S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4416
 
                        2017-2018 Regular Sessions
 
                             I N  S E N A T E
 
                             February 14, 2017
                                ___________
 
 Introduced  by  Sen.  AVELLA -- read twice and ordered printed, and when
   printed to be committed to the Committee on Cities
 
 AN ACT to amend the administrative code of the  city  of  New  York,  in
   relation to enacting the "small business survival act"
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Short title. This act shall be known and may  be  cited  as
 the "small business survival act".
   § 2. Legislative intent. The legislature finds that the small business
 sector  of  the  city  of New York remains vulnerable at a time when New
 York city is more dependent than ever on small business for  job  growth
 and  revenues. The New York city commercial rental market has been nega-
 tively influenced by speculators for such an  extended  period  of  time
 that  the interest of small businesses and job creation, and the broader
 general economic interest of the city, are being harmed. An unacceptable
 number of established small businesses are being forced out of  business
 solely  as  a result of the commercial lease renewal process.  Whereby a
 breakdown has taken place in normal processes of bargaining and  freedom
 of  contract  has become an illusory concept during the commercial lease
 renewal process.   The  current  commercial  rental  market  results  in
 unjust,  unreasonable, and oppressive leases for the payment of rent for
 commercial space in New York city.  Landlords  continue  to  exact  such
 agreements from tenants under stress of prevailing market conditions and
 unequal  bargaining  power,  without  any  tenants'  rights to allow for
 bargaining in good faith to arrive at fair and reasonable  lease  terms.
 The  absence of legal protection for the interests of commercial tenants
 in the lease renewal process has unnecessarily accelerated  the  closing
 of  small businesses and resulted in lost jobs, lost tax revenues caused
 higher inflation and cost of living rates, decreased job growth opportu-
 nities for New Yorkers and community instability. It is  the  intent  of
 the legislature, through this legislation, to give small businesses some
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD00821-01-7

 S. 4416                             2
 
 rights in the commercial lease renewal process, and therefore, a measure
 of  predictability of future costs through a two-step procedure of medi-
 ation and, if necessary, arbitration for  negotiating  commercial  lease
 renewals.    This  process  would create a fair negotiating environment,
 which would result in more reasonable and fair lease terms to help small
 businesses survive and encourage job retention and growth in the city of
 New York.
   § 3. Title 22 of the administrative code of the city of  New  York  is
 amended by adding a new chapter 10 to read as follows:
                                 CHAPTER 10
                COMMERCIAL LEASE ARBITRATION AND MEDIATION
 SECTION 22-1001 SCOPE.
         22-1002 DEFINITIONS.
         22-1003 MANNER OF SERVICE.
         22-1004 RENTAL GUIDELINES.
         22-1005 SECURITY DEPOSITS.
         22-1006 RETALIATION.
         22-1007 WAIVER.
         22-1008 EVALUATION.
         22-1009 PENALTIES.
         22-1010 INCONSISTENCY WITH OTHER LAWS.
   § 22-1001 SCOPE. THIS CHAPTER SHALL APPLY ONLY TO ALL COMMERCIAL LEASE
 RENEWALS FOR COMMERCIAL PREMISES. ON ANY OCCASION WHEREIN A LANDLORD AND
 TENANT  ARE  REQUIRED  TO  NEGOTIATE  THE  TERMS  OF A LEASE RENEWAL FOR
 COMMERCIAL  USES  THE  PROVISIONS  OF  THIS  CHAPTER  SHALL  APPLY.  THE
 PROVISIONS  OF  THIS  CHAPTER  SHALL  APPLY  TO ANY LANDLORD AND CURRENT
 TENANT WHOSE LEASE EXPIRED ON OR AFTER JULY FIRST,  TWO  THOUSAND  EIGH-
 TEEN.
   §  22-1002  DEFINITIONS. A. "ADMINISTERING AGENCY" SHALL MEAN ANY CITY
 AGENCY, OFFICE, DEPARTMENT, DIVISION, BUREAU OR INSTITUTION  OF  GOVERN-
 MENT,  THE  EXPENSES OF WHICH ARE PAID IN WHOLE OR IN PART FROM THE CITY
 TREASURY, AS THE MAYOR SHALL DESIGNATE.
   B. "ARBITRATOR" SHALL MEAN THE PERSON CHOSEN BY THE PARTIES OR BY  THE
 AMERICAN  ARBITRATION  ASSOCIATION,  OR ANY OTHER RECOGNIZED ARBITRATION
 ORGANIZATION, TO RESOLVE A DISPUTE  BETWEEN  A  LANDLORD  AND  A  TENANT
 CONCERNING  A COMMERCIAL LEASE RENEWAL OR THE RENT TO BE CHARGED FOR THE
 COMMERCIAL PREMISES.
   C. "COMMERCIAL PREMISES" SHALL MEAN A BUILDING OR SPACE  OCCUPIED  FOR
 NON-RESIDENTIAL  PURPOSES  INCLUDING, BUT NOT LIMITED TO, MANUFACTURING,
 RETAIL, PROFESSIONAL SERVICES, OFFICES, ASSEMBLING, PROCESSING, CULTURAL
 AND NOT-FOR-PROFIT ENTITIES THAT ARE PRESENT IN THE CITY  OF  NEW  YORK,
 WHO HAVE A VALID COMMERCIAL LEASE.
   D.  "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.
   E. "MEDIATOR" SHALL MEAN ANY PERSON, AGREED UPON BY THE PARTIES TO THE
 DISPUTE  OR  CHOSEN BY THE AMERICAN ARBITRATION ASSOCIATION OR ANY OTHER
 RECOGNIZED MEDIATION OR ARBITRATION ASSOCIATION, TO ACT AS  AN  INTERME-
 DIARY  BETWEEN THE PARTIES. THE MEDIATOR SHALL NOT OFFER A BINDING DECI-
 SION CONCERNING THE MATTER IN DISPUTE.
   F. "NEGOTIATION" SHALL MEAN THE PROCESS OF CONFERRING WITH ONE ANOTHER
 THROUGH CONFERENCES, DISCUSSIONS AND COMPROMISE, TO ARRIVE AT A MUTUALLY
 AGREEABLE SETTLEMENT.
   G. "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.

