The Real Estate Board of New York to The New York City Council Committee on Small Business Regarding Intro. Nos. 90 and 874

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The Real Estate Board of New York (REBNY) is the City’s leading real estate trade association representing commercial, residential, and institutional property owners, builders, managers, investors, brokers, salespeople, and other organizations and individuals active in New York City real estate. REBNY thanks the committee for the opportunity to testify regarding New York City’s storefront retail sector and Intros. 90 and 874.

In recent years, storefront leasing activity has been driven by mom-and-pop businesses rather than larger chain retailers, particularly in food and beverage. A 2024 report from the Department of City Planning found that local retailers selling experiences – whether it be dining, event spaces, or bakeries – are replacing goods retailers who are facing increased pressure from changing consumer behavior and online retail. At the same time, however, many of the new businesses opening are small mom-and-pop entrepreneurs. According to a recent analysis by the City Comptroller, of the approximately 96,500 storefronts occupied by small businesses in early 2020, 84% either continued to house the same small business or had been replaced by another small business.

While certain neighborhoods are experiencing above average vacancy rates, and certain corridors have pockets of long-term vacancy, the overall market is healthy. According to the Comptroller, approximately 15,700 of the City's 142,000 storefronts were vacant as of April 2026. The citywide vacancy rate was 11.0%, down from 11.6% in late 2023 but still somewhat above the 10.5% rate at the beginning of 2020. REBNY's most recent retail report similarly shows conditions that vary substantially by corridor. Asking rents increased in eight of 16 Manhattan corridors during the first half of 2026 and availability continued to tighten in several of the strongest areas, although asking rents remain below their 2016 highs.

This success is a testament to the fact that more often than not, owners work with their tenants to help both parties succeed. Successful owners and tenants work in partnership as lease expiration approaches to make the best decision possible for both sides. Owners do not walk away from viable tenants and work collaboratively with their tenants to support their long-term success. Indeed, it is more costly for an owner to lose a quality tenant as the owner faces costs of lost rent, turnover expenses, and the cost of building out the space for the next tenant.

At the same time, not all businesses will succeed, and there are many reasons a storefront business fails, especially in a costly and highly regulated market like New York City. Rent is one factor, but businesses also face rising utility, insurance, labor, and financing costs, taxes, permitting delays and changing consumer demand. DCP’s 2024 analysis also illustrates some of these differences as retail corridors facing the greatest challenges tended to be in central businesses districts where foot traffic had not fully recovered from the pandemic, while more retailers were opening in residential neighborhoods that gained daytime activity from remote and hybrid work.

These differences matter because City policy should help small businesses enter leases with better information and reasonable protections without making it harder for the next business to get their chance. REBNY therefore supports provisions of Intros. 90 and 874 that require written leases and reasonable notice, improve disclosure and model leases, strengthen assistance for small businesses and recognize successful long-term businesses. However, provisions in Intro. 90 allowing a tenant to extend a lease after the parties have failed to agree on renewal terms would go considerably further and could make owners less willing to rent to newer or riskier businesses in the first place.

BILL: Intro 90

SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to lease agreements concerning storefront premises

SPONSORS: Council Members Brewer, Louis, Brooks-Powers, Hanif, Aldebol, Schulman, Wilson, Maloney, Farías, and Epstein.

REBNY supports clear written leases, reasonable advance notice, accessible model documents, and legal counseling for storefront tenants. However, Intro. 90 goes beyond those objectives by prescribing the outcome when parties cannot agree on renewal terms. REBNY therefore opposes the bill as drafted and recommends a narrower approach focused on sharing information, providing predictability, and voluntary dispute resolution rather than giving a tenant the unilateral right to extend the lease for up to a year.

Aspects of this bill will help to create a more balanced and transparent process for owners and tenants. Specifically, there is merit to requiring clear written leases for longer-term storefront tenancies and giving businesses adequate notice about whether an owner intends to offer a renewal. Intro. 90 would generally require a written lease for storefront tenancies longer than one year and would establish a process beginning 120 days before expiration if the parties have not already agreed on a renewal.

The bill would also require the Department of Small Business Services (SBS) to make model commercial leases available in multiple term lengths and translate them into the City's designated languages. This is a valuable provision as a small business owner should not have to become an expert in commercial real estate law simply to understand the basic terms of a lease.

The disclosure provisions are also generally reasonable, although the requirement to project certain future costs should be reviewed. The legislation would require an owner to provide historical information on utilities, insurance, real property taxes, commercial rent taxes, BID assessments and

other costs, along with the reasonable expected average cost of those expenses for the following two years.

