What's happening
This bill defines residential ground leases and sets rules for tenants' rights to encumber leases, requiring lessors to justify refusals.
Why it matters
Clarifies what constitutes a "residential ground lease,". making it easier for tenants, landlords, lenders, and courts to know when these new protections and rules apply—especially relevant for long-term tenants who build or renovate homes on leased land.
Empowers tenants to use their leasehold interest as collateral. (e.g., for a mortgage or loan) unless explicitly prohibited in the lease, which could make it easier for those on ground leases to access financing to build, improve, or renovate their homes.
Requires lessors to justify refusals to encumber a lease. by providing a written, reasonable cause within 15 days, protecting tenants from arbitrary or unexplained denials and promoting transparency in the landlord-tenant relationship.
Mandates that any cap on how much a tenant can encumber their lease must adjust annually with inflation,. ensuring that tenants' borrowing capacity keeps up with economic changes and cannot be eroded over time by outdated limits.
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Who cares
Headline styles
Protect Residential Ground Leases
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Substituted by A215
- Advanced to third reading
- 2nd report cal.
- 1st report cal.702
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Protect Tenant Ground Lease Rights
Vetoed · Sponsor Edward Braunstein
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
3987
2019-2020 Regular Sessions
IN SENATE
February 22, 2019
Introduced by Sen. STAVISKY -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary
AN ACT to amend the real property law, in relation to ground leases
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The real property law is amended by adding a new section 220-a to read as follows:
§ 220-a. Residential ground leases. 1. Definitions. For the purposes of this section only, a "residential ground lease" shall be defined as a rental agreement that:
(a) has a term of at least ten years;
(b) is for the use of real property, which may or may not include any improvements or structures, but shall not apply to real property owned as the common property of any Indian nation, tribe, or band as such lands are described under and protected by Indian law and/or Title 25 of the United States Code; and
(c) allows a tenant to construct or substantially improve, renovate, or rehabilitate structures or improvements that include one or more residential dwellings upon such real property.
2. Refinancing. (a) If any residential ground lease does not contain express provisions prohibiting a lessee from encumbering its interest in a residential ground lease, a lessee may encumber up to and including its entire interest in such residential ground lease. If such residential ground lease contains provisions restricting the lessee's ability to encumber its interest, the lessee must obtain the lessor's written permission prior to such encumbrance.
(b) If the lessee is required to obtain the lessor's permission to encumber the lessee's interest, the lessor may only refuse to grant such permission for reasonable cause and must provide the lessee with a written statement that sets forth the basis for the refusal within fifteen days of a written request for permission from the lessee.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02662-01-9
S. 3987 2
(c) Any residential ground lease provision that limits the amount a lessee could encumber its interest, up to and including its entire interest in such residential ground lease, shall also adjust such amount annually on the first day of October of each year by the change in the regional consumer price index for all urban consumers, New York-Northern New Jersey-Long Island, NY-NJ-CT-PA, as established the preceding August.
If a lessee has encumbered its interest in a residential ground lease, no adjustment pursuant to this paragraph that reduces the amount such lessee could receive shall be considered a breach of the residential ground lease. Any agreement by a lessee waiving or modifying the provisions as set forth in this paragraph shall be void as contrary to public policy.
§ 2. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the real property law, in relation to ground leases
Purpose or general idea of bill
Relates to ground leases.
Summary of specific provisions
Section 1 adds a new section 220-a to define a residential ground lease for the purpose of this section as a rental agreement that has a term of at least ten years; is for the use of real property, which may or may not include any improvements or structures; and allows a tenant to construct or substantially improve, renovate, or rehabilitate structures or improvements that include one or more residential dwellings upon such real property. This definition shall exclude real property owned as the common property of an Indian nation, tribe, or band as such lands are protected under federal code.
Read the full memo (654 words)
The new section also concerns the ability of holders of residential ground leases to refinance their property, and includes guidelines for lessors. For example, absent an express provision prohibiting a lessee from encumbering its interest, a lessee may encumber up to and including its entire interest in such residential ground lease. If a residential ground lease does contain provisions restricting the lessee's ability to encumber its interest, the lessee must obtain the lessor's written permission prior to such encumbrance.
Additionally, if the lessee is must receive the lessor's permission to encumber the lessee's interest, the lessor may only refuse to grant such permission for reasonable cause and must provide the lessee with a writ- ten statement that sets forth the basis for the refusal within fifteen days of a written request for permission from the lesSee.
Finally, any residential ground lease provision that limits the amount a lessee could encumber its interest, up to and including its entire interest in such residential ground lease, shall also adjust such amount annually on the first day of October of each year by the change in the regional consumer price index for all urban consumers, New York-Northern New Jersey-Long Island NY-NJ-CT-PA, as established the preceding August. If lessee has encumbered its interest in a ground lease, no adjustment that reduces the amount such lessee could receive shall be considered a breach of the ground lease.
Any agreement by a lessee waiving or modifying the provisions as set forth in this paragraph shall be void as contrary to public policy.
Section 2 provides the effective date.
Justification
Some co-ops in New York City are constructed on land owned by a holding company. The holding company leases the land to co-ops for a stated term sometimes as long as 99-years. Under the terms of the lease, some hold- ing, companies may place restrictions on the lessee's ability to encum- ber its interest by refinancing. In recent times, many co-ops have sought to take advantage of favorable interest rates to refinance and modernize in order to meet mandated requirements of the City of New York. Despite the fact that it is finan- cially prudent for a co-op to undergo refinancing, there have been instances where the landlord exercises their contractual right to deny new borrowing. This bill would require that when rejecting a request to refinance, the landlord mast give a reason for such a denial. Requiring the landlord to offer a justification for denial of refinancing would ensure that both parties are negotiating in good faith, as intended under the contract.
This bill would also adjust the amount that the encumbrance placed on the property in accordance with the regional consumer price index. The limits placed on many leases may have been appropriate at the time the lease was conveyed, but as a result of inflation, the maximum allowable encumbrance in many leases are likely out of date and must keep up with the current economic climate.
Prior legislative history
2018: S.5219 referred to Judiciary; / A.353 - passed Assembly.
Fiscal implications
None to state.
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.