 S. 4416                             3
 
   H. "SERVICES" SHALL MEAN THOSE FACILITIES WHICH ENHANCE THE USE OF THE
 COMMERCIAL PREMISES, INCLUDING, BUT NOT  LIMITED  TO,  REPAIRS,  MAINTE-
 NANCE,  PAINTING, HEAT, HOT AND COLD WATER, UTILITIES, ELEVATOR SERVICE,
 SECURITY DEVICES AND PATROLS, FURNISHINGS, STORAGE, JANITORIAL AND LAND-
 SCAPING  SERVICES,  REFUSE REMOVAL, INSURANCE PROTECTION, PARKING SPACES
 AND FACILITIES IN COMMON AREAS OF THE BUILDING OR PARCEL  IN  WHICH  THE
 RENTAL UNIT IS LOCATED.
   I.  "TENANT"  SHALL  MEAN TENANT, SUBTENANT, LESSEE, SUBLESSEE, OR ANY
 OTHER PERSONS LAWFULLY ENTITLED TO USE OR OCCUPANCY  OF  ANY  COMMERCIAL
 PREMISES.
   §  22-1003  MANNER  OF  SERVICE.  ALL PAPERS AND NOTICES WHICH, BY THE
 TERMS OF THIS CHAPTER ARE REQUIRED TO BE SERVED, SHALL BE  SERVED  BY  A
 PROCESS SERVER, OR SHALL BE SENT BY FIRST CLASS MAIL AND CERTIFIED MAIL,
 RETURN RECEIPT REQUESTED OR BY ANY EXPRESS MAIL SERVICE.
   §  22-1004  RENTAL  GUIDELINES. A. 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.  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 SHORTER OR LONGER DURATION  MAY  BE
 SELECTED.
   B.  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.
   C. ANY LANDLORD WHOSE OBLIGATIONS UNDER THIS CHAPTER  ARE  LIMITED  BY
 THE  PROVISIONS OF THIS SECTION SHALL NOT BE REQUIRED TO NEGOTIATE OR TO
 ARBITRATE AS OTHERWISE PROVIDED FOR IN THIS  CHAPTER  BUT  SHALL  REMAIN
 OBLIGATED  TO NEGOTIATE AND TO ARBITRATE A RENEWAL LEASE FOR SUCH PERIOD
 OF TIME FOR WHICH THE LANDLORD HAS A LAWFUL ABILITY TO RENT THE  COMMER-
 CIAL  PREMISES  TO  THE TENANT. THE LANDLORD SHALL PROVIDE NOTICE TO THE
 TENANT ONE HUNDRED EIGHTY DAYS BEFORE THE TERMINATION OF  THE  LEASE  OF
 THE  BASIS  ON  WHICH  THE  LEASE CANNOT BE EXTENDED FOR A FULL TEN-YEAR
 TERM.
   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;

