LIBOR (the London Inter-bank Offered Rate) is an interest rate benchmark published by ICE Benchmark Administration Limited that is used as a reference rate for a wide range of financial transactions. It is a common floating rate interest option for corporate borrowers, who may pay interest on loans based on LIBOR (usually with a margin in excess of LIBOR).

LIBOR has dropped dramatically since the start of the COVID-19 pandemic. For example, one month LIBOR (based on the US Dollar) was approximately 2.5% in early January 2019. While there had been a decrease to approximately 1.8% in late December 2019, and a further slide to 1.7% in mid-February 2020 and 1.6% in late February, by March 12 one month LIBOR had plummeted to .7%. After a slight recovery to 1% by the end of March, this rate decreased to below .2% in early May and has remained there ever since. Rates for other LIBOR periods have seen similar declines, with overnight rates at near zero percent since early April.

Although LIBOR is very likely to be replaced as a reference rate after 2021 (see our blog article at NY Business Law ), there are still many months to go before this happens. In the interim, one area of concern for lenders has been the absence of LIBOR floors in a near-zero rate environment. While language providing for LIBOR to be deemed zero if it would otherwise be negative has been common for some time, the number of loans with floors above zero, and the floor level, have both increased after first quarter 2020.

The following is a summary of LIBOR floors included in loan agreements filed on EDGAR since the start of the year[1]:


Quarter of 2020 # of Loans (revolving and/or term) % with Floors % with 0% Floor % with >0% and <.5% Floor % with  .5% Floor % with >5% and <1% Floor % with 1% Floor % with >1% Floor
First 80 100% 90% None 1.25% 1.25% 5% 2.5%
Second 110 94.5% 45.5% 2.7% 8.2% 18.2% 17.3% 2.7%
Third 88 96.6% 44.3% 5.7% 8.5% 10.8% 23.9% 3.4%

The third quarter of 2020 breaks down as follows:

Month # of Loans (revolving and/or term) % with Floors % with 0% Floor % with >0% and <.5% Floor % with  .5% Floor % with >5% and <1% Floor % with 1% Floor % with >1% Floor
July 30 93.3% 36.7% 3.3% None 16.7% 30.0% 6.7%
August 30 100% 53.3% 3.3% 15.0% 8.3% 16.7% 3.3%
September 28 96.4% 42.9% 10.7% 10.7% 7.1% 25% None

As is clear from the quarterly figures above, deals with a zero percent LIBOR floor have decreased by 50% since first quarter 2020, with floors of 1% or greater having a significant increase during this period. The trend towards 1% LIBOR floors will likely continue in the coming months.

[1] Source: Practical Law.

David Paseltiner is chair of the firm’s corporate and commercial transactions practice group and a member of its banking and financial services practice group. He represents businesses in a wide variety of industries, ranging in size from small start-up operations. He also represents individuals in connection with employment agreements, shareholders agreements and operating agreements. David can be reached at 516-393-8223 or

Jaspan Schlesinger LLP partner Robert Londin will moderate the fourth episode of a five-part webinar series dedicated to private Mergers and Acquisitions transactions.  The series spans from early transaction concerns and planning to key provisions of transaction documents, and Rob serves as moderator for the entire series.   “On to the next; we recently concluded episode number three which addressed the general M &A process.  Episode number four tackles deal points arising in connection with post-closing matters” noted Robert Londin of the JSLLP Corporate and Commercial Transactions Group.  Episode Four of the series from Financial Poise debuts on the West LegalEd Center on November 5, 2020.  In addition, Robert agreed to moderate the five-part 2021 M &A Boot Camp Series as well as the 2021 three-part Start-Up/Small Business Advisor series.  Both series are presented by Financial Poise debuts on the West LegalEd Center.

For more about Robert Londin, CLICK HERE:  Robert Londin partner, Jaspan Schlesinger LLP

For information about the Financial Poise M&A webinar series episode, CLICK HERE:

On October 2, 2020, the Small Business Administration (SBA) issued a long awaited Procedural Notice providing guidance with respect to a change of ownership of businesses that borrowed Paycheck Protection Program (PPP) loans. PPP loans were made commencing in early April, and since then we have witnessed first-hand the frustration experienced by business owners having to deal with the uncertainty of the treatment of PPP loans in the context of a change of ownership (often compounded by the inability of PPP lenders to accept forgiveness applications). The new guidance provides sellers with some certainty with regard to the procedures for selling a business that has borrowed a PPP loan.

What is a Change of Ownership?

For purposes of the PPP, a “change of ownership” is considered to have occurred when (1) at least 20% of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity, (2) the PPP borrower sells or otherwise transfers at least 50% of its assets (measured by fair market value), whether in one or more transactions, or (3) a PPP borrower is merged with or into another entity. For purposes of determining a change of ownership, all sales and other transfers occurring since the date of approval of the PPP loan must be aggregated to determine whether the relevant threshold has been met. For publicly traded borrowers, only sales or other transfers that result in one person or entity holding or owning at least 20% of the common stock or other ownership interest of the borrower must be aggregated.

