As described in our client alert dated August 6, 2025 (the “NY Rent Minimum Bill Alert”), a bill was passed by the New York Assembly (A. 174) and Senate (S.1163) that could have major ramifications for the real estate finance industry. The bill prohibits the inclusion of “rent minimums” in real estate secured (i.e., mortgage) loans and states that no borrower of such a loan “shall be charged a fee, forced to default, or otherwise penalized by the [lender] because the [borrower] did not set a high enough rent on all or part of the real estate.” The bill goes on to say that all terms of a mortgage that cause the borrower to be penalized for not setting a high enough rent “shall be void and unenforceable as against public policy.” The bill further states that it shall apply to “all mortgages regardless of when issued, renewed, modified, altered or amended.” (emphasis added). In other words, if adopted, the bill would extend retroactively to all real estate secured loans. If enacted, the bill could create chaos for both real estate lenders and borrowers (see the NY Rent Minimum Bill Alert for the reasons why).
The bill was delivered to NY Governor Hochul on October 9, 2025 and the real estate industry is watching to see if she signs, vetoes, or takes some other action relating to the bill. Many expect her to veto the bill, with some speculation that this might occur this week. If so, it would be a welcome relief to the real estate industry.
Once the governor takes some informative action, we will report back.
As always, feel free to reach out to any member of the Morrison Foerster team if you wish to discuss the bill or have any questions.