 S. 4416                             4
 
   (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
 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 THE ADMINISTERING AGENCY OR BY A CIVIL
 COURT OF COMPETENT JURISDICTION THAT THE TENANT IS A GROSS AND  PERSIST-
 ENT  VIOLATOR  OF  NEW  YORK  CITY  TAX LAWS, OF ANY LICENSE OBLIGATIONS
 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 AS DETERMINED BY AN ARBITRATOR AS RESTITUTION FOR THE LOSS OF SUCH
 TENANT'S  BUSINESS.  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  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.
   E.  PROCEDURE  FOR  LEASE  RENEWALS.  (1) 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 NEGOTIATE THE RENEWAL OF THE  COMMER-
 CIAL 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. THE TENANT  IS  TO
 CONTINUE RENT PAYMENTS AS SET FORTH IN THE LEASE UNTIL THE PARTIES REACH
 AN  AGREEMENT  ON  A  LEASE  RENEWAL  OR  UNTIL  A DECISION IS OTHERWISE
 RENDERED THROUGH THE ARBITRATION OR MEDIATION PROCESSES DESCRIBED IN THE
 PROVISIONS OF THIS SUBDIVISION.   THE  FIRST  NINETY  DAYS  OF  THE  ONE
 HUNDRED  EIGHTY-DAY  NOTICE  PERIOD  IS FOR THE PURPOSE OF NEGOTIATIONS.
 ALTERNATIVELY, EITHER PARTY MAY COMPEL THE OTHER PARTY TO THE DISPUTE TO
 USE THAT NINETY-DAY PERIOD, OR ANY PART THEREOF,  FOR  THE  PURPOSES  OF
 MEDIATION. IF EITHER THE LANDLORD OR TENANT CHOOSES MEDIATION, HE OR SHE
 SHALL  NOTIFY THE OTHER PARTY THAT A MEDIATION SESSION IS REQUESTED. THE
 PARTIES SHALL CHOOSE A MEDIATOR WHO IS AGREEABLE TO  BOTH  THE  LANDLORD
 AND  TENANT,  OR IF NO SUCH PERSON IS AGREEABLE, THEN THE AMERICAN ARBI-
 TRATION ASSOCIATION SHALL APPOINT A MEDIATOR  OR  ANY  OTHER  RECOGNIZED