While not clearly stated in the guidance, it would appear that a transaction that does not satisfy one of the change of ownership descriptions above does not constitute a “change in ownership” subject to determination of whether SBA consent is required, and presumably, no consent of SBA is required with respect to such transaction.

Does an Indirect Change of Ownership Require SBA Consent?

A PPP borrower may be owned by one or more entities, each of which may also be owned by multiple individuals or other entities. The SBA form of note does not specify whether a change of ownership (which the form provides is a default absent lender consent) applies only to direct ownership interests or would include indirect ownership interests, although the PPP loan application only required reporting of direct ownership interests in the borrower. As a result, the general understanding has been that only changes in direct ownership interests were covered by PPP loans.

The Procedural Notice does not address this issue. The term “common stock or other ownership interest” could be meant to refer to stock or other interests such as partnership or limited liability company interests or other forms of direct equity issued by the PPP borrower. Alternatively, “other ownership interest” could be meant to cover indirect interests, such as ownership of a corporation that itself owns an interest in the borrower. Further guidance from SBA will be needed in order to provide a definitive answer as to whether the change of ownership requirement is limited to direct ownership of a PPP borrower or is meant to include indirect ownership changes. Guidance as to the meaning of “other ownership interests” would also be helpful in determining whether a “change of ownership” has occurred.

Does Notice of the Change of Ownership Need to Be Given?

Yes, prior to the closing of any change of ownership transaction, the PPP borrower must notify the PPP lender in writing of the contemplated transaction and provide the PPP lender with a copy of the proposed agreements or other documents that would effectuate the proposed transaction.

Is SBA Consent Required for a Change of Ownership?

There are no restrictions on a change of ownership if, prior to the closing, the PPP loan has been fully satisfied, either by the borrower repaying the PPP loan in full, or by the SBA having remitted funds to the PPP lender in full or partial satisfaction of the PPP loan with the PPP borrower repaying any remaining balance in the case of partial satisfaction by the SBA. The guidance does not allow for transactions where the pay-off occurs simultaneously with or immediately after consummation of a change in ownership transaction. Accordingly, transactions should be structured to cause the pay-off to occur prior to consummation of the other components of the sale.

If the PPP loan is not fully satisfied as described above prior to the closing of the change of ownership, then the SBA’s consent will be required unless the PPP borrower or the terms of the transaction satisfy the applicable conditions set forth below.

  1. Sale of Stock/Ownership Interest or Merger. The PPP lender may (but apparently is not required to) approve the change of ownership and SBA’s prior approval will not be required if the following conditions are met for a change of ownership structured as a sale or other transfer of common stock or other ownership interest or as a merger:

(i) The sale or other transfer is of 50% or less of the common stock or other ownership interest of the PPP borrower (in determining whether a sale or other transfer exceeds this 50% threshold, all sales and other transfers occurring since the date of approval of the PPP loan must be aggregated), or

(ii) the PPP borrower completes a forgiveness application reflecting its use of all of the PPP loan proceeds (partial use doesn’t appear to be permitted) and submits it, together with any required supporting documentation, to the PPP lender, and an interest-bearing escrow account controlled by the PPP lender is established with funds equal to the outstanding balance of the PPP loan. After the forgiveness process (including any appeal of SBA’s decision) is completed, the escrow funds must be disbursed first to repay any remaining PPP loan balance plus interest. Note that the guidance requires the escrow account to be interest bearing, and while funding the full amount of the PPP loan with accrued interest into a non-interest bearing account would seem to be an acceptable alternative, the guidance doesn’t provide for it. The guidance doesn’t require a particular party to fund the escrow, or address what becomes of the escrow funds should the PPP loan be forgiven. Presumably this would be addressed between the buyer and seller, and the ultimate disposition of the escrow funds would be documented in the escrow agreement.

  1. Asset Sale. The PPP lender may (but, again, is apparently not required to) approve the change of ownership and SBA’s prior approval will not be required for a change of ownership structured as an asset sale involving 50% of more of the seller’s assets if the PPP borrower complies with the provisions of clause (ii) above. Unlike the situation where SBA approval is required (see discussion below), assumption of the PPP note by the buyer is not a condition to utilizing this escrow exception, and whether or not the buyer assumes this liability will be a function of the negotiations between the buyer and the seller.

The guidance does not address the fact that many PPP lenders are not accepting forgiveness applications at this time, meaning that their PPP borrowers will not be able to satisfy the escrow requirement.

What is the Procedure for Obtaining SBA Consent?

If a change of ownership of a PPP borrower does not meet the conditions set forth above, prior SBA approval of the change of ownership is required and the PPP lender may not unilaterally approve the change of ownership. To obtain SBA’s prior approval of requests for changes of ownership, the PPP lender must submit the request to the SBA. The request must include:

(i)           the reason that the PPP borrower cannot fully satisfy the PPP loan or provide the escrow funds as described above;

(ii)          the details of the requested transaction;

(iii)         a copy of the executed PPP note;

(iv)         any letter of intent and the purchase or sale agreement setting forth the responsibilities of the PPP borrower, seller (if different from the PPP borrower), and buyer;

(v)          disclosure of whether the buyer has an existing PPP loan and, if so, the SBA loan number; and

(vi)         a list of all owners of 20 percent or more of the buyer.

