On April 22, 2020, a series of bills designed to address the effects of the COVID-19 pandemic were introduced in the New York City Council during its first-ever remote session. A number of these bills relate to landlord/tenant matters and, after some debate among the council members, were referred to committees. This blog post summarizes the proposed landlord/tenant legislation and discusses considerations for commercial landlords in New York City in light of potential changes in the law.
Int. 1912-2020 is a bill that would suspend the enforcement of evictions against individuals and businesses impacted by COVID-19 through at least April 2021.
Among other things, this bill prohibits the city sheriff and marshals from evicting tenants until the “first suspension date,” which is defined as the later of: (i) the end of the first month that commences after the end of the eviction moratorium set out in Governor Cuomo’s Executive Order 202.8 (currently, this moratorium is set to expire on June 20, 2020); (ii) the end of the first month that commences after the end of the eviction moratorium set out in the federal Coronavirus Aid, Relief and Economic Security Act (CARES Act) (currently, this moratorium is set to expire on July 25, 2020); or (iii) September 30, 2020. The bill does contain exceptions—it would permit evictions: (i) when ordered by the governor or mayor, or when necessary to carry out an order by the governor or mayor; and (ii) when ordered in connection with a matter that is under the jurisdiction of the Family Court.
The bill further provides that, except in limited circumstances, the city sheriff and marshals will remain barred from carrying out evictions until the “second suspension date” which is defined as the later of: (i) the end of the seventh month that commences after the expiration of the state eviction moratorium, (ii) the end of the seventh month that commences after the expiration of the federal eviction moratorium; or (iii) April 1, 2021. Evictions will only be permitted during this time if one of the exceptions relevant to the first suspension period is met, or if the tenant “has been provided a reasonable opportunity to show the court…that [he/she/it] suffered a substantial loss of income because of COVID-19 and such court has found that [he/she/it] has not suffered such a loss or has effectively waived [the] opportunity [to make such a showing].”
The bill sets out a list of ways in which a party may show that it has “suffered a substantial loss of income because of COVID-19.” Specifically, where the tenant is an individual, the required showing can be made if, between March 7, 2020 and the first suspension date, the individual experienced two or more weeks in which (i) he or she claimed federal or state unemployment insurance benefits in connection with a claim that was filed on or after March 7, 2020 or (ii) he or she worked fewer than three days and earned less than $504 because of one or more of the following situations:
- The person was diagnosed with COVID-19 or was experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- A member of the person’s household was diagnosed with COVID-19;
- The person was providing care for a family member or a member of the person’s household who was diagnosed with COVID-19;
- A member of the person’s household for whom the person had primary caregiving responsibility was unable to attend school or another facility that was closed as a direct result of the COVID-19 state disaster emergency and such school or facility care was required for the person to work;
- The person was unable to reach the person’s place of employment because of a quarantine imposed as a direct result of the COVID-19 state disaster emergency;
- The person was unable to reach the person’s place of employment because the person had been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The person was scheduled to commence employment and did not have a job or was unable to reach the job as a direct result of the COVID-19 state disaster emergency;
- The person became the breadwinner or major supporter for a household because the head of the household died as a direct result of COVID-19;
- The person quit a job as a direct result of COVID-19; or
- The person’s place of employment is closed as a direct result of the COVID-19 state disaster emergency.
The bill also addresses the ability of the city sheriff and marshals to enforce a money judgment against the guarantor of a lease, stating that such a judgment cannot be enforced against an individual guarantor before the second suspension date if that individual meets one of the ten conditions described above.
Where the tenant is a business, it can show that it suffered a substantial loss of income because of COVID-19 by demonstrating that: (i) it was subject to seating, occupancy or on-premises service limitations pursuant to an executive order issued by the governor or mayor during the COVID-19 period; or (ii) its revenues for any three-month period between March 7, 2020 and the first suspension date, were less than 50 percent of its revenues for the same period in 2019 or less than 50 percent of its aggregate revenues for the months of December 2019, January 2020, and February 2020.
Int. 1932-2020 is a bill that would prohibit landlords from enforcing a personal liability provision against any commercial tenant impacted by COVID-19, and would make such conduct a form of harassment.
Specifically, the bill would amend the New York City Administrative Code to bar enforcement of a personal liability provision against a business impacted by COVID-19 where the event of default occurred between March 7, 2020 and: (i) the end of the first month that commences after the end of the eviction moratorium set out in Governor Cuomo’s Executive Order 202.8; (ii) the end of the first month that commences after the end of the eviction moratorium set out in the CARES Act; or (iii) September 30, 2020. The term “impacted by COVID-19” largely mirrors the definition of “suffered a substantial loss of income because of COVID-19” set forth in Int. 1912-2020.
The bill also proposes to amend Section 22-902 of the New York City Administrative Code to include within the definition of “commercial tenant harassment” the act of “threatening to or implementing a personal liability provision that is not enforceable” for the reasons described above.
Int. 1914-2020 would amend section 22-902 of the New York City Administrative Code to bar landlords from threatening a commercial tenant because of its “status as a person or business impacted by COVID-19, or…its receipt of a rent concession or forbearance of any rent owed during the COVID-19 period.” As a result of this amendment, landlords who engage in such conduct would be subject to a fine ranging from $10,000 to $50,000.
Int. 1936-2020 would amend the definition of “harassment” in the Housing Maintenance Code to include threats against an individual based on their status as a COVID-19 impacted person, their status as an essential employee, or their receipt of a rental concession or forbearance. Such harassment would be subject to a penalty of between $2,000 and $10,000.
These proposed bills make it more important than ever for landlords to attempt to privately resolve matters with non-paying commercial tenants. Landlords are likely to have greater latitude in negotiations at this time, before they have to worry about restrictions on “threats” to enforce personal guarantees or take other action as a result of a business’ receipt of a rent concession or forbearance. Additionally, if these bills become law, eviction proceedings over the next year will become more costly because they will involve litigation about tenants’ financial condition and ability to pay rent. Landlords should consider whether it makes sense to avoid these costs by negotiating with tenants now instead. At the very least, negotiations will allow landlords to request documents from tenants to substantiate their financial condition, and these documents will be helpful in future proceedings if they need to be brought.
More details about negotiation and litigation strategies for commercial landlords can be found here in our prior blog post. If you need assistance, please contact Steven Schlesinger at email@example.com or Marci Zinn at firstname.lastname@example.org.