 S. 4416                             5
 
 MEDIATION  OR ARBITRATION ASSOCIATION. THE FULL COSTS OF MEDIATION SHALL
 BE EQUALLY SHARED BY BOTH PARTIES.  THE MEDIATOR SHALL NOTIFY THE  LAND-
 LORD  AND TENANT, NO MORE THAN TEN DAYS AFTER HIS OR HER APPOINTMENT, OF
 THE  DATE,  TIME,  PLACE  AND  RULES  OF THE HEARING. THE MEDIATOR SHALL
 FOLLOW HIS OR HER CUSTOMARY RULES AND MAY RENDER AN  OPINION  CONCERNING
 THE  DISPUTE, WHICH SHALL NOT BE BINDING ON THE PARTIES. IF AFTER NINETY
 DAYS OF NEGOTIATION AND ANY MEDIATION SESSIONS, THE LANDLORD AND  TENANT
 DO  NOT  REACH AN AGREEMENT ON A NEW LEASE, THEN THE TENANT IS TO NOTIFY
 THE AMERICAN ARBITRATION ASSOCIATION OR ANY OTHER  RECOGNIZED  MEDIATION
 OR  ARBITRATION  ASSOCIATION,  WITHIN FOURTEEN DAYS OF THE EXPIRATION OF
 THE FIRST NINETY DAY PERIOD, THAT AN ARBITRATION HEARING  IS  REQUESTED.
 FAILURE  BY THE TENANT TO NOTIFY THE AMERICAN ARBITRATION ASSOCIATION OR
 ANY OTHER RECOGNIZED MEDIATION OR ARBITRATION ASSOCIATION  WITHIN  FOUR-
 TEEN  DAYS OF THE EXPIRATION OF THE FIRST NINETY DAY PERIOD SHALL RESULT
 IN THE FORFEITURE OF THE TENANT'S RIGHT OF RENEWAL.
   (2) WHERE THE LANDLORD REFUSES TO  RENEW  A  LEASE  WITH  THE  CURRENT
 TENANT,  SUCH  LANDLORD IS TO NOTIFY THE TENANT A MINIMUM OF ONE HUNDRED
 EIGHTY DAYS BEFORE THE EXPIRATION OF THE LEASE THAT SUCH LANDLORD IS NOT
 GOING TO RENEW THE TENANT'S LEASE AND STATE THE REASON  OR  REASONS  FOR
 SUCH DENIAL IN DETAIL. FAILURE OF THE LANDLORD TO GIVE SUCH NOTICE SHALL
 SUBJECT  THE PARTIES TO THE PROVISIONS OF PARAGRAPH THREE OF THIS SUBDI-
 VISION. THE LANDLORD IS TO FURNISH THE TENANT WITH  ALL  PERTINENT  DATA
 SUPPORTING  SUCH  REASON OR REASONS. IF THE TENANT STILL WISHES TO CHAL-
 LENGE THE REFUSAL TO RENEW THE LEASE AND APPLY  FOR  A  RENEWAL  OF  THE
 LEASE, THEN THE TENANT MUST NOTIFY THE LANDLORD WITHIN THIRTY DAYS AFTER
 THE  RECEIPT  OF THE LANDLORD'S NOTICE OF HIS OR HER INTENT TO CHALLENGE
 THE REFUSAL AND SEEK ARBITRATION SOLELY ON THE  VALIDITY  OF  THE  LAND-
 LORD'S  GROUNDS  FOR DENIAL OF TENANTS' RIGHT TO RENEWAL ON THE ISSUE OF
 RENEWAL. THE TENANT SHALL THEN NOTIFY THE AMERICAN  ARBITRATION  ASSOCI-
 ATION  OR  ANY  OTHER  RECOGNIZED  MEDIATION OR ARBITRATION ORGANIZATION
 WITHIN FOURTEEN DAYS AFTER NOTIFICATION BY THE TENANT  TO  THE  LANDLORD
 THAT  A HEARING IS REQUESTED TO DETERMINE WHETHER THE LANDLORD'S GROUNDS
 FOR REFUSAL ARE VALID.
   (3) IF AN ARBITRATION HEARING IS REQUESTED PURSUANT  TO  EITHER  PARA-
 GRAPHS ONE OR TWO OF THIS SUBDIVISION:
   (A) THE LANDLORD AND TENANT SHALL CHOOSE THE ARBITRATOR FROM A LIST OF
 ARBITRATORS  PROVIDED  BY  THE  AMERICAN  ARBITRATION ASSOCIATION OR ANY
 OTHER RECOGNIZED MEDIATION OR ARBITRATION ASSOCIATION.  IF  THEY  CANNOT
 AGREE  ON  THE  SELECTION  OF  THE  ARBITRATOR WITHIN THIRTY DAYS OF THE
 TENANT'S NOTICE TO SUCH ASSOCIATION THAT A  HEARING  IS  REQUESTED,  THE
 TENANT  SHALL  NOTIFY  WITHIN  FOURTEEN  DAYS  SUCH  ORGANIZATION OF THE
 PARTIES' FAILURE TO MAKE A SELECTION AND SUCH  ARBITRATION  ORGANIZATION
 SHALL  DETERMINE  THE  ARBITRATOR  WITHIN  FIVE  DAYS OF RECEIPT OF SUCH
 NOTICE FROM THE TENANT.  BOTH PARTIES SHALL FOLLOW THE RULES ESTABLISHED
 BY THE ARBITRATION ASSOCIATION IN PREPARING FOR  AND  HOLDING  AN  ARBI-
 TRATION HEARING.
   (B)  THE ARBITRATOR SHALL NOTIFY BOTH PARTIES OF THE DATE, PLACE, TIME
 AND RULES OF THE HEARING WITHIN FOURTEEN DAYS OF RECEIPT  BY  THE  ARBI-
 TRATION ASSOCIATION OF THE REQUEST FOR A HEARING. THE HEARING SHALL TAKE
 PLACE  IN  THE  BOROUGH WHERE THE COMMERCIAL PREMISES ARE LOCATED UNLESS
 OTHERWISE AGREED TO BY THE LANDLORD AND TENANT. THE LANDLORD AND  TENANT
 SHALL  FURNISH  THE  ARBITRATOR WITH ALL RELEVANT DOCUMENTATION, AND THE
 ARBITRATOR SHALL CONDUCT A PRELIMINARY MEETING OR  CONFERENCE  TELEPHONE
 CALL  PRIOR TO THE HEARING TO REVIEW THE DATA AND FAMILIARIZE HIMSELF OR
 HERSELF WITH THE CASE. THE MATTERS THE ARBITRATOR SHALL DETERMINE DURING
 THE PRELIMINARY MEETING SHALL INCLUDE, BUT NOT BE LIMITED TO,  THE  NEED