SBA approval of any change of ownership involving the sale of 50% or more of the assets of a PPP borrower will be conditioned on the buyer assuming all of the PPP borrower’s obligations under the PPP loan, including responsibility for compliance with the PPP loan terms. In such cases, the purchase agreement must include appropriate language regarding the assumption of the PPP borrower’s obligations under the PPP loan by the buyer, or a separate assumption agreement must be submitted to SBA. If deemed appropriate, SBA may require additional risk mitigation measures as a condition of its approval of the transaction. The SBA will review and provide a determination within 60 calendar days of receipt of a complete request. PPP borrowers considering change in ownership transactions where SBA consent may be required are advised to seek such consent as early as possible.

While the guidance doesn’t address this issue, if a PPP consummates a change of ownership without having obtained SBA consent, it would likely result in a default under the applicable PPP note (as noted above, the SBA form 7(a) note provides that a change of ownership is a default without PPP lender consent, and a PPP lender will not consent without the required SBA approval), pursuant to which the PPP loan could be declared due and payable. In addition, although not stated in the guidance, such failure would likely result in denial of forgiveness of the PPP loan.

Continuing Obligations

Regardless of any change of ownership, the PPP borrower remains responsible for (1) performance of all obligations under the PPP loan, (2) the certifications made in connection with the PPP loan application, including the certification of economic necessity, and (3) compliance with all other applicable PPP requirements. Additionally, the PPP borrower remains responsible for obtaining, preparing, and retaining all required PPP forms and supporting documentation and providing those forms and supporting documentation to the PPP lender or to SBA upon request.

Terms Applicable to All Sales

For all sales or other transfers of common stock or other ownership interest or mergers, whether or not the sale requires SBA’s prior approval, in the event of a sale or other transfer of common stock or other ownership interest in the PPP borrower, or a merger of the PPP borrower with or into another entity, the PPP borrower (and, in the event of a merger of the PPP borrower into another entity, the successor to the PPP borrower) will remain subject to all obligations under the PPP loan. In addition, if the new owner uses PPP funds for unauthorized purposes, SBA will have recourse against the owner for the unauthorized use.

In addition, if any of the new owners or the successor arising from such a transaction has a separate PPP loan, then, following consummation of the transaction: (1) in the case of a purchase or other transfer of common stock or other ownership interest, the PPP borrower and the new owner are responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements by each PPP borrower, and (2) in the case of a merger, the successor is responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements with respect to both PPP loans.

The guidance requires the PPP lender to notify the SBA, within five business days of completion of a sale transaction (regardless of whether it requires SBA approval), of the (i) identity of the new owners of the common stock or other ownership interest; (ii) the new owner’s ownership percentage; and (iii) the tax identification number for any owner holding 20 percent or more of the equity in the business; and (iv) location of, and the amount of funds in, the escrow account under the control of the PPP lender, if an escrow account is required. While the guidance does not expressly require the PPP borrower to provide this information to the PPP lender, as a practical matter it will likely be required to do so in connection with obtaining the lender’s consent as required under the PPP note.


While the SBA’s guidance is useful, as has been the case with much of the PPP regulations, some questions do remain. In particular, if the SBA’s consent to a sale is not required, is the PPP lender required to consent (assuming its loan documents require such consent prior to a sale)? Use of the words “may consent” would indicate that the lender is not required to do so, even if the escrow arrangement described above is implemented and the SBA’s consent is not required. If the PPP lender is required to consent, on what basis can they refuse to do so? Is a PPP lender required to agree to an escrow arrangement if the borrower request it to do so? Is this guidance meant to apply retroactively? How are sales that have been consummated going to be treated? What reasons will the SBA accept for not repaying the PPP loan or establishing an escrow? How does this work if the PPP borrower has not used all of the PPP loan proceeds?

In any event, we advise all PPP borrowers seeking to consummate a sale of their business to review their PPP loan documentation, as it may contain different or additional requirements applicable to their sale transaction.

For further information or guidance on this matter, please contact David Paseltiner.





As you are aware, LIBOR (London Interbank Offered Rate) is due to phase out by the end of 2021. Currently, many companies in the United States use LIBOR as a benchmark for various commercial and financial contracts, including corporate and municipal bonds and loans, floating rate mortgages, asset backed securities, consumer loans, and interest rate swaps and other derivatives. In transitioning away from LIBOR, the Alternative Reference Rates Committee (ARRC), a committee comprised of a group of market participants to identify an alternative reference rate for use primarily in derivative contracts, has selected Secured Overnight Financing Rate (SOFR) as the proposed representative rate. See for a more in depth look at LIBOR and the transition.

