The City and State of New York have seen a number of recent legal developments with potentially far-reaching ramifications for both owners of multifamily properties and the lenders who finance such properties. Landlords and lenders involved with multifamily properties in New York should familiarize themselves with these developments.
Key Takeaways
- New York City’s rent freeze for rent-regulated apartments, and the lawsuit seeking to vacate that freeze, have significant implications for owners of rent-stabilized properties.
- The City administration’s efforts to delay the bankruptcy auction of 5,000 rent-stabilized apartments in Broadway Realty provide an indication of its policy priorities concerning multifamily buildings.
- Proposed COPA legislation could give certain Qualified Entities a right of first offer and, if a third-party offer is made, a right of first refusal to purchase certain “covered properties,” while presenting significant constitutional questions.
- The proposed Fair and Transparent Real Estate Listing Act and TOPA legislation could further affect how residential properties are marketed and sold in New York, although the TOPA bills have not advanced to a vote.
Rent Control Freeze in New York City
On June 25, 2026, New York City’s Rent Guidelines Board voted to freeze rents for both one-year and two-year leases for the city’s one million rent-regulated apartments. This is the first time that the Board has voted to freeze rents for two-year leases, and only the fourth time the Board has voted to freeze rents for one-year leases.
On July 22, 2026, owners of rent-stabilized properties in New York City filed a lawsuit against the Board seeking to vacate the rent freeze and, in the interim, continue the prior-rent adjustment guidelines of 3% for one-year leases and 4.5% for two-year leases. The suit maintains that the “outcome” was “predetermined from inception” as the mayor “took affirmative steps to stack the deck” by “pack[ing] the Board with loyalists and … fill[ing] the Board’s hearing with tenant advocates,” among other actions. The suit further maintains that the Board disregarded its own studies indicating that operating costs would increase and ignored statutory requirements that it needed to take into account factors such as operating costs, taxes, financing costs, and vacancy rates. Because the suit argues that the mayor had a “hand-picked Board super-majority,” the landlords are seeking an expedited discovery request for all communications regarding the vote between the mayor and several of his offices. The case has been heard as Kenilworth Holdings LLC et al v. New York City Rent Guidelines Board, Index No. 85199/2026 in Richmond County (Staten Island) Supreme Court. However, on August 21, the Court granted the City’s motion to change the venue to Manhattan. A Manhattan court date is to be determined.
City Administration’s Interference in Court Auctions of Multi-Family Buildings (In Re Broadway Realty I Co.)
The case of Broadway Realty presents an example of the New York City administration’s recent efforts to interfere with and delay bankruptcy auctions of multifamily buildings. In In Re Broadway Realty I Co., LLC (25-11050-dsj, SDNY), the City administration tried to delay the bankruptcy auction of 5,000 rent-stabilized apartments to give the new administration time to formulate a plan that would maintain the affordable housing. The brief was filed on January 5, 2026, just five days after the new mayoral administration began. Indeed, the mayor viewed this brief as such a priority that he went to one of the buildings slated to be sold at auction on his first day as mayor. While the judge denied the City’s motion, lenders and landlords should take note of the administration’s efforts as indications of its policy priorities.
Proposed COPA Legislation
New York City’s recent proposed Community Opportunity to Purchase Act (COPA) legislation could require owners of “covered properties” who wish to sell those properties to give certain “qualified” community land trusts and certain nonprofit organizations the opportunity to submit a first offer and to match competing offers before the landlords can attempt to sell them to other third parties.
To be a “Qualified Entity,” a community land trust or a nonprofit organization needs to be formally certified by the New York City Department of Housing Preservation and Development (HPD). Qualified Entities may include joint ventures between private developers and community organizations as long as the community organization holds a controlling interest.
COPA defines “covered properties” as Class A properties that have four or more dwelling units and meet any of the following criteria:
- participate in NYC HPD’s Alternate Enforcement Program for at least one year;
- are subject to an in-rem foreclosure action as a distressed property;
- are subject to an underlying condition that has caused the city to issue an order to correct for at least one year;
- have an annual daily average of three or more violations (defined as a “hazardous or immediately hazardous violation of the housing maintenance code that has been open for more than 60 days with a deadline for certification of correction within the preceding 3 years”);
- were denied a certificate of no harassment within the preceding year where there has been no cure;
- have no more than 100 units and are subject to affordability restrictions set to expire within two years; or
- meet any other criteria as established by HPD by rule.
