BILL NUMBER:  S5219

 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.

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 written 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 Foropq,for a
stated term sometimes as long as 99-years. Under the terms of the
lease, some holding, companies may place restrictions on the lessee's
ability to encumber 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 financially 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 :

this bill was previously introduced.

 FISCAL IMPLICATIONS :

None to state.

 EFFECTIVE DATE :
This act shall take effect immediately.