The onset of coronavirus (COVID-19) disrupted the world as we know it. The transition away from LIBOR is already a difficult process posing multiple risks. Now throw in a pandemic. A report done by Moody’s Investors Services, states COVID-19 has delayed the efforts of transitioning. They further report that market participants have been addressing other needs rather than LIBOR transition efforts. For example, the U.S. Fed used LIBOR instead of an alternative reference rate for the Main Street Lending Program during COVID-19. The Main Street Lending Program supports lending to small and medium-sized for profit businesses and nonprofit organizations that were in sound financial condition before the onset of the pandemic. LIBOR was used because “quickly implementing new systems to issue loans based on SOFR would require diverting resources from challenges related to the pandemic.” If market participants and firms are addressing their efforts elsewhere it makes sense that an already difficult transition exacerbated by COVID-19 demands a delay, right? Not so much.

The ARRC published the following response in July, 2020 with respect to how COVID-19 influenced the end of the 2021 expiration date: “The ARRC recognizes that near-term, interim steps may be delayed given the current economic environment with the global pandemic…it remains clear that the financial system should continue to move to transition by the end of 2021.” But, how does something like a pandemic not yield an extension or delay? The Financial Conduct Authority (FCA) already extended the use of the LIBOR benchmark to be used in new loans until the end of March, 2021, originally set to expire in September 2020.  So will there be another extension? As of now there has been no mention of any further delays. Some believe there is no excuse to not have an alternative reference rate in place since the world has been on notice since 2017. In May, 2020, Chris McHugh, director, Centre for Sustainable Finance, London Institute of Banking and Finance discussed how banks were advised in 2017 to begin transition and “unless there is some systemic or prudential reason as to why it makes sense for regulators to delay, then the transition should continue as planned.” This statement suggests the notion that a pandemic is not a systemic or prudential reason for a delay. Furthermore, the Financial Stability Board (FSB) released a press statement on July 1, 2020 that encourages going forward with plans to transition away from LIBOR. While the FSB recognizes that some firms will encounter temporary delays, they stipulate that “financial and other firms should continue to ensure that their transition programs enable them to transition to LIBOR alternatives before end-2021.” Hence, institutions should continue their efforts in moving toward adopting alternative reference rates, if they have not already.

In the age of COVID-19 nothing is certain. Only time will tell how market participants are using their resources. In the meantime, institutions should continue their efforts in moving toward an alternative reference rate since it looks like the pandemic will not allow Libor to stay around much longer than planned.





Businesses have been hard hit by the COVID-19 pandemic and resulting “shelter in place” orders issued by state officials. Bankruptcy courts have been flooded with large retailer bankruptcy filings.  Since January 2020, approximately 27 retailers have filed for bankruptcy, including Century 21, Stein Mart, Tailored Brands, Inc., Lord & Taylor, Ascena Retail Group, Inc., Modell’s Sporting Goods, Pier 1 Imports, Inc., J. Crew, Neiman Marcus, JCPenney, Tuesday Morning, GNC, Sur La Table and Brooks Brothers, just to name a few. Large gyms and fitness centers are also joining the mix, including Gold’s Gym, Town Sports International, Flywheel Sports and 24 Hour Fitness.  The restaurant industry is suffering too, as we see companies like TooJay’s, FoodFirst Global Restaurants, CEC Entertainment Inc. and Garden Fresh Restaurants filing for bankruptcy.  The foregoing is certainly not exhaustive and does not even consider small business filings.  And, guess what? We have approximately three months left in 2020, leaving plenty of time for this list to grow.

Yes, commercial landlords are worrying, as they should, about whether or not their tenants will file for bankruptcy.  However, that should not be their only concern.  They need to worry about whether their tenants will look to void their commercial leases outside of bankruptcy.  In New York, due in part to the ongoing moratorium imposed by Governor Andrew Cuomo on the commencement of proceedings relating to the nonpayment of rent and eviction of commercial tenants [the freeze has most recently been extended to October 20, 2020, by Executive Order 202.64], few courts have been able to test the enforcement of commercial leases and potential defenses tenants may raise as a result of the COVID-19 pandemic.

However, an August 2020 decision and order issued by New York County Supreme Court Judge Kathryn E. Freed in Backal Hospitality Group LLC, et al. v. 627 West 42nd Retail LLC, Index No. 154141/2020, may give practitioners and commercial landlords a sneak peek at what is to come.  For now, it is too early to tell whether other courts will find commercial leases unenforceable due to the COVID-19 pandemic and related government-mandated shutdowns in New York.

In Backal, a private event company/caterer entered into a ten-year lease for property located in New York City for the purpose of hosting and organizing large-scale private parties and events in June 2018.  A $500,000 security deposit and “good guy guarantee” [a type of personal guarantee putting the business owner or principal on the hook for any rent due up to the time the tenant vacates the space and returns it to the landlord, typically found in commercial lease agreements] were required under the lease and later, a $500,000 letter of credit was established to replace the cash initially provided as security.  Pursuant to the lease, landlord 627 West 42nd Retail LLC (“627 West”) was authorized to draw upon the letter of credit in the event the lease was breached. Fast forward to March 2020 – – when Governor Cuomo’s March 22, 2020 Executive Order prevented the event company/caterer from operating the leased space for events and thus, left it unable to pay future rent and looking to vacate the space and terminate the lease.

