Recently, New York City Council Speaker Corey Johnson proposed a new law called the “Small Business Jobs Survival Act.” The Mayor of New York City, Bill de Blasio, has questioned the legal underpinnings of the proposed law. The law has also been described as legalizing commercial rent control in New York City. What are the legal issues involved in commercial rent control, and how will it affect small business owners with commercial leases in New York? This blog post will address these questions.
Currently, unlike certain residential properties, commercial properties are not subject to rent regulation such as rent control and rent stabilization. Many residential apartments in New York City, as well as Westchester County, are subject to rent regulation under the rent control and rent stabilization statutes. What this means is that tenants living in apartments subject to these regulations, under certain conditions, are entitled to perpetual renewal leases which cannot increase rent more than a certain percentage as set by the New York City Rent Guidelines Board.
However, these regulations do not currently apply to commercial properties. If a store is being rented to a tenant, only the free market regulates the amount of rent to be paid, and whether the lease will be renewed. Let’s give an example. A grocery store signs a commercial lease for 5 years with the rent set at $4,000.00 per month. At the end of the lease term, if the parties have not signed a new lease, the tenant would be considered a holdover and subject to eviction. Absent any specific provisions in the current lease relating to a lease renewal, the landlord is under no legal obligation to offer a new lease to the tenant. The landlord is also free, at the end of the lease term, to request a rent increase to $7,000.00 per month. If the tenant does not agree to the new rental rate, again, they would have to vacate the premises or be subject to eviction.