Changes to Retail Leasing Law
There is no doubt that the legal landscape has changed, and it is changing fast. New executive orders are issued on a regular basis, and legislation is moving quickly through the legislature. Changes to retail leasing law is important for landlords and tenants to keep an eye (or have counsel that keeps an eye) on changes in the law that could impact their business.
What is the difference between retail and commercial leases?
One issue that we are currently monitoring is the possible imposition of rent control in commercial leasing. Specifically, the City Council Committee on Small Business is considering a bill (Council Int. No. 2299) which, if passed, would impose certain restrictions upon the ability of owners of retail space to increase rental rates upon lease renewal.
This bill has the potential to have significant unintended consequences. First, it will limit the amount of space available for mom-and-pop shops. Landlords will be able to focus more on financial quality when reviewing a potential tenant, which may result in fewer retail spaces being available for smaller businesses.
Second, it will likely restrict the ability of a tenant to make certain types of transfers or transactions of stock or other ownership interests in the business. In particular, if the bill passes, it will prevent a tenant from transferring their stock to another company, or selling their share in the business. Without such flexibility, a retail tenant will be hamstrung in their ability to find new space for growth or in the event of a sale/buyout of their business.