As the tenant failed to pay rent, 627 West drew down the letter of credit to satisfy outstanding rental arrears through June 2020. The tenant and guarantors on the lease quickly commenced an action seeking (1) a declaratory judgment that the lease had been terminated, and (2) an order permanently enjoining 627 West from preventing the tenant and guarantors from canceling the letter of credit that secured the lease. They then brought an emergency application seeking an order directing 627 West to refund the amount of the letter of credit or, alternatively, directing 627 West to post a bond in the amount of the letter of credit pending the final resolution of the case.

On June 23, 2020, the court granted a temporary restraining order (“TRO”) preventing 627 West from further drawing on the letter of credit and enjoining the landlord from using or transferring any of the funds it had already drawn down.  However, after oral argument, the court issued its decision and order on August 3, 2020, which vacated the June 25, 2020 TRO and denied the plaintiffs’ application (the “decision and order”).

According to the decision and order, the tenant and guarantors argued that they were “likely to succeed on the merits since their surrender of the premises, combined with 627’s acceptance of the keys, establish[ed] that 627 allowed plaintiffs to terminate the lease without penalty.”  Further, they argued that they would suffer “irreparable harm [] if they [were not] granted the relief they [sought] since they [would] be unable to return the deposits their clients made in connection with parties planned at the premises.”  They also argued the doctrine of “impossibility of performance” under the lease in light of the March 22, 2020 executive order prohibiting large gatherings.

In opposition, 627 West argued that (1) 627 West delivered a notice of default to the caterer after it failed to pay March and April 2020 rent obligations, (2) after the tenant and guarantors requested a lease modification as a result of the COVID-19 pandemic, the parties entered into negotiations regarding a possible lease modification, and (3) notwithstanding such discussions about a possible lease modification, 627 West never agreed to allow the caterer to vacate the premises without penalty. 627 West noted that the tenant and guarantors had no evidence that the parties agreed to an early termination of the lease or waiver of all rent due.  It further argued that the lease prohibited the caterer from surrendering the premises without written approval from 627 West and required the caterer to pay any rent after it vacated the premises due to a default.

The court found that the tenant and guarantors failed to establish the likelihood of success on the merits and focused on the language of the lease itself.  The lease contained provisions stating that surrender of all or part of the premises would be valid only if in writing and signed by 627 West [plaintiffs failed to produce any such writing] and that the delivery of keys would not operate as termination of the lease or surrender of the premises.

Further, the court was not persuaded by the plaintiffs’ argument that the March 22, 2020 executive order banning large gatherings made it impossible for them to perform under the terms of the lease.  In so holding, the court referred to a provision in the lease which suggested that the parties “contemplated a scenario…in which performance by plaintiffs might become prohibited by a governmental order, and agreed that, if such a situation arose, they would reach an agreement regarding the collection of rent at the conclusion of the governmental restriction.”  The court reasoned that, “[a]lthough the parties attempted in vain to negotiate a lease modification, plaintiffs nevertheless attempted to unilaterally terminate the lease in a manner violative of the terms thereof.”

It is important to note that the court’s decision in Backal is only a finding that the tenants and guarantors were not likely to succeed on the merits of their claim.  It is not a final determination as to whether the tenant and guarantors can obtain the relief they are seeking. Nonetheless, Backal offers a glimmer of hope for landlords that New York courts will look specifically at the terms of the negotiated lease obligations in instances where the COVID-19 pandemic and governmental restrictions prevent a tenant’s business from operating, and will not be persuaded by common law doctrines like impossibility of performance or frustration of purpose.

Backal Hospitality Group LLC, et al. v. 627 West 42nd Retail LLC is a case to watch as it develops.  The plaintiffs filed their complaint earlier this month, including causes of action for rescission of the lease based on frustration for purpose and impossibility of performance, reformation of the lease [i.e. asking the court to find the parties’ “true intent” of the tenant’s obligations should it be deprived of the use of the premises], breach of contract, money had and received, and unjust enrichment.

Practitioners and commercial landlords alike should also look out for other judicial decisions that address whether tenants can avoid commercial leases based on impossibility of performance or frustration of purpose in the COVID-19 era.  A finding by a court that a lease is void and unenforceable by law based on the impact of COVID-19 and impossibility of performance or frustration of purpose will chill the commercial real estate market.

In addition to the arguments raised by the plaintiffs in Backal, practitioners and commercial landlords should be on the lookout for tenants to raise the applicability of a lease’s force majeure provision [a provision that excuses non-performance due to certain enumerated circumstances beyond the parties’ control, such as war, strikes, riots, “Acts of God” and governmental orders] or the doctrine of impracticability of performance [in general, the doctrine excuses nonperformance based on the occurrence of an event “the non-occurrence of which was a basic assumption on which the contract was made.”  See Restatement 2d of Contracts, § 261.]

