NEW YORK CITY—Seyfarth Shaw LLP, an international law firm that specializes in real estate as well as labor and employment, has issued an alert to its clients notifying them of the expansion of the 2012 Fair Wages for New Yorkers Act (“Living Wage Law”) brought about by a recent executive order issued by Mayor Bill de Blasio. Stephen Epstein, a partner in the firm's real estate group, sat down with GlobeSt.com EXCLUSIVELY to discuss the Mayor's executive order and its impact on real estate development and leasing in New York City.

GlobeSt.com: How does the Mayor's Executive Order expand the NYC Living Wage Law?

Epstein: The Living Wage Law established a minimum living wage for employees of certain entities that received at least $1 million in discretionary financial assistance from the city. Businesses with gross income below $3 million, non-profits, projects with at least 75% affordable units and manufacturers are exempt under the law. The Mayor's recent executive order, among other things, expands the types of covered entities to include not only the recipients of financial assistance, but also their tenants, concessionaires and construction contractors.

This could have a substantial impact on many tenants in the retail and hospitality sectors that lease space in subsidized New York City buildings since they will be required to pay the minimum living wage.

In addition, construction contractors and building service contractors with contract term lengths longer than 90 days will have to pay their employees the minimum living wage.

GlobeSt.com: Why is the expansion of the Living Wage Law to tenants, concessionaires, and contractors significant?

Epstein: The order requires any entity that occupies space in—or provide services to—a subsidized building now must pay the living

wage, even if they have not received direct financial assistance from the city. As such, the order will have a direct impact on the construction costs, labor costs and profit margins of tenant retailers, who may seek the additional costs recouped in lower rents or higher concessions.

In addition, developers in parts of the city where rents already are discounted to attract retailers will be particularly challenged to balance the benefits of the subsidies with the additional costs associated with them.

GlobeSt.com: Should developers who are thinking about purchasing one of these properties be concerned with the Executive Order?

Epstein: Yes. The order also has expanded the definition of who is considered a financial benefits recipient to include any assignee or successor in interest of real property improved or developed with financial assistance. This inclusion of successors and assignees could have significant impact on the city's real estate market since purchasers, assignees and other successors of benefited property will want, among other things, full disclosure of the subsidized benefits and assurances of compliance with the living wage law.

GlobeSt.com: What else should interested parties know about the Mayor's executive order?

Epstein: The Mayor has made the order prospective and it will only apply to discretionary awards and/or assistance granted on or after September 30, 2104, its effective date. The order considers the negative impact a retrospective application would have and limits its application so as not to interfere with previously awarded assistance. Notably, any amendment to the underlying agreements or material terms of the award made after September 30, 2014 could subject the recipient (and by extension its tenants, contractors and concessionaires) to compliance with the living wage law.

Owners of subsidized commercial properties who are contemplating or negotiating an amendment should review their existing agreements and awards for a cost-benefit analysis of doing the amendment.

Instant Insights /

Seyfarth Shaw Issues Living Wage Law Alert

Related Stories

Recommended For You