A10467A

The New York State Senate passed legislation Tuesday to help residential housing cooperatives secure mortgage financing by allowing them to renew ground leases at any time before expiration, rather than only at predetermined intervals. Assembly Bill 10467A, sponsored by Sen. Stavisky, passed 39-21. The bill addresses a financing obstacle for co-op shareholders seeking 30-year mortgages when ground lease renewal dates fall before mortgage maturity. Ground leases typically run 99 years and are negotiated between the cooperative corporation, which owns the building, and the landowner. Sen. Stavisky argued the bill addresses only the timing of lease renewal, not the terms or costs negotiated in original lease agreements. She cited a 1977 U.S. Supreme Court decision establishing that state regulation does not substantially impair contracts if it serves a significant purpose and is reasonable. The bill is prospective, applying only to future leases, she said. Sen. Palumbo raised constitutional concerns, arguing the bill effectively shortens lease terms from 99 years to potentially 75 years by allowing early renewal, thereby substantially impairing existing contracts in violation of the U.S. Constitution's Contracts Clause. He also questioned whether lenders would invest in mortgages if renewal terms could be renegotiated at the cooperative's discretion, potentially affecting costs and lease stability. Palumbo voted against the measure. The bill takes effect 90 days after becoming law.