On September 18, 2020, Governor Cuomo issued an Executive Order extending the toll “that prohibited the initiation of a proceeding or enforcement of an eviction of any commercial tenant for nonpayment of rent . . . through October 20, 2020” (Commercial Evictions Due to Non-Payment). As a result of this Order, commercial evictions have now been, once again, stayed until at least October 20, 2020.  Despite the language of the Order, commercial summary non-payment proceedings have been commenced and accepted by the New York Courts, however, enforcing a warrant and evicting a commercial tenant is clearly stayed through October 20.

As governmental orders and legislation can change daily and may alter a landlord’s decision and strategy, staying informed is of the utmost importance. If you need assistance, please contact Marci Zinn at or Christopher E. Vatter at


The COVID-19 crisis has placed significant pressure on landlords throughout the State.   Governor Cuomo and the Courts have issued various stays of enforcing warrants of eviction preventing landlords from evicting both residential and commercial tenants, although there is no stay on commencing a proceeding to seek a warrant of eviction.

For example, on June 30, 2020, the Governor signed the “Tenant Safe Harbor Act” which, among other things, prohibits evictions of residential tenants but allows a landlord to obtain a money judgment for nonpayment of rent (Covid-19 Eviction updates). On August 12, 2020, the Chief Administrative Judge, Lawrence Marks, issued an Administrative Order presently staying residential and commercial evictions until no sooner than October 1, 2020 (Administrative Order for Eviction Notices).

On September 4, 2020, the Centers for Disease Control and Prevention (CDC), issued an Order under Section 361 of the Public Health Service Act, temporarily staying residential evictions until December 31, 2020, to prevent the further spread of COVID-19.  “Under this Order, a landlord, owner of a residential property, or other person with a legal right to pursue eviction or possessory action, shall not evict any covered person[1] from any residential property in any jurisdiction to which this Order applies during the effective period of the Order.” (CDC Issues Shall Not Evict Order).

There are certain eligibility requirements that a covered person must demonstrate in order to obtain the stay.  These eligibility requirements include that:

  • The individual used their “best efforts to obtain all available government assistance for rent or housing”;
  • The individual does not expect to: (i) earn more than $99,000 in 2020, or $198,000 if they are married and filing a joint tax return; (ii) “was not required to report any income in 2019 to the U.S. Internal Revenue Service, or (iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act”;
  • The individual is experiencing a “substantial loss” of income, “or extraordinary out-of-pocket medical expenses”;
  • The individual is using their best efforts to make partial timely payments that are close to the full payment; and
  • An eviction would likely result in homelessness or being forced to move to another place that was either more expensive or where the individual could get sick from being close to others.

According to the Bill’s explanation, “[l]andlords would still be able to obtain money judgments for unpaid rent that accrued during that time period, but tenants would remain stably located in the meantime”.  The CDC Order also “does not relieve any individual of any obligation to pay rent, make a housing payment, or comply with any other obligation that the individual may have under a tenancy, lease, or similar contract.”  Moreover, “[n]othing in this Order precludes the charging or collecting of fees, penalties, or interest as a result of the failure to pay rent or other housing payment on a timely basis, under the terms of any applicable contract.” The CDC Order also does not prevent evictions based upon grounds that are not related to non-payment of rent, such as criminal behavior or destruction of the property. The CDC Order also does not prevent the non-renewal of leases.

The Realities of Future Landlord/Tenant Litigation

With many tenants not paying any rent, landlords may find themselves planning to litigate at the first opportunity. The CDC Order adds another hurdle that landlords with residential tenants will need to clear before evicting a defaulting tenant.  However, landlords must keep in mind the practical realities of life in a post-coronavirus world in deciding how to proceed.

When courts resume full operations and the moratorium on evictions are completely lifted, there will be a torrent of landlord-tenant cases and inordinate delays as a result. In fact, those delays have already started, as summary eviction proceeding may be commenced, albeit a landlord cannot yet enforce a warrant of eviction. Those proceedings have “return dates” that can be months in the future.  Post COVID-19, substantial time and money will need to be expended if litigation is pursued. There will also be more risk involved, as judges with equitable powers may favor tenants that were forced to close their businesses or lost their jobs during the height of the pandemic.  With that in mind it may make sense for landlords to consider alternatives to litigation. The other alternative is to commence litigation now, to “get in line” and not wait until the system is flooded with cases, and use the time (and leverage) to negotiate with their tenants.

Landlords should consider whether their business plans and financial circumstances would be better served by negotiation and private resolution. ​If you conclude that your business needs are best served by negotiating now rather than waiting to go to court, reach out to your tenants and suggest that accommodations can be made during this time, while reserving your right to later pursue collection of the full amount of rent due.


Although it may feel like the world has come to a halt, this is no time for landlords to sit on their hands. Taking a pragmatic but proactive approach to non-paying tenants will help to insulate a landlord from the chaos that will undoubtedly ensue when the moratorium on evictions is lifted.

