As seen in the Real Deal on January 23, 2025. Click here to view the full story online.
Lawmakers are reviving their fight to limit rent increases on ground lease co-ops.
Last year, in the final days of the legislative session, Sen. Liz Krueger amended a bill that would restrict ground-lease rent increases and grant co-op shareholders the right to renew the lease.
Despite that 11th hour momentum, the bill did not pass last year. Still, it was clear that supporters of the measure were not backing down from the fight — especially those whose ground lease is expiring in March of this year. The co-op board at Carnegie House has supported the legislation, and has sued to delay the reset of their ground lease, where the owners initially wanted to raise the rent from $4 million to $40 million, according to a lawsuit filed by the board. Court filings indicate the owners subsequently pitched $25 million, which is where the offer still stands, according to a source familiar with negotiations.
The parties are in arbitration, after a judge struck down the board’s attempt to halt the talks.
Opponents have argued that the measures wrongfully interfere in private contracts and provide a windfall for wealthy co-op shareholders who were able to buy their buildings at a steep discount because of the ground lease arrangement. (Supporters say many co-op shareholders are middle class.)
“Instead of focusing on the mountain of pressing issues faced by every day New Yorkers, policymakers have chosen to try — again — to legislate a windfall for some of the wealthiest New Yorkers while throwing contract law into chaos,” Real Estate Board of New York’s Zach Steinberg said in a statement.
Krueger and Assembly member Linda Rosenthal just reintroduced their bills in their respective chambers. In a statement, Krueger said the bill will “address the legal gaps facing ground lease co-op residents and provide much-needed protections.”
Here’s what these bills seek to do:
— Cap annual increases on ground rent at 3 percent or the Consumer Price Index, whichever is greater.
— Give shareholders the right to renew their ground leases on the same terms as their existing agreement for up to 30 years.
— Give the right of first refusal if the landowner decides to sell the underlying property. It would also override provisions in ground leases that prevent shareholders from borrowing money over certain thresholds.
What we’re thinking about: In her executive budget, Gov. Kathy Hochul has proposed extending the state’s millionaire’s tax. What do you think of that proposal, and what do you wish the governor included? Send a note to kathryn@therealdeal.com.