Recent Legislation that Allows Residential Cooperatives with Long-Term Ground Leases to Renew their Lease at any Point
By Bonnie Reid Berkow
One of Adam Leitman Bailey, P.C.’s clients is a residential cooperative in Queens which is located on land held through a 99 year ground lease that expires in 2025. According to the terms of the ground lease the tenant may exercise its right to renew not more than 24 months and at least 18 months prior to expiration of the initial term. However, the remaining term of the lease is now less than 30 years, which impacts the coop’s ability and the ability of its shareholders to obtain financing, as many lenders require any underlying lease to extend for at least 30 years. The client asked Adam Leitman Bailey if it would be able to exercise its right to renew the lease early.
There are many cooperative residential buildings in New York City that are located on property held through a long-term ground lease – typically 99 years. When the ground lease is due to terminate in less than 30 years, many residential coops begin to find it difficult for the coop and its shareholders to obtain mortgage financing, as most lenders require any underlying lease to extend for at least 30 years to be co-terminus with the mortgage. This applies to a proprietary lease and to a ground lease. Many coops have the ability to extend the proprietary lease for another 50 or more years with shareholder vote. However, many ground leases provide that the period in which a renewal of the lease can be requested is limited to a specific period prior to its termination date, which may be more than 20 years in the future.
New York has recently passed legislation to address this difficulty associated with long term ground leases.
SR Bill S9721A/2023, which passed on Sept. 27, 2024, enables ground lease residential co-ops to extend or renew their leases at any point, provided their leases allow such extensions or renewals at the sole option of the tenant co-ops. The legislation protects private co-ops but explicitly excludes “excepted ground lease owners”. This means the protections do not apply to ground leases owned by the federal government, the State of New York, the City of New York, Indian nations, or approved 501(c)(3) charities that acquired the interest prior to January 1, 2024.
The Bill amends Real Property Law §233(c) and states as follows:
Notwithstanding any term of a subject residential cooperative ground lease to the contrary, if a subject residential cooperative ground lease authorizes the ground lease residential cooperative to renew or extend its lease at the sole option of the ground lease residential cooperative, then the ground lease residential cooperative may exercise such right to renew or extend at any time prior to the expiration of the subject residential cooperative ground lease in accordance with all other terms thereof.
The new approved legislation benefits coops subject to a long term ground lease as they can now exercise their option to renew the ground lease according to its terms for an additional 99 years at any point and do not have to wait until the end of the ground lease and the stated limitations on when the right to renew may be exercised. Thus, they will be able to renew the ground lease at any point when there is less than 30 years remaining on the term so that they will be able to satisfy lenders and prospective shareholders will not incur impediments in seeking financing.
If the ground lease provides that it will renew on the same terms and conditions, including amount of base rent, the coop will clearly benefit from early renewal.
However, if the ground lease provides for a significant rent increase on renewal that would impose a major financial burden on shareholders the coop may not want to exercise its option to renew early.
Another proposed Bill – NY State Senate Bill S2433/A2619 seeks further protections for residents in residential ground-lease cooperative apartment buildings. Key provisions are a limit on ground lease rent increases capping increases at 3% or Consumer Price Index, whichever is greater, after the 30th year, to prevent catastrophic financial burden on shareholders; provides that existing tenants shall be offered to convert to rental leases if a coop is forced to convert to a standard rental building; grants the coop the right of first refusal to purchase the underlying land if the property is offered for sale; and allows coops to borrow for repairs despite lease restrictions.
This Bill failed to pass in Assembly in 2025 but was re-introduced in January 2026. It has currently passed the Senate and is in Assembly.
According to the summary and justification explanation underlying the proposed legislation:
In recent years, a growing number of owners of the land under ground lease cooperatives have been demanding rent increases that are so excessive that they put the financial viability of the residential cooperatives at risk. There are currently ground lease residential cooperatives 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 cooperative buildings which are occupied primarily by middle-income residents on fixed incomes who have lived in their homes for decades.
If the ground lease contains terms that would result in a significant rent increase upon renewal, the coop may want to wait to see if the pending legislation which would cap rent increases passes before seeking renewal.
Bonnie Reid Berkow is a partner at Adam Leitman Bailey P.C. in the Coop/Condo Litigation Group.