NYC Lawmakers Consider Mandating Lease Extensions For Retailers

Commercial brokers and real estate lobbyists showed up to a New York City Council Committee on Small Business hearing Wednesday to push back on a bill that could guarantee retail tenants the right to stay in their spaces for up to a year following a lease expiration while capping their rents.

The Committee on Small Business can either send the bill, Intro 90, back to its sponsors for amendments or vote on it as it stands before referring it to the city council.

The legislation, dubbed the Storefront Business Bill of Rights by its sponsors, contains mandates that some advocacy groups say will help stabilize small businesses, like requiring written leases and providing models for leasing agreements in several languages.

The bill would also give tenants the right to a one-time lease extension if they can’t reach a renewal agreement with their landlord and limit landlords to increasing rent by a maximum of 10% during that period — an element that brokers and business groups said would destabilize the market for tenants and landlords alike.

“I support the council’s goal of protecting small businesses and improving transparency,” Cushman & Wakefield Executive Vice Chair Joanne Podell said during the hearing. “However, I have concerns that some provisions of Intro 90 will do the opposite.”

Versions of Intro 90 have been around since 2021 but haven’t received hearings, according to The Real Deal. But the latest version of the bill, introduced by Manhattan Council Member Gale Brewer in January, comes as Mayor Zohran Mamdani’s administration pushes to create more stability for small businesses.

Brewer’s bill has nine co-sponsors. It would apply to ground- and second-floor spaces used for retail sales and would provide standard leasing agreement language for tenants and landlords, which the business community has said would serve both parties. It requires landlords to provide a tenant written notice of intent to offer a renewal or that they don’t intend to renew 120 days before a lease’s expiration.

It also contains a requirement for landlords to provide information on costs, like utilities and insurance, for the past two years to the tenant, as well as two years of projected future costs. While providing information about past costs would be helpful for tenants, predicting future costs would be tricky for landlords, the Real Estate Board of New York said in a written testimonial shared with Bisnow ahead of the hearing.

But the most problematic part of the bill, industry members argued, is a mandate giving tenants the right to extend their leases for up to a year.

The right to a one-year extension would kick in if a tenant already has a lease agreement for more than one year but hasn’t reached a renewal agreement with the landlord 30 days before their lease expires. If the landlord already has a new tenant lined up for the space and informed the in-place occupant, that mandatory extension period shrinks to 90 days. 

Additionally, the landlord’s ability to raise the rent is capped at between 7% and 10% during any extension period, depending on how much notice the landlord has given the tenant. If a landlord doesn’t comply with the bill’s provisions, tenants could sue for up to 3% of the property’s assessed value, plus damages and attorney fees. 

Brewer said at the hearing that the extension requirement is necessary for tenants who are facing substantial rent increases as landlords try to take advantage of a competitive leasing market.

“The pressure of the chain stores, for lack of a better word, is so intense,” she said.

The proposed legislation comes as retail tenants are facing steadily climbing rents and an increasingly tight market. 

New York’s prime retail corridors ended the second quarter with their lowest average availability rate since 2017, at 11.6%, with just 164 storefronts available, according to JLL. Asking rents in many corridors are around 30% below pre-pandemic peaks but have been on the rise in most corners of Manhattan, with demand for space now spreading beyond the prime corridors, according to REBNY.

The vast majority of businesses in East Williamsburg’s Grand Street Business Improvement District rent their space, the organization’s executive director, Francesca Bruce, said during the hearing. While the area’s vacancy rate remains higher than the citywide average, tenants are still being squeezed between declining business and “exploding rents,” she said.

“The Storefront Business Bill of Rights levels a drastically unequal playing field, helping to slow the engines of speculation, commercial warehousing, gentrification and displacement,” Bruce said.

The mandatory one-year extension addresses an insignificant issue of retail tenants, Cushman & Wakefield Vice Chair Steven Soutendijk testified.

“Replacing a tenant means marketing the space, paying brokers, negotiating a new lease, and accepting the risk that the storefront may remain vacant,” he said. “I’ve seen time and time again that an owner will work with a proven tenant who has been there for years rather than start over with an unknown business.”

While the Manhattan Chamber of Commerce largely supports the bill, President and CEO Jessica Walker told Bisnow that she shares concerns over the one-year lease extension provision. 

In addition to potentially making it harder for small businesses to lease space, the extension could make it harder for landlords to refinance, she said. Around 35% to 40% of landlords have mortgages with covenants that require them to charge a minimum rent, meaning a rent cap would cause problems.

“One of the places where small businesses can be very vulnerable is at the point of lease renewal, so there are some things in this bill that support that,” she said. “We do not support the mandatory renewal provisions, which could actually, we think, be counterproductive.”