NYC considering commercial rent regulation in small business leases

On Behalf of | Sep 22, 2021 | Commercial Leases, Rent Stabilization

Originally introduced in 2019, a bill that would bring commercial rent control is again before the New York City Council. Rent control for business properties was in effect in New York City from World War II through 1963, but not reinstated since then.

Key aspects of the current proposal:

  • A commercial rent guidelines board, similar to the existing residential rent guidelines board, would determine limits on yearly rent adjustments (measured by percentage). The mayor would appoint nine people to the board representing landlord, tenant and public interests.
  • The provisions would apply to small retail and office (10,000 square feet or fewer for both types) and manufacturing leases (25,000 square feet or fewer).
  • The law would not apply to existing leases. Instead, property owners would register new and renewing commercial rental agreements.
  • Property owners or commercial tenants could ask for a rent adjustment under “extraordinary circumstances.”

Supporters say the proposal would create financial stability for small businesses in gentrifying parts of the city that might otherwise get priced out by rent increases that favor large chains. But landlords, property owners and property managers largely oppose commercial rent control. While the pandemic may have hurt small businesses, some COVID-19 restrictions on evictions and rent collection have negatively impacted property owners. In addition, rent levels have dropped during these uncertain economic times.

The Real Estate Board of New York (REBNY) stands opposed to the bill, saying in written testimony that commercial rent control over small business leases would make property owners less inclined to rent to new businesses or agree to short-term leases, according to the Commercial Observer.

Legal questions also exist over whether commercial rent control in New York City would conflict with state law or be unconstitutional.

A Sept. 17 online hearing before the council’s Committee on Small Business is available for replay through a link on this page.

Borah, Goldstein, Altschuler, Nahins & Goidel, P.C., will watch this bill closely and can answer questions about its status or content.