 S. 4416                             6
 
 TO INSPECT THE PROPERTY REQUESTING ADDITIONAL DATA FROM EITHER PARTY AND
 ANY FACTS DEEMED RELEVANT TO THE ARBITRATOR, LIST OF POTENTIAL WITNESSES
 WITH  BACKGROUNDS  OF  EACH,  AND THE NEED TO HIRE EXPERT CONSULTANTS TO
 CERTIFY  THE  ACCURACY  OF  DATA.  THE ARBITRATOR MAY SEEK TO CONDUCT AN
 INSPECTION OF THE PROPERTY AFTER NOTIFYING BOTH PARTIES AT  LEAST  THREE
 DAYS  IN  ADVANCE OF THE INSPECTION AND INFORMING THEM OF THEIR RIGHT TO
 BE PRESENT DURING THE INSPECTION.
   (C) THE HEARING BEFORE THE ARBITRATOR MAY BE RECORDED BY DIGITAL, TAPE
 OR VIDEO DEVICE, AT THE REQUEST OF EITHER PARTY AND  AGREED  TO  BY  THE
 ARBITRATOR  AND  WHOSE  COSTS  WILL BE BORNE BY THE PARTY WHO DECIDED ON
 THIS METHOD TO CREATE A RECORD OF THE HEARING. IF BOTH  PARTIES  ARE  IN
 AGREEMENT,  THE  COSTS FOR RECORDING THE HEARING WILL BE SHARED EQUALLY.
 SUCH RECORDING MAY BE TRANSCRIBED UPON THE  REQUEST  OF  ANY  PARTY  WHO
 POSTS  IN  ADVANCE THE ESTIMATED COST OF THE TRANSCRIPTION. EITHER PARTY
 MAY PROVIDE, AT THEIR EXPENSE, A REPORTER TO TRANSCRIBE THE HEARING. THE
 OFFICIAL RECORD OF THE HEARING SHALL INCLUDE ALL DOCUMENTS AND OFFERS OF
 PROOF PRESENTED TO THE ARBITRATOR, THE WRITTEN DECISION OF THE  ARBITRA-
 TOR AND ANY TRANSCRIPT OF THE HEARING. THE LANDLORD AND TENANT WILL EACH
 BE  GIVEN  ADEQUATE  TIME  TO  PRESENT THEIR CASES, AS DETERMINED BY THE
 ARBITRATOR TO PRESENT TESTIMONY, WITNESSES, PICTURES, VIDEOS, DOCUMENTS,
 INCLUDING CHARTS, COMPARABLE RENT DATA AND ANY OTHER RELEVANT DATA. EACH
 PARTY SHALL BE ALLOWED TO CONFRONT AND CROSS-EXAMINE ADVERSE  WITNESSES.
 THE  ARBITRATOR CAN CHOOSE TO INVESTIGATE ANY ASPECT OF THE CASE TO HELP
 ARRIVE AT A DECISION.
   (D) FOR A DISPUTE BROUGHT BEFORE AN ARBITRATOR UNDER PARAGRAPH ONE  OF
 THIS  SUBDIVISION,  SUCH ARBITRATOR SHALL RENDER A WRITTEN DETERMINATION
 SETTING THE RENT TO BE PAID  DURING  A  RENEWAL  PERIOD  OF  TEN  YEARS,
 TOGETHER  WITH  THE  BASIS  FOR THE DETERMINATION OF THE RENT, AND SHALL
