State lawmakers are again attempting to pass legislation that amounts to a giveaway for wealthy real estate investors under the guise of protecting the middle class.

State Sen. Liz Krueger and Assembly Member Linda Rosenthal have reintroduced their bill designed to provide unprecedented benefits to owners of cooperative apartments on ground-leased land and interject the state’s power into existing legal contracts by unilaterally changing previously negotiated rent provisions.

Across the city — but mostly in the wealthiest neighborhoods in Manhattan — there are cooperative apartment complexes on land that the building does not own. Instead, they have ground leases with an unrelated party and make rent payments.

These agreements are typically 99 years, with periods included to reassess land value and recalibrate payments. Co-op owners are aware of these ground lease arrangements when they purchase apartments, and the inclusion of a ground lease often means purchasers of co-ops get a better deal buying their own apartment due to higher ground rent payments.

Bill supporters claim it will protect cooperative owners not only from ground lease increases but will even keep them from being thrown into the street, as ground lease holders seek to demolish buildings and build new ones.

That’s preposterous. According to the state, if shareholders can’t come to terms with holders of their ground lease their apartment becomes rent stabilized. Nobody will be evicted.

No, this bill is about protecting rich real estate investors — including ultra-wealthy commercial landlords — in Manhattan, in Krueger and Rosenthal’s districts, who have lobbied vigorously for the bill for the second straight year and purchased apartments at a lower price because of the rent provision in the ground lease. If rent increase provisions are now cancelled, they’d get a windfall.

All ground lease co-op shareholders are made aware that ground rents might occasionally increase, that their apartments will lose value as the ground lease agreement approaches expiration, and that their ownership interest in the co-op will end when the long-term ground lease expires.

All of this is known at purchase and reiterated in annual financial statements, which are distributed annually to all apartment owners. Cooperatives in ground lease buildings are often cheaper than market rate because of this, and buyers have long benefitted from that discount.

Incredibly, some cooperative owners now say they had no idea they faced a looming ground lease reset when they bought their apartments. This is either untrue or an embarrassing admission that they did not pay attention to closing paperwork — hardly a likely scenario.

Further, this bill would seriously impair the reappraisal process in existing ground leases and interfere with any required negotiation. Last session, Albany leadership saw this for what it was and the bill died without a vote. But it has been resurrected: a zombie law promising rent control for the rich amid a genuine housing crisis. Is this what our Legislature should be focused on in the waning days of session?

But this law is worse than just being a billion-dollar giveaway to some of our wealthiest. It is also quite clearly unconstitutional, and passing it has the potential to throw contract law across the state into disarray. The Legislature injecting itself between two parties to rewrite preexisting contracts would create terrible precedent.

Rather than serving a compelling public purpose, this law would serve the special interests of a narrow, select band of constituents at the expense of others by enacting a permanent change to an existing contractual relationship and opening the possibility that no contract in the state would be safe from similar interference.

If lawmakers can alter this contract for spurious reasons, why not mortgages or car loans? If they decided that either side in an employment contract was making too much or too little, what would stop them from changing contracts for one side’s benefit?

This is a slippery slope that would impair the ability of reasonable people to do business and likely lead to years of lawsuits. This attempt to rewrite a ground lease — a binding contract — is simply unconstitutional.

Finally, passage of this law would impact the City of Yes program, part of which smartly encourages the conversion of office buildings to housing. But this bill would have a chilling effect on the value and financeability of any office buildings with ground leases, throwing a significant wrench into this widely applauded policy tool.

The state has many serious issues for Albany to address. It’s unfortunate that legislators continue to waste time and effort crafting a dubious, unconstitutional solution to a problem that does not really exist.

Neveloff is chair of the U.S. real estate practice at HSF Kramer (formerly Kramer Levin Naftalis & Frankel).

https://www.nydailynews.com/2025/06/11/albany-mustnt-meddle-in-ground-lease-contracts/