NYC Aims to Protect Small Tenants During Lease Renewals

The commercial real estate industry is up in arms over a New York City Council bill that aims to change the city’s commercial lease renewal process. One effect of the proposed Small Business Jobs Survival Act would be the creation of a new city-supervised mediation program for lease renewal negotiations, which would permit landlords to decline a renewal only under certain circumstances.

Critics are concerned that in a market like New York, where commercial real estate investment is a driving market force, restraining the benefits of CRE investors will discourage that type of financial commitment. A possible effect would be lower property values, a major blow to an industry that’s still getting back on its feet after the recession.

The way it’s currently written, the bill would give any tenant the right to challenge a landlord’s nonrenewal, set up mediation on lease terms for all renewals, and limit security deposits to no more than two months’ rent.

Supporters of the bill feel that it would provide so-called “mom and pop” tenants with a better chance of survival because small businesses sometimes have difficulty during the lease renewal process and there currently is no recourse for them. The bill’s mediation terms would supposedly fix that, providing a way for landlords and tenants to settle disputes fairly.

Nine lawmakers have co-sponsored the bill, which could ultimately lead to a lawsuit challenging whether New York City has the authority to implement the changes. They say that protecting small businesses, which are often responsible for gentrification of previously rough neighborhoods, is a priority. Critics say there are other methods that could be used, rather than putting restrictions on landlords who already have taken risks on such tenants.