Prohibits rent minimums in all mortgages regardless of when issued.
Summary
This bill would add a new section to New York’s Real Property Law prohibiting mortgage lenders from imposing rent minimum requirements on borrowers. Under the bill, a mortgagor on a loan secured primarily by real property could not be charged a fee, forced into default, or otherwise penalized because they did not set rent high enough on all or part of the property. Any mortgage term that would penalize a borrower for not charging sufficient rent would be void and unenforceable as against public policy.
The bill applies immediately and would cover all mortgages, including those already issued as well as those later renewed, modified, altered, or amended. In practical terms, it would limit lender control over rental pricing decisions for properties subject to mortgage agreements, including residential or mixed-use properties where rent levels may affect loan terms.
Impact
The bill would amend the Real Property Law by creating a new statewide rule invalidating mortgage provisions that require minimum rent levels or impose penalties tied to rent amounts. It would affect mortgage lenders, borrowers, and owners of income-producing real property by preventing enforcement of rent-minimum clauses in existing and future mortgage contracts. Because the bill applies retroactively to all mortgages regardless of issuance date, it could also affect previously negotiated loan terms and any lender remedies based on rent-setting requirements.
Sentiment
The bill appears to have received mixed but ultimately favorable legislative support. It advanced through committee votes with repeated 14-6 margins in Judiciary and Codes, then passed Rules 20-9, and later passed both chambers on the floor, though with notable opposition in each chamber. The vote pattern suggests broad support among sponsors and many members for limiting lender-imposed rent controls, alongside a substantial minority concerned about the bill’s effects on mortgage underwriting and contract terms.
Contention
The main point of contention is whether lenders should be allowed to condition mortgage terms on a borrower’s rental pricing decisions. Supporters likely view rent minimums as an unfair or coercive restriction on property owners and tenants, while opponents appear concerned that prohibiting such clauses could interfere with lender risk management, loan covenants, and the ability to protect collateral value. The retroactive application to all existing mortgages is another likely source of concern, since it could invalidate terms already agreed to by borrowers and mortgagees.