Commercial property management in New York may see changes with new rent bill

New York City's commercial real estate landscape could shift with the adoption of a new bill protecting small businesses.

With the reintroduction of the Small Business Jobs Survival Act, tenants who rent from commercial property management companies would be empowered by stricter leasing standards, potentially impacting the health of the commercial real estate industry.

The Epoch Times reported that, if approved and singed into law, the Small Business Jobs Survival Act would allow commercial tenants arbitration rights to strike agreeable terms with their landlords, as well as the ability to sign a minimum lease agreement lasting 10 years.

The thoughts behind such a bill stem from a small business owner perspective. Currently, commercial rent is not regulated, unlike some residential terms. Small business owners, who invest a large amount of capital into the growth and success of their business – which relies on the commercial space it inhabits – would be severely undermined if a property manager decided to not renew a lease agreement or if rents were raised outside of the businesses budget.

"If you had to perpetually renew tenants' leases the city would be stagnant," said Robert Knakal, chairman of Massey Knakal Realty. "I think it's the stupidest idea I've ever heard of. … One of the beautiful things about the city is that it's constantly reinventing itself."

Understandably, those working in the commercial real estate industry think the bill would negatively influence flexibility and would detract from an ability to adapt to greater economic trends. 

The results
Smaller, independent businesses have less power to weather rent increases or slumps in transaction activity. Consequently, landlords often prefer corporate or franchise tenants. Such businesses have, as a result of their size, a greater ability to pay rent. The effect, then, is a New York City retail environment dominated by chains – a trend that is not welcomed by everyone. 

"What we are seeing is the mallinization of New York City," said Letitia James, city council member, at a press conference heralding the bill.

While some version of the bill has been floating around the legislative landscape since 1986, the most recent incarnation was written and introduced by Margaret Chin in December. Interestingly, Chin's bill doesn't guarantee lease renewal. However, it does contain a provision that makes room for rent to be determined by a third party that assess the market value of the immediate real state environment.

Still room for industry moves
In addition, if a business cannot pay their rent, they will not have the ability to sign a new lease. In the case that a landlord receives a proposal from a new commercial tenant offering a higher rent, the current tenant will need to offer the landlord a "better deal." If not – the landlord has a right to take on the new, higher rent tenant. 

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