OR GENERAL IDEA OF BILL: Relates to ground leases.

SUMMARY OF SPECIFIC PROVISIONS:

Section 1 defines ground lease for the purpose of this section as a
rental agreement that has a term of at least ten years; is for the use
of real property, which may or may not include any improvements or
structures; and allows a tenant to construct or substantially improve,
renovate, or rehabilitate structures or improvements upon such real
property. This definition shall exclude real property owned as the
common property of an Indian nation, tribe, or band as such lands are
protected under federal code.

Section 2 concerns the ability of holders of ground leases to
refinance their property, and includes guidelines for lessors. For
example, absent an express provision prohibiting a lessee from
encumbering its interest, a lessee may encumber up to and including
its entire interest in such ground lease. If a ground lease does
contain provisions restricting the lessee's ability to encumber its
interest, the lessee must obtain the lessor's written permission prior
to such encumbrance.

Additionally, if the lessee is must receive the lessor's permission to
encumber the lessee's interest, the lessor may only refuse to grant
such permission for reasonable cause and must provide the lessee with
a written statement that sets forth the basis for the refusal within
fifteen days of a written request for permission from the lessee.

Finally, any around lease provision that limits the amount a lessee
could encumber its interest, up to and including its entire interest
in such ground lease, shall also adjust such amount annually on the
first day of October of each year by the chance in toe regional
consumer price index for all urban consumers, New York-Northern New
Jersey-Long Island NY-NJ-CT-PA, as established the preceding August.
If lessee has encumbered its interest in a ground lease, no adjustment
that reduces the amount such lessee could receive shall be considered
a breach of the around lease.

Any agreement by a lessee waiving or modifying the provisions as set
forth in this paragraph shall be void as contrary to public policy.

JUSTIFICATION: Some co-ops in New York City are constructed on land
owned by a holding company. The holding company leases the land to
co-ops for a stated term sometimes as long as 99-years. Under the
terms of the lease, some holding, companies may place restrictions on
the lessee's ability to encumber its interest by refinancing.

In recent times, many co-ops have sought to take advantage of
favorable interest rates to refinance and modernize in order to meet
mandated requirements of the City of New York. Despite the fact that
it is financially prudent for a co-op to undergo refinancing, there
have been instances where the landlord exercises their contractual


right to deny new borrowing. This bill would require that when
rejecting a request to refinance, the landlord mast give a reason for
such a denial. Requiring the landlord to offer a justification for
denial of refinancing would ensure that both parties are negotiating
in good faith, as intended under the contract.

This bill would also adjust the amount that the encumbrance placed on
the property in accordance with the regional consumer price index.
The limits placed on many leases may have been appropriate at the time
the lease was conveyed, but as a result of inflation, the maximum
allowable encumbrance in many leases are likely out of date and must
keep up with the current economic climate.

PRIOR LEGISLATIVE HISTORY: None.

FISCAL IMPLICATIONS: None to state

EFFECTIVE DATE: This act shall take effect immediately.

view full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 5245--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                              May 15, 2013
                               ___________

Introduced  by Sen. STAVISKY -- read twice and ordered printed, and when
  printed to be committed to the Committee  on  Judiciary  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

AN ACT to amend the real property law, in relation to ground leases

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The real property law is amended by adding  a  new  section
220-a to read as follows:
  S  220-A.  GROUND  LEASES.  1.  DEFINITIONS.  FOR THE PURPOSES OF THIS
SECTION ONLY, A "GROUND LEASE" SHALL BE DEFINED AS  A  RENTAL  AGREEMENT
THAT:
  (A) HAS A TERM OF AT LEAST TEN YEARS;
  (B)  IS FOR THE USE OF REAL PROPERTY, WHICH MAY OR MAY NOT INCLUDE ANY
IMPROVEMENTS OR STRUCTURES, BUT SHALL NOT APPLY TO REAL  PROPERTY  OWNED
AS  THE  COMMON  PROPERTY  OF  ANY INDIAN NATION, TRIBE, OR BAND AS SUCH
LANDS ARE DESCRIBED UNDER AND PROTECTED BY INDIAN LAW AND/OR TITLE 25 OF
THE UNITED STATES CODE; AND
  (C) ALLOWS A TENANT TO CONSTRUCT OR SUBSTANTIALLY  IMPROVE,  RENOVATE,
OR REHABILITATE STRUCTURES OR IMPROVEMENTS UPON SUCH REAL PROPERTY.
  2.  REFINANCING.  (A)  IF  ANY  GROUND  LEASE DOES NOT CONTAIN EXPRESS
PROVISIONS PROHIBITING A LESSEE  FROM  ENCUMBERING  ITS  INTEREST  IN  A
GROUND  LEASE,  A  LESSEE  MAY  ENCUMBER  UP TO AND INCLUDING ITS ENTIRE
INTEREST IN SUCH GROUND LEASE. IF SUCH GROUND LEASE CONTAINS  PROVISIONS
RESTRICTING  THE  LESSEE'S  ABILITY TO ENCUMBER ITS INTEREST, THE LESSEE
MUST OBTAIN THE LESSOR'S WRITTEN PERMISSION PRIOR TO SUCH ENCUMBRANCE.
  (B) IF THE LESSEE IS REQUIRED TO OBTAIN  THE  LESSOR'S  PERMISSION  TO
ENCUMBER THE LESSEE'S INTEREST, THE LESSOR MAY ONLY REFUSE TO GRANT SUCH
PERMISSION FOR REASONABLE CAUSE AND MUST PROVIDE THE LESSEE WITH A WRIT-
TEN  STATEMENT  THAT SETS FORTH THE BASIS FOR THE REFUSAL WITHIN FIFTEEN
DAYS OF A WRITTEN REQUEST FOR PERMISSION FROM THE LESSEE.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10836-03-3

S. 5245--A                          2

  (C) ANY GROUND LEASE PROVISION THAT LIMITS THE AMOUNT A  LESSEE  COULD
ENCUMBER  ITS  INTEREST, UP TO AND INCLUDING ITS ENTIRE INTEREST IN SUCH
GROUND LEASE, SHALL ALSO ADJUST SUCH AMOUNT ANNUALLY ON THE FIRST DAY OF
OCTOBER OF EACH YEAR BY THE CHANGE IN THE REGIONAL CONSUMER PRICE  INDEX
FOR  ALL  URBAN  CONSUMERS,  NEW  YORK-NORTHERN  NEW JERSEY-LONG ISLAND,
NY-NJ-CT-PA, AS ESTABLISHED THE PRECEDING AUGUST.
  IF A LESSEE HAS ENCUMBERED ITS INTEREST IN A GROUND LEASE, NO  ADJUST-
MENT  PURSUANT  TO  THIS  PARAGRAPH  THAT REDUCES THE AMOUNT SUCH LESSEE
COULD RECEIVE SHALL BE CONSIDERED A BREACH OF THE  GROUND  LEASE.    ANY
AGREEMENT  BY  A LESSEE WAIVING OR MODIFYING THE PROVISIONS AS SET FORTH
IN THIS PARAGRAPH SHALL BE VOID AS CONTRARY TO PUBLIC POLICY.
  S 2. This act shall take effect immediately.

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