Historical expenses and how future costs will be allocated are useful information for a potential tenant. However, predicting what those costs will be two years later can be complicated. For instance, if a restaurant is replacing a clothing store, the insurance and utility costs will be dramatically different. Further, those costs can change for reasons neither party controls, and the legislation should not create a new dispute pathway because an estimate made when the lease was signed later turned out to be wrong.

While these provisions are meritorious, Intro. 90 proceeds to go much further. For leases longer than one year, the bill gives a tenant the unilateral right to extend the existing lease for as much as one additional year if the parties have not reached an agreement 30 days before expiration, subject to several conditions. The bill would then prescribe the rent during that extension, generally allowing an increase of between 7% and 10% depending on when the owner provided notice. Similar requirements would apply to shorter leases.

Giving a business enough time to prepare for lease expiration makes sense. Requiring the parties to continue the lease after they have been unable to agree on new terms is a different policy that fundamentally limits the ability of an owner to control their property, hurts the ability of new businesses to open, and can allow businesses that are either no longer viable or serving the needs in their community to linger.

It also changes the calculation before a lease is signed. If taking on a tenant also means accepting a greater risk that the tenancy cannot end when the negotiated lease expires, an owner has more reason to focus on creditworthiness, operating history and financial capacity at the beginning. That could make an established national tenant relatively more attractive than a new restaurant, retailer or first-time entrepreneur.

Given these concerns, a modified bill should adhere to the following principles:

• Increase disclosure: Ensure that potential tenants are fully aware of the property history and prior costs and can work with the owner to understand potential future costs, where warranted.

• Preserve notice without mandating outcomes: Support adequate advance notice of lease expiration but remove provisions that compel lease extensions and prescribe rent when the parties cannot agree. Mandatory extensions may cause owners to prioritize established, well-capitalized tenants over new restaurants, retailers, and first-time entrepreneurs.

• Target intended beneficiaries: Limit eligibility to independently owned or small businesses rather than defining coverage principally by the location and configuration of the premises.

• Make enforcement proportional: Provide an opportunity to cure good-faith administrative violations and calibrate penalties to the conduct and actual harm, rather than tying liability to the assessed value of the entire property.

• Enhance City supports: A City-created model storefront lease and enhanced services for small businesses can help more small local businesses open their doors.

We look forward to working with the Council on these reforms.

BILL: Intro 874

SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to establishing a legacy business registry and preservation fund

SPONSORS: Council Members Maloney, Louis, Thomas-Henry, Cabán, Riley, Sanchez, Krishnan, Avilés, Hanif, Epstein, Hankerson, Santosuosso, and Morano.

Intro. 874 would allow SBS to designate a business as a legacy business if it has operated in New York City for at least 20 years and has significantly contributed to the history, identity or character of its neighborhood or community. The bill would also establish a preservation fund, subject to appropriation. A qualifying business at significant risk of displacement could receive an annual grant of $500 per full-time employee, up to 100 employees. A property owner could receive $4.50 per square foot, up to 5,000 square feet, after entering into or extending a lease with the legacy business for at least 10 years.

REBNY supports this legislation.

The advantage of this structure is that it does not require either party to accept a particular lease. Instead, the City is providing an incentive where an owner and business can reach a mutually beneficial agreement that they otherwise might not have reached.

An incentive model with optional participation is a successful model instituted in other cities with similar retail and built environment challenges. San Francisco has operated a legacy business program for years and currently provides incentives to landlords that enter into long-term leases with registered legacy businesses. Portland completed a major review of legacy-business policies earlier this year and recommended a program combining formal recognition with technical assistance, succession planning, dedicated staff support and financial assistance.

Those examples also help show where Intro. 874 could be further refined to encourage participation:

• Simplify access to the registry: Allow businesses to apply directly to SBS rather than requiring nomination by an elected official.

• Invite supporting evidence: Permit elected officials, Community Boards, BIDs, chambers, and other community organizations to nominate businesses or submit letters supporting an application.

• Use preservation review selectively: Give SBS discretion to consult the Landmarks Preservation Commission when an application involves a landmark, historic district, or related preservation issue, rather than requiring LPC review for every applicant.

The program does not need to preserve every business that reaches 20 years. However, where a long-standing business provides meaningful value to a neighborhood, faces a real risk of displacement and can remain through a modest City incentive tied to a voluntary agreement, there is a reasonable case for assistance. With a simple application process, Intro. 874 could provide a useful and targeted way to help those businesses remain in their communities.

Thank you for your consideration of these points.

CONTACT:
Zach Steinberg
Executive Vice President, External Relations and Advocacy
Real Estate Board of New York
zsteinberg@rebny.com