 NOTIFY THE PARTIES OF SUCH DETERMINATION NO LATER THAN THIRTY DAYS AFTER
 THE HEARING HAS BEEN CONCLUDED. FAILURE TO  NOTIFY  THE  PARTIES  WITHIN
 THIRTY  DAYS  SHALL NOT AFFECT THE ENFORCEABILITY OF SUCH DETERMINATION.
 ARTICLE SEVENTY-FIVE OF THE CIVIL PRACTICE LAW AND RULES  GOVERNS  ARBI-
 TRATION  PROCEDURE IN NEW YORK STATE. THEREFORE, THE RULING OF THE ARBI-
 TRATION WILL BE GOVERNED BY THIS NEW YORK STATE STATUTE.  SUCH  DETERMI-
 NATION  SHALL  BE  BASED ON (I) THE COST OF MAINTENANCE AND OPERATION OF
 THE ENTIRE PROPERTY INCLUDING LAND AND BUILDING IMPROVEMENTS,  INCLUDING
 ALL  SERVICE DEBT SUCH AS MORTGAGES, (II) THE KIND, QUALITY AND QUANTITY
 OF SERVICES FURNISHED BY THE LANDLORD, (III) THE CONDITION OF THE  SPACE
 INCLUDING CAPITAL IMPROVEMENTS MADE BY THE TENANT, (IV) CURRENT INTEREST
 RATES  ON  BANK  DEPOSITS  AND  UNITED  STATES GOVERNMENT BONDS, (V) THE
 CURRENT FAIR MARKET RATES FOR COMPARABLE PROPERTIES IN THE AREA IN WHICH
 THE PROPERTY IS  LOCATED,  (VI)  THE  LEASE  HISTORY  AND  ANY  RELEVANT
 SUBLEASE  HISTORY,  (VII)  THE  LONGEVITY  OF  THE  BUSINESS, (VIII) THE
 LOCATION OF THE BUSINESS, (IX) THE EXTENT TO WHICH THE BUSINESS IS BOUND
 TO ITS PARTICULAR LOCATION, (X) THE SIZE OF THE SPACE, (XI) THE COST  OF
 LEASING SIMILAR PREMISES WITHIN A ONE MILE RADIUS OF THE PROPERTY, (XII)
 THE  PAST TEN YEAR RENTAL MARKET HISTORY WITHIN A ONE MILE RADIUS OF THE
 PROPERTY, AS WELL AS, THE LENGTH OF TIME OF ANY CONSISTENT  REAL  ESTATE
 SPECULATION  OCCURRING  IN  THE  MARKET AND DEGREE OF REAL ESTATE SPECU-
 LATION FOR A PARTICULAR AREA WHICH  THE  BUSINESS  IS  LOCATED  IN,  THE
 EXISTENCE  OF EMPTY STOREFRONT PROPERTY FOR EXTENDED PERIODS OF TIME AND
 THE IMPACT UPON THE LOCAL COMMERCIAL RENTAL MARKET OF UNUSUAL CONDITIONS
 AND (XIII) ALL OTHER RELEVANT FACTORS.  THE  ARBITRATOR  SHALL  CONSIDER
 THAT  EACH SMALL BUSINESS AND LANDLORD RELATIONSHIP SHOULD BE DEALT WITH
 ON A CASE-BY-CASE BASIS. WHERE THE COMMERCIAL PREMISES IS LOCATED  IN  A
 MIXED-USE  BUILDING  WITH  LESS  THAN TWENTY-FIVE RESIDENTIAL UNITS, THE

