In order to address the August 31, 2021 expiration of various New York State eviction and foreclosure moratoria, and in light of the United States Supreme Court’s (SCOTUS) recent invalidation of certain provisions of New York State’s residential eviction moratorium statute, as we wrote here, both houses of the New York State Legislature held Extraordinary Sessions on September 1, 2021, to extend the moratorium on both commercial and residential evictions and foreclosures through January 15, 2022. The bill immediately enacted by New York Gov. Kathy Hochul on September 2, 2021, as Chapter 417 of the Laws of 2021 (the “Act”). Here’s a summary of the provisions.
Part A of the Act addresses various issues related to access to COVID-19 Emergency Rental Assistance Program (ERAP) funds, including for residents of municipalities that elected not to participate in ERAP; and authorizes the Office of Temporary and Disability Assistance (OTDA) to share information with the Office of Court Administration (OCA) to allow courts to determine whether respondent tenants may be eligible for protection from eviction.
The “COVID-19 covered period” under the Tenant Safe Harbor Act (THSA), applicable to residential tenants, has been amended to mean the period between March 7, 2020 until January 15, 2022. For those of you counting, that is 1 year, 10 months and 8 days – nearly two years.
The previous August 31, 2021 expiration (as repeatedly extended) represented one-and-a-half years, during which many small “mom and pop” landlords were forced to carry properties for the benefit of tenants who may or may not have had the ability to pay their fair rent. This was because tenants were able to avail themselves summarily of absolute protection from eviction by merely signing a preprinted form, requiring no proof or corroboration. Landlords were afforded no ability to challenge these self-certified statements, leaving innocent owners with no legal recourse or means of relief, but with ongoing obligations to continue providing free housing and pay expenses from which there is no relief, including property taxes, insurance and maintenance.
SCOTUS agreed and struck down Part A of New York’s residential COVID Emergency Eviction and Foreclosure Prevention Act (CEEFPA) due to its failure to allow landlords due process to contest a tenant’s self-serving hardship declaration. The Act now provides some modicum of due process for property owners, however dubious or illusory it may be, as it states that a hardship declaration automatically creates a “rebuttable presumption that the tenant is experiencing financial hardship,” thereby shifting the burden to the owner to prove otherwise. Only if the owner is successful, will the matter be permitted to continue to a determination on the merits.
The Act also apparently “expands the grounds under which a lawful eviction can proceed despite a finding of hardship,” as to both commercial and residential evictions. However, this is also a high burden, as it requires a landlord to show that a tenant “intentionally caused significant damage to the property or persistently and unreasonably engaged in behavior that substantially infringed on the use and enjoyment of other tenants or occupants or caused a substantial safety hazard to others, with a specific description of the behavior alleged.” Given such stringent criteria and extraordinarily high burden to proof, dispossessing problem tenants will remain exceedingly difficult.
Part B of the Act extends the moratorium on commercial evictions until January 15, 2022, for commercial tenants that have endured COVID-related hardship and are independently owned and operated, not dominant in their field and have one hundred (100) or fewer employees. The threshold was previously, fifty (50) employees. So, this expanded definition will now cover many more commercial tenants.
Commercial Landlords’ Concerns
The “legislative intent” portion of the Act explains that the legislation was needed due to the COVID-19 pandemic’s ravaging effects in the state, including 55,000 New Yorkers killed, the financial hardship faced by thousands of residents, and general economic losses caused by the various public health measures implemented in an effort to contain the pandemic. It goes on to acknowledge that New York has entered a phase of economic recovery, but that the “rates of transmission” purportedly justify the need for continued statutory protections.
Of course, a small commercial landlord, who is certainly a “small business owner,” might wonder why no distinction is made in the Act to separate the protections given to keep residential tenants in their homes and out of crowded shelters – and for whom rental assistance is available, which might ease a residential landlord’s financial calamity – with a commercial tenant, for whom no such assistance is available, and for which there is no equivalent transmission risk. Yet the commercial tenant, for which these factors clearly do not apply, is similarly protected from eviction; this is an incongruous situation that could easily have been avoided.
In this regard the Act also seems to miss the mark as to its stated goal of fostering “a full and equitable recovery.” Since the effect on the commercial landlord’s business, which employs many others, directly and indirectly, is quite the opposite. Consequently, commercial landlords continue to argue that the Courts should be allowed the discretion to consider commercial evictions on a case-by-case basis, free from the pandemic-related restrictions more appropriately imposed on residential tenancies. A full copy of the legislation can be found here.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.