Under COPA, before taking any action to sell a Covered Property, a landlord would be required to give formal notice of intent to sell to both HPD and all “Qualified Entities.” Following the notice to HPD and the Qualified Entities, Qualified Entities would have 20 days to submit a statement of interest in exercising their right of first offer to buy the property. If no Qualified Entity timely submits a statement of interest, the owner may sell the property on the open market.
If, however, a Qualified Entity submits a statement of interest, the owner is required to provide information about the property’s finances and operations (e.g., income and expense reports, rent rolls, mortgage information, open violations, pending legal actions, findings of tenant harassment, the pricing terms of any open offer to purchase the property, and other information as established by HPD by rule) within five days of receipt of such a statement. Following the twenty-day statement of interest period, entities would have 70 days to submit an offer. The HPD Commissioner can extend that 70-day window by five days; an extension of more than five days requires a written application from the entity with an “explanation of the need.” The Commissioner may not provide more than one prior extension for the same entity. If an offer is made, the owner has ten days to accept, reject, or counter it. If the owner rejects the offer, and a third-party makes an offer within one year that the owner intends to accept, the first Qualified Entity that made an offer has a 15-day right of first refusal to match the third-party offer.
COPA presents significant constitutional questions at both the state and federal level, such as whether the right of first offer and first refusal given to Qualified Entities under COPA constitutes a) a taking of private property without compensation in contravention of the Fifth Amendment as applied through the Fourteenth Amendment, and b) an unlawful restraint against New York’s constitutional property protections and long-standing preference for the free alienability of property.
If COPA becomes law, it will likely quickly become the subject of litigation. Indeed, an earlier version of this Act was enmeshed in constitutional questions. It had passed in the City Council in 2025, but Mayor Eric Adams vetoed it on his final day in office, and the City Council ultimately did not overcome the mayor’s veto. Given Mayor Zohran Mamdani’s support for COPA, the City Council may be expected to act on the bill again, albeit with a possibly narrowed scope. If the law goes into effect, McCarter will provide a more detailed advisory.
The Fair and Transparent Real Estate Listing Act
The proposed state Fair and Transparent Real Estate Listing Act legislation aims to enact a sweeping change in how residential real estate properties are marketed. Under the existing practice, residential properties are often marketed through private or restricted home listings, such as members-only platforms, that are only accessible to a select number of buyers and brokers. If the law goes into effect, listing agents will be required to make residential sale and rental listings available for showings and publicly market them on free or publicly accessible platforms. Sellers have the option to opt out of public marketing by signing an agreement acknowledging that, by selecting the private marketing option, they risk receiving fewer offers or a lower purchase price.
While on its surface, the bill seems to encourage competition and transparency, it has met with some criticism. Some commentators have remarked that it uses circular definitions and vague marketing standards. Also, the proposed seller “opt-out” disclosure form appears to be very one-sided, focusing on the possible risks of private marketing without addressing reasons for choosing the private marketing option, such as personal security or privacy concerns.
This bill was passed unanimously by the New York State Senate on June 9, 2026, after being previously passed by the State Assembly. Governor Kathy Hochul has until the end of the year to sign it into law. If Governor Hochul does not sign the law into effect, it would be considered a “pocket veto” on her part, and the Act will not become New York law.
Tenant Opportunity to Purchase Act (TOPA) This term, several bills were proposed in the New York State legislature modeled after the Tenant Opportunity to Purchase Act (TOPA) legislation in other cities. The bills, if enacted, would give tenants the first opportunity to buy when landlords decide to sell. The bills have not advanced to a vote. While it seems the momentum for this legislation has passed for now, it is too early to say whether the New York State legislature has completely abandoned all efforts to enact such legislation or similar legislation in the future.
For any questions about the topics in this Alert, please contact the authors, a member of the Bankruptcy, Restructuring & Litigation Practice Group, or your McCarter attorney.