 S. 4416                             7
 
 ARBITRATOR SHALL GIVE SPECIAL CONSIDERATION TO THE  CRITERIA  LISTED  IN
 ITEMS (I) AND (II) OF THIS SUBPARAGRAPH. WITHIN THIRTY DAYS OF THE HEAR-
 ING,  THE ARBITRATOR SHALL SEND THE DECISION AS TO THE RENT PRICE TO THE
 PARTIES  INVOLVED  BY CERTIFIED MAIL.  THE COSTS OF ARBITRATION SHALL BE
 BORNE EQUALLY BY LANDLORD AND TENANT.  ARTICLE SEVENTY-FIVE OF THE CIVIL
 PRACTICE LAW AND RULES GOVERNS ARBITRATION PROCEDURE IN NEW YORK  STATE.
 THEREFORE,  THE  RULING  OF THE ARBITRATION WILL BE GOVERNED BY THIS NEW
 YORK STATE STATUTE.
   (E) FOR A DISPUTE BROUGHT BEFORE AN ARBITRATOR UNDER PARAGRAPH TWO  OF
 THIS  SUBDIVISION,  SUCH ARBITRATOR SHALL RENDER A WRITTEN DETERMINATION
 STATING THE BASIS FOR SUCH DETERMINATION AND NOTIFYING  THE  PARTIES  OF
 SUCH  DETERMINATION NO LATER THAN THIRTY DAYS AFTER THE HEARING HAS BEEN
 CONCLUDED. FAILURE TO RENDER A  TIMELY,  WRITTEN  DETERMINATION  AND  TO
 NOTIFY PARTIES WITHIN THIRTY DAYS SHALL NOT AFFECT THE ENFORCEABILITY OF
 SUCH DETERMINATION. SUCH DETERMINATION SHALL BE BASED ON (I) APPROPRIATE
 LAWS  APPLICABLE  TO  COMMERCIAL SPACES; (II) THE TERMS OF THE LEASE AND
 COMPLIANCE THEREWITH; (III) RENTAL GUIDELINES AS SET FORTH BY THE ADMIN-
 ISTERING AGENCY; (IV) FOLLOW THE PROVISIONS OF  PARAGRAPHS  ONE  THROUGH
 EIGHT  OF  SUBDIVISION D OF THIS SECTION; AND (V) ANY OTHER RELEVANT AND
 MATERIAL FACTORS THAT THE ARBITRATOR SHALL DEEM PROPER. IF THE  ARBITRA-
 TOR  DECIDES  IN FAVOR OF THE LANDLORD, THEN THE TENANT SHALL HAVE UNTIL
 THE END OF THE CURRENT LEASE TO VACATE. IF  THE  ARBITRATOR  DECIDES  IN
 FAVOR  OF  THE  TENANT, THE PARTIES WILL BEGIN THE RENEGOTIATIONS OF NEW
 LEASE TERMS AND IF NECESSARY, THE MEDIATION PERIOD AS DETAILED IN  PARA-
 GRAPH  TWO  OF SUBDIVISION E OF THIS SECTION. THE MAXIMUM LENGTH OF TIME
 PERMITTED FOR THIS RENEGOTIATION/MEDIATION PERIOD WILL BE  REDUCED  FROM
 NINETY  DAYS  TO  THIRTY  DAYS  FROM THE DATE OF RECEIPT OF ARBITRATOR'S
 RULING. IF THE PARTIES HAVE NOT REACHED A MUTUAL AGREEMENT ON THE  TERMS
 OF  A  NEW  LEASE,  AND MEDIATION FAILED TO ACHIEVE AGREEMENT WITHIN THE
 THIRTY DAY PERIOD AFTER ARBITRATORS' RULING ON "RIGHT OF RENEWAL",  THEN
 THE  PARTIES  ARE TO PROCEED TO ARBITRATION AS DETAILED IN PARAGRAPH TWO
 OF SUBDIVISION E OF THIS SECTION.
   (F) THE ARBITRATOR'S DECISION SETTING THE RENT PRICE  SHALL  BE  FINAL
 AND  BINDING  ON  BOTH PARTIES EXCEPT AS PROVIDED HEREIN, AND THEY SHALL
 ENTER INTO A LEASE INCORPORATING SUCH RENT WHICH LEASE DOES NOT DIMINISH
 ANY SERVICES PROVIDED BY THE LANDLORD PURSUANT TO  THE  EXISTING  LEASE.
 SUCH  RENEWAL LEASE SHALL BE ENTERED INTO BY THE TERMINATION DATE OF THE
 CURRENT LEASE AND SHALL COMMENCE AT THE TIME OF EXPIRATION OF THE EXIST-
 ING LEASE. IF, HOWEVER, THE TENANT ELECTS NOT TO PAY THE RENT SET BY THE
 ARBITRATOR, THEN THE LANDLORD AND TENANT SHALL  NOT  ENTER  INTO  A  NEW
 LEASE AGREEMENT OR RENEW THE EXISTING LEASE.
   (G)  IF,  PURSUANT  TO  SUBPARAGRAPH (F) OF THIS PARAGRAPH, THE TENANT
 ELECTS TO NOT PAY THE RENT SET BY THE ARBITRATOR,  THE  TENANT  WILL  BE
 ALLOWED  TO REMAIN IN POSSESSION AT A RENT NO GREATER THAN A TEN PERCENT
 INCREASE OF THE AVERAGE RENT CHARGED DURING THE FINAL TWELVE  MONTHS  OF
 THE  LAST  RENTAL  AGREEMENT  BETWEEN  THE  LANDLORD AND TENANT FROM THE
 TERMINATION DATE OF THE EXISTING LEASE UNTIL  SUCH  DATE  ON  WHICH  THE
 TENANT  SHALL  REMOVE  HIS OR HER PROPERTY FROM THE PREMISES AS PROVIDED
 HEREIN. IN THE EVENT THE LANDLORD RECEIVES A  WRITTEN  BONA  FIDE  OFFER
 FROM  A PROSPECTIVE TENANT TO RENT THE PREMISES, THE LANDLORD MUST FIRST
 OFFER THE CURRENT TENANT THE OPTION OF ENTERING INTO A LEASE AT THE RENT
 AND OTHER TERMS AGREED TO BY THE PROSPECTIVE TENANT TO THE LANDLORD. THE
 LANDLORD IS TO NOTIFY THE TENANT OF SUCH  OFFER  WITHIN  THREE  DAYS  OF
 RECEIPT  OF  SUCH WRITTEN BONA FIDE OFFER. IF THE TENANT DECLINES TO PAY
 THE RENT OR FAILS TO ACCEPT THE OFFER WITHIN FOURTEEN DAYS OF RECEIPT OF
 THE LANDLORD'S NOTIFICATION TO THE TENANT OF SUCH OFFER, THEN THE TENANT