As governmental orders and legislation can change daily and may alter a landlord’s decision and strategy, staying informed is of the utmost importance. If you need assistance, please contact Marci Zinn at or Christopher E. Vatter at

[1] The CDC defines the “Covered Person” as “any tenant, lessee, or resident of a residential property who provides to their landlord, the owner of the residential property, or other person with a legal right to pursue eviction or a possessory action” who can meet certain eligibility requirements.

The COVID-19 crisis has placed great pressure on commercial real property taxpayers in Nassau County who already pay some of the highest real property tax rates in the Country.

In Nassau County, commercial properties are assessed for purposes of real property taxation based on the value of the real property, which is determined in large part on the real properties’ potential to generate income.  The ongoing COVID-19 crisis has already crippled many commercial property owners this year through mandatory closures or defaulting tenants.  There appears to be virtually no end in sight for some commercial owners and operators.  The threat of present and possible future restrictions on operations makes tenants anxious to terminate current leases and wary to enter into new leases.  As a result, it is important that property taxes be grieved by either the property owner or tenant to ensure that the real property is not being over assessed.

In any taxing jurisdiction a property is taxed on the “tax status” date based upon current conditions. In Nassau County, the next tax status date is January 1, 2021. These real property assessments can be grieved based upon an overvaluation and/or overassessment. While the next evaluation by the taxing authority will presumably reflect the adverse impacts on commercial property values due to the COVID-19 crisis and hopefully lower the assessed value for such real properties, it is more important than ever for property owners and their tenants to grieve their real property assessments to make sure that their properties are not being overvalued and over-assessed.

However, the issue as to who has standing to challenge these commercial taxes where the property is leased must be addressed before filing any such grievance.  Most triple net leases require the tenant to pay all real property taxes on the property, and the tenant is often authorized under the lease to grieve the assessments underlying the taxes the tenant is required to pay. The property owner/landlord in a triple net tenancy has no interest or incentive to grieve that assessment because the tenant pays all of the taxes and would be the sole beneficiary of a successful grievance.

In a decision which came out just a few months before the COVID-19 crisis hit, the Appellate Division, Second Department (which covers Nassau County), issued a decision which could undermine a tenants’ ability to grieve its commercial real property taxes.  In DCH Auto v. Town of Mamaroneck, 178 A.D.3d 823 (2d Dep’t 2019), the Appellate Court affirmed a lower court decision which dismissed tax certiorari petitions filed by a net tenant even though the lease provided that the tenant/petitioner has the right to contest any assessment at its sole cost and expense and could settle any such proceeding without the consent of the owner. The Appellate Court ruled that the tenant/petitioner failed to satisfy a condition precedent to bringing the petitions because the administrative grievances filed with the assessor were not filed on behalf of the owner or an agent of the owner as required by RPTL §524(3), RPTL §706(2). (See Matter of Larchmont Pancake House v. Board of Assessors, et al., 153 A.D.3d 521 (2d Dep’t 2017), aff’d. on other grounds 33 N.Y.3d 228).

Therefore, in order to reduce the real property’s assessed value to reflect the adverse impact due to COVID-19, a commercial tax payer must file a grievance for the January 1, 2021 filing period.  It is important to ensure that a commercial tenant in Nassau County who files the grievance has right to grieve the tax assessment of its leased property. Similarly, in the event that there are no tenants, it is important for property owners to file the necessary timely grievance.

If you have any question concerning your Nassau County commercial property taxes due to COVID-19 or otherwise, please feel free to contact Andrew M. Mahony, Esq., Chair of the firm’s Tax Certiorari and Condemnation Group at (516) 746-8000 or

Jaspan Schlesinger LLP partner Robert Londin will moderate the second episode of a five-part webinar series dedicated to private Mergers and Acquisitions transactions.  The series spans from early transaction concerns and planning to key provisions of transaction documents, and Mr. Londin will serve as moderator for the entire series.  “Episode #2 is one of my favorite installments of this series.  This episode focuses on key provisions of M&A transaction documents” noted Robert Londin of the JSLLP Corporate and Commercial Transactions Group.  Episode #2 of the series from Financial Poise debuts on the West LegalEd Center on September 3, 2020.

For information about the Financial Poise webinar series episode, CLICK HERE: M&A Boot Camp #2

For more about Robert Londin, CLICK HERE:  Robert Londin Corporate & Commercial Transactions

Debtor fails to comply with the terms of his or her contractual obligations.  Creditor then sues Debtor for breach of contract and ultimately prevails and obtains a judgment against Debtor.  Creditor then seeks post-judgment discovery from Debtor in a search of Debtor’s assets in order to satisfy the judgment against him or her.  In response, Debtor invokes the constitutional privilege against self-incrimination under federal and state law and Debtor refuses to provide the requested post-judgment discovery to Creditor.  Now what?

