The tall towers of Billionaire’s Row line the midtown skyline.
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New York, June 15, 2025 – A bill currently moving through the state legislature, designed to protect co-op owners, is facing scrutiny as a NYC real estate lawyer claims it might very well be unconstitutional.
This proposed legislation, backed by state lawmakers, intends to grant more rights to co-op owners, sparking debate over its potential impact on established real estate contracts.
- The bill, S2433/A2619, seeks to give co-op owners more rights.
- A real estate lawyer argues the bill is unconstitutional.
- The legislation could impact how ground leases and co-ops function in the city.
The proposed bill, S2433/A2619, sponsored by state Senator Liz Krueger and Assembly Member Linda Rosenthal, aims to bolster the rights of those who own co-operative apartments, tho it doesn’t extend to the land beneath these properties. Ther are many co-op buildings in NYC. As part of this design, renters pay monthly maintenance fees to landowners who provide a ground lease.
Anita Laremont, a partner at the law firm of Fried Frank and member of the Board of Governors of the Real Estate Board of New York, argues that the bill, which has already passed the state Senate, is unconstitutional. According to Laremont, the bill woudl mandate that tenants secure leases under rent stabilization law and also provide them the right of first refusal if the ground lease is terminated.
“Those two things are inserting new structures into the relationship between the ground lessor and the cooperative,” laremont said. “And that is what is unconstitutional. If you insert new relationships there that were not there when they agreed to become cooperatives, then you are doing something that is unconstitutional as you are changing that relationship.”
Contracts are supposed to be solid and reliable, according to laremont.
“When parties enter into a contract, they really have to know that they can rely upon it,” she said.
Contract Law Risks in NYS
Other sources suggest potential impacts beyond contract law. If the state legislature can meddle with ground leases and co-ops, it could set a precedent for interfering with other everyday contracts used by New Yorkers.
Rosenthal, chair of the Assembly’s housing committee, said attorneys have fought against the legislation, arguing it would prevent New Yorkers from paying exorbitant maintenance increases.
“From the very start, big real estate, including one of Donald Trump’s very own attorneys, vehemently opposed and spread misinformation about my bill,” she said. “Landowners can rationalize homelessness however they want, but their facetious argument is not going to stop me from protecting New Yorkers from triple-digit maintenance increases. With more than 10,000 ground lease co-ops in New York, including over 4,000 in Queens alone, staving off mass foreclosures during an affordability crisis shouldn’t be up for debate.”
Krueger has been contacted for comment.
The bill points out co-ops have limited say in negotiations because current laws do not provide lease renewal rights, limits on rent increases, or other protections when a lease expires.
“In this way, shareholders in ground lease cooperatives are in a similar position to manufactured home residents who own their units but not the land on which they are located and cannot move the structures,” according to language in the bill.
Ground-lease co-ops are not plentiful in the Big Apple, but many are located citywide, with a heavy concentration in Manhattan. an example is carnegie House, a site near Billionaire’s Row on 57th Street in Midtown.
A source familiar with the legislation said the bill would provide the co-ops’ owners with new “unimagined benefits” in setting and renewing ground leases between building and property owners.
“Carnegie House residents have gone to court to alter their ground lease and keep losing, so they have turned to their legislators to change the terms of their contracts,” the source said. “the building is filled with units owned by people who don’t live there and are just holding their apartments as investment properties.”
Carnegie House residents include multi-millionaires and celebrities, the source added.
“I don’t believe that there are truly what we would characterize as working-class people in these buildings because you have to buy the units. People pay cash for these buildings as it’s not an easy thing to get a mortgage for one of these units,” Laremont said.
She added that banks see potential risks involved if the ground lease goes away.
“Rather than giveaways to the rich, lawmakers should instead focus their attention on enacting meaningful policy changes that will actually make housing more affordable for New Yorkers,” Laremont said.
Beyond Ground Leases: Other Contracts at Risk?
The debate surrounding the potential impact of the proposed legislation on New York’s ground leases raises a broader question. If the state legislature can modify these contracts, what other agreements could be susceptible to future intervention? The implications of such actions could reverberate across various sectors, impacting everything from commercial leases to personal service contracts. This has many New yorkers concerned.
One area of potential vulnerability is commercial real estate.Could the state modify the terms of existing commercial leases, perhaps capping rent increases or mandating specific tenant protections? Such moves, while potentially benefiting some businesses, could destabilize the market. Moreover,alterations to existing contracts could make investors wary of putting money into commercial properties.
Furthermore, the precedent set by this bill could extend to other types of contracts. Consider the possibility of intervention in employment agreements, consumer contracts, or even private loan agreements. The potential for unforeseen consequences is critically important. This level of government overreach could chill investment, and cause contract disputes to be settled in court, instead of via contract.
Here are a few additional examples of contracts that could be affected:
- Residential Leases: Could rent stabilization laws be expanded or altered retroactively?
- Service Contracts: Could regulations affect contracts for everything from landscaping to personal training?
- Business Agreements: Might partnerships or vendor agreements face legislative modification?
These are major concerns that must be looked at by legislators. Any shift in the established framework of contract law can create uncertainty. This is especially true when the goal is to protect a group of people not in a position to bargain.
The potential impact on investment decisions in New York real estate is considerable. Investors require a stable, predictable legal environment. When the rules of the game can change mid-stream, it increases risk. this uncertainty makes it more challenging to assess potential returns and could led to reduced investment activity. This, in turn, could slow progress, limit housing options, and potentially harm the local economy.
here are some ways this could impact the future of investment:
- Reduced Investment: Investors might choose to put their money elsewhere, fleeing to more secure markets.
- Higher Costs: Developers may factor in the increased risk,raising construction and operating costs.
- Legal disputes: Expect more lawsuits as parties seek to clarify and enforce their contractual rights.
Protecting Your Interests
Concerned New yorkers should keep a close eye on this bill.it’s also important to understand how these changes might affect your own contracts.
Here are some things to consider:
- Review Your Contracts: Understand the terms and conditions.
- Stay Informed: Follow developments in the legislature.
- Seek Legal Advice: Consult with an attorney to understand your specific rights and obligations.
The debate over ground leases underscores a critical need for balance. Policymakers must consider the need to protect vulnerable parties. These lawmakers must also ensure that thay do not undermine the foundation of contract law, which is crucial for a healthy economy.
Frequently Asked Questions
Q: What is the primary legal argument against the bill?
A: Opponents argue the bill is unconstitutional as it would insert new structures into existing contracts. This includes mandating provisions not originally agreed upon by both parties.
Q: What is a ground lease?
A: A ground lease is an agreement separating ownership of land from the building on top of it. The building owner leases the land for an extended period, paying rent to the landowner.
Q: How could this bill affect investment in New York City?
A: By changing the rules of the game, the bill could make investment riskier. This could result in less investment and higher costs.
Q: What other types of contracts could be affected?
A: There is concern this could set a precedent impacting commercial leases, employment agreements, and consumer contracts.
Q: What should New Yorkers do to protect themselves?
A: Stay informed, review your contracts, and consult with a legal professional.
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