 S. 4416                             8
 
 HAS THIRTY DAYS, FROM THE DATE SUCH NOTICE IS RECEIVED, TO REMOVE  PROP-
 ERTY  FROM  THE COMMERCIAL PREMISES PROVIDED THAT THE LEASE HAS EXPIRED.
 IF THE TENANT ACCEPTS THE OPTION OF  FIRST  REFUSAL,  THE  LANDLORD  AND
 TENANT  SHALL  ENTER  INTO A LEASE BASED UPON THE TERMS OF THE BONA FIDE
 OFFER RECEIVED BY THE LANDLORD FROM THE PROSPECTIVE TENANT.
   § 22-1005 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.
   § 22-1006 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.
 PROOF  OF  RETALIATION  BY THE LANDLORD OCCURRING PRIOR TO OR DURING THE
 ARBITRATION PROCEEDING SHALL BE CONSIDERED BY THE ARBITRATOR IN MAKING A
 DETERMINATION AS TO THE RENT TO BE PAID.
   § 22-1007 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.
   § 22-1008 EVALUATION. AT THE END OF EACH FIFTH YEAR, THE ADMINISTERING
 AGENCY SHALL REPORT TO THE MAYOR AND THE COUNCIL ON THE EFFECTIVENESS OF
 THIS CHAPTER IN CARRYING OUT THE PURPOSES SET FORTH IN  THE  LEGISLATIVE
 FINDINGS.  THE  RECOMMENDATIONS  SHOULD  TAKE  INTO ACCOUNT THE EXISTING
 COMMERCIAL  RENTAL  MARKET  WHICH  INCLUDES  AMONG  OTHER  FACTORS   THE
 INFLATION  AND INTEREST RATES. THIS REPORT SHALL ALSO IDENTIFY ANY OTHER
 POSITIVE OR NEGATIVE EFFECTS OF THE LAW.
   § 22-1009 PENALTIES. A. A  LANDLORD  OR  TENANT  MAY  SEEK  INJUNCTIVE
 RELIEF  MANDATING  ARBITRATION  AND/OR  APPROPRIATE  DAMAGES AGAINST ANY
 LANDLORD OR TENANT WHO FAILS TO SUBMIT  VOLUNTARILY  TO  ARBITRATION  OR
 OTHERWISE FAILS TO ACT IN GOOD FAITH.
   B. ANY AND ALL LEGAL EXPENSES INCURRED BY ONE PARTY AS A RESULT OF ITS
 ATTEMPT  TO COMPEL THE OTHER PARTY TO COMPLY WITH THE PROVISIONS OF THIS
 CHAPTER MAY BE AWARDED TO THE APPROPRIATE PARTY BY THE ARBITRATOR  OR  A
 CIVIL COURT OF COMPETENT JURISDICTION.
   §  22-1010  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.
   § 4. 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.
   § 5. This act shall take effect on the one hundred thirtieth day after
 it shall have become a law.