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What Implications Does the New York State Ground Lease Bill, S7825A, Hold for Cooperative Shareholders in New York?

Co-ops and Condos

Cooperatives that have ground leases are less desirable because shareholders are subject to the whims of the party that owns the land upon which the cooperative is built. This can manifest in several ways, such as steep rent increases, property modification restrictions, and lease renewal uncertainty. Recognizing these challenges, the New York State legislature is considering legislation known as Ground Lease Bill S7825A. If passed, the bill will amend New York’s real property law to provide protections for shareholders of cooperative apartment buildings with ground leases. These protections are designed to mitigate uncertainties and vulnerabilities associated with ground leases, thereby enhancing stability, control, and autonomy over shareholders’ homes.

The Key Provisions Include:

  1. Granting residents the right to lease renewal and the right of first refusal if the landowner decides to sell or transfer the land.
  2. Limiting annual rent increases to 3% or the Consumer Price Index after the thirtieth anniversary of the initial ground lease.
  3. Allowing residential cooperatives to borrow money for repairs and capital improvements, even if prohibited in the ground lease, unless the landowner denies consent within 15 days.

New York State Senator, Liz Krueger, amended the bill to clarify that the rent cap does not cover escalations pertaining to “additional rent,” including maintenance fees, property taxes, and related building expenses. The Condominium and Cooperative lawyers at Guzov, LLC are here to answer questions that will undoubtedly arise should S7825A be enacted into law.
If you would like to discuss the Ground Lease Bill, ground leases, or any issues relating to cooperatives and condominiums, please contact us to schedule a consultation.

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