Establishes certain rights upon the expiration of ground lease residential cooperative apartment buildings

• Democratic49

◆ The sponsor's argument

Why Liz Krueger says this is needed

There are dozens of residential cooperative buildings throughout New York City containing thousands of homes that do not own the land under- neath. Instead, private property owners lease the land to ground lease cooperatives for set periods of time, and the buildings' residents make rent payments to the landowner through their monthly maintenance fees. When each building's lease is set to expire, an appraiser is tasked with evaluating the land's fair market value, which is then used to negotiate a rent increase between the landowner and the cooperative. Residential cooperatives have extremely limited power in these negotiations since the buildings cannot be physically moved, and existing laws do not provide the right to lease renewal, limits on rent increases, or any other protections. In this way, shareholders in ground lease cooper- atives are in a similar position to manufactured home residents who own their units but not the land on which they are located and cannot move the structures. In recent years, a growing number of owners of the land under ground lease cooperatives have been demanding rent increases that are so exces- sive that they put the financial viability of the residential cooper- atives at risk. There are currently ground lease residential cooper- atives that are facing rent increases as high as 1,000% from one year to the next. While ground rent increases of this magnitude would be extraordinarily difficult for any group of cooperative shareholders to absorb, they threaten the very viability of the many residential cooper- ative buildings which are occupied primarily by middle-income residents on fixed incomes who have lived in their homes for decades. A number of cooperative buildings with ground leases coming.up for renewal in.the coming years face default due to the rent increases being demanded and there is a lack of clarity about what happens if a cooperative building defaults or the ground lease is terminated. There is the possibility that this would leave longtime shareholders without their homes. Many owners of the land under ground lease cooperatives have also refused to allow buildings to borrow money required to perform critical repairs and/or capital improvements. Numerous ground leases contain language explicitly prohibiting cooperatives from taking on debt over certain levels regardless of the circumstances. In some cases, property owners have even prohibited ground lease cooperatives from borrowing funds to perform repairs ordered by New York City agencies. Given the high cost of maintaining aging buildings, along with the ongoing need to make capital improvements to comply with changing laws, improve energy efficiency and resiliency, and respond to emergencies, it is essential for ground lease cooperatives to have the ability to borrow funds when necessary. As the housing crisis worsens, it is crucial that New York provide basic protections to ground lease cooperative residents facing displacement from their homes due to exorbitant rent increases and extremely limited negotiating power in abnormal market conditions. This legislation simply provides transparency to shareholders if their cooperative build- ing defaults, and if the land under their homes is sold, by extends protections comparable to established state laws for manufactured home residents to ground lease residents to ground lease residential cooper- atives that similarly cannot move their buildings from the land under- neath.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.