Co-ops Protest New Rules on Commercial Lease Renewals

Stuart Saft is chairman of the Council of New York Cooperatives and Condominiums. This article appeared in Crain’s. It has been lightly edited. 

The City Council is considering a bill, innocuously titled the Small Business Jobs Survival Act (SBJSA), that would effectively prevent co-operative apartment buildings from managing their commercial spaces. Our review of city records shows approximately 1,500 co-ops have ground-floor commercial space, representing nearly 100,000 households across the city. All would be hurt by this proposal. 

While the bill is ostensibly meant to assist small retailers, it would thwart thousands of residential buildings’ ability to maintain control over the occupants of their retail space. Shareholders in co-ops would no longer be able to manage this important aspect of their building for the good of their communities and the surrounding neighborhood. 

Any New Yorker can tell you the city’s retail landscape has changed. Merchants large and small have been challenged by the growth of e-commerce, changing customer needs and tastes, and other market forces. Sadly, some have not survived, but others have used grit, ingenuity and technology to thrive. In addition, those of us who have tried to fill a retail space know all too well the costs associated with hiring expediters and attorneys. The time it takes to acquire myriad permits frequently delays an establishment from opening on time and, from the beginning, puts their business plans in jeopardy. 

Our member co-operatives and condominiums across the five boroughs are feeling the ripple effect of the changes in the retail market. Our member buildings are small-scale property owners who are now struggling to find viable and suitable tenants in an uncertain market where rents have declined and long-term leases that provide stable income for years no longer seem realistic. 

Notwithstanding these challenges, our buildings’ carrying costs are extremely high and unavoidable. The bills for property taxes, water and sewer charges, and ordinary maintenance arrive like clockwork and continue to rise. Co-ops with commercial spaces rely on the revenue they produce to help fund capital improvements, including clean-energy and resiliency upgrades. These revenues also support good-paying jobs for building service workers, and they keep maintenance fees reasonable for homeowners, thousands of whom are middle-class working people and senior citizens. 

As a 40-year-old nonprofit organization dedicated to supporting homeowners in multi-family buildings, the Council of New York Cooperatives and Condominiums has always empowered residents to protect their homes and their communities. If this bill passes, it would strip co-ops of their agency and force tenancies and lease terms on them through binding arbitration. 

We are disappointed that some proponents of the bill are engaging in a campaign of misinformation, arguing, for example, that building owners purposefully keep retail spaces vacant. With our high carrying costs, this argument makes no sense at all. Equally troubling is the proposal to levy a tax on vacant retail space. This makes as much sense as imposing a tax on the unemployed! 

Finally, at a time when many New York residents’ have lost the federal tax deduction of state and local taxes, the city needs creative inducements to keep retail stores occupied. It should not be intruding on the decision-making process of co-op boards and dictating to whom they should lease their retail space. The city certainly should not penalize homeowners with a vacancy tax if a suitable, economically viable tenant in a challenging retail environment can’t be found quickly. 

(Editor’s note: SBJSA would set all commercial lease renewals for 10 years, unless both parties agree to different terms; allow for arbitration by a third party to resolve disputes; and restrict co-ops from passing their property taxes on to commercial tenants. According to TakeBackNYC, a small-business advocacy group that supports the bill, “The government would not set the rent for even a single business.”)