In New York, a judgment creditor is generally entitled to broad discovery to assist in enforcing the judgment, especially since the evidence is typically within the possession of the judgment debtor.  See  Petrocelli v. Petrocelli Elec. Co., Inc., 121 A.D.3d. 596 (1st Dep’t. 2014).  In addition, N.Y. C.P.L.R. § 5223 compels disclosure of all matter relevant to the satisfaction of a judgment and sets forth a generous standard which allows the judgment creditor a broad range of inquiry through either the judgment debtor or any third person with knowledge of the debtor’s property.  See  ICD Group, Inc. v. Israel Foreign Trade Co. (USA), 224 A.D.2d 293, 294 (1st Dep’t. 1996).

The refusal of the Debtor to provide the requested post-judgment discovery will likely result in the Creditor moving to hold Debtor in contempt.  The law is clear that a party may not be held in contempt based upon a good faith invocation of the privilege against self-incrimination, which can be asserted in any proceeding, civil or criminal, and which protects against disclosures which the debtor reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used.  See Carver Fed. Sav. Bank v. Shaker Gardens, Inc., 167 A.D.3d 1337, 1340 (3d Dep’t. 2018) (internal cites omitted).  However, the law is also clear that the witness asserting the privilege must have reasonable cause to apprehend danger from a direct answer and the witness is not exonerated from answering merely because the witness declares that in so doing he or she would incriminate himself or herself.  Id.

Among the documents usually sought from a judgment debtor by a judgment creditor in the search of assets to satisfy a judgment are tax returns.  Generally, the disclosure of tax returns is disfavored due to their confidential and private nature.  See Pinnacle Sports Media & Entertainment, LLC v. Greene, 154 A.D.3d 601 (1st Dep’t. 2017).  However, once a judgment debtor invokes the privilege against self-incrimination, the issue becomes whether any recognized exception to that privilege allows production of the judgment debtor’s tax returns.  The answer is yes.  It has been held in New York that a judgment debtor’s income tax returns, W-2 wage statements and 1099 forms all fall within what is known as the “required records exception” to the privilege against self-incrimination.  Shaker Gardens, Inc., supra, 167 A.D.3d at 1341.

Under the “required records exception”, the Fifth Amendment privilege against self-incrimination cannot be asserted with respect to records which are required, by law, to be kept and which are subject to governmental regulation and inspection.  Id. (internal cites omitted).  In order to constitute “required records” the documents must satisfy a three-part test:  (1) the requirement that they be kept must be essentially regulatory, (2) the records must be of a kind which the regulated party has customarily kept, and (3) the records themselves must have assumed ‘public aspects’ which render them analogous to public documents.  Id.  Tax returns, W-2 wage statements and 1099 forms have all been held to fall under this rubric.  Id.  That means that despite Debtor’s invocation of the privilege against self-incrimination, Debtor is required to produce his or her tax returns, W-2 wage statements and 1099 forms in response to post-judgment disclosure requests made by Creditor.  The Debtor’s failure to produce the requested tax documents can lead to a judicial finding of civil contempt against the Debtor.

What about the rest of the documents sought by Creditor to assist in the search of assets to satisfy the judgment?  Assuming the information sought by Creditor is customarily asked at judgment debtor examinations and there is no indication that the purpose of the examination is anything other than an ordinary search of Debtor’s assets to satisfy the judgment against him or her, then Debtor will be required to establish that any fear of criminal prosecution based on the disclosure of the requested information is anything other than “imaginary” or based on something more than a “remote and speculative possibility.”  See Shaker Gardens, Inc. , 167 A.D.3d at 1342 (internal cites omitted).  Where the danger of incrimination is not readily apparent, the witness is required to establish a factual predicate for the invocation of the privilege against self-incrimination.  Id.  That means that Debtor cannot make a broad, undifferentiated assertion of the privilege as to each and every question asked at a judgment debtor examination or to all documents requested by Creditor.  Instead, in order to effectively invoke the protections of the privilege against self-incrimination Debtor must make a particularized objection to each discovery request.  Id.  That will likely require the trial court to conduct an in camera inquiry to assess the validity of the assertion of the privilege upon particularized objections.  Id.  As to documents, Debtor is required to establish a factual predicate and will usually require the submission of the documents at issue for an in camera inspection and/or compiling a privilege log in order to aid the Court in its assessment of a privilege claim and enable it to undertake in camera review.  Id. (internal cites omitted).

In sum, Debtor cannot invoke the privilege against self-incrimination as a vehicle to prevent disclosure of his or her tax returns, W-2 wage statements and 1099 forms to Creditor.  The failure to produce the tax documents can lead to a finding of civil contempt.  As to other requested post-judgment documents and questions asked during judgment debtor examinations, in order to invoke the privilege against self-incrimination, Debtor must show that the hazards of incrimination are substantial and real and not merely trifling or imaginary and that usually requires particularized objections to each discovery request and a determination by the Court of the validity of those particularized objections under the circumstances.

If you have any questions regarding the enforcement of contract rights, the satisfaction of judgments, or the interplay of enforcement of judgments with the privilege of self-incrimination, please feel free to contact Scott Fisher at (516) 746-8000, Ext. 248 or at