In light of the rapidly changing coronavirus (COVID-19) situation, Troutman Sanders and Pepper Hamilton have postponed the effective date of their previously announced merger until July 1, 2020. The new firm – Troutman Pepper – will feature 1,100+ attorneys across 23 U.S. offices. Read more.
On May 7, 2020, New York Gov. Andrew Cuomo enacted Executive Order No. 202.28, which extended and expanded — but in some cases narrowed — the temporary suspension of several New York state laws due to the COVID-19 crisis. The Executive Order impacts many industries and individuals in New York state, including both commercial and residential landlords and tenants.
Effective June 20, 2020 and continuing for a period of 60 days, through August 20, 2020, the Executive Order prohibits the following:
the eviction of both commercial and residential tenants for the failure to pay rent if the tenant (1) is eligible for unemployment insurance or benefits under state or federal law or (2) is otherwise facing financial hardship due to COVID-19. Note that this prohibition only applies to tenants that demonstrate their eligibility under one of these two factors. In addition, since this prohibition is limited to evictions for failure to pay rent, a qualifying tenant may still be evicted as a result of any other default under its lease.
the foreclosure of both residential and commercial properties for failure to make mortgage payments if the owner of the property (1) is eligible for unemployment insurance or benefits under state or federal law, or is otherwise facing financial hardship due to COVID-19, or (2) rents the property to a person or entity that falls into one of the categories described in clause (1). Similar to the eviction prohibition, this prohibition is limited to foreclosures due to a qualifying property owner’s failure to make mortgage payments and not any other default by the owner under its loan documents.
The Executive Order offers further relief to residential tenants. A residential tenant may request that any security deposit being held by the landlord be applied toward rent payments that are overdue or will become due, and the landlord must agree to this request if (1) the residential tenant is eligible for unemployment insurance or benefits under state or federal law or (2) the residential tenant is otherwise facing financial hardship due to COVID-19. This arrangement is at the residential tenant’s option only, and the landlord cannot attempt to compel residential tenants into requesting this arrangement. If the tenant and the landlord reach an agreement to apply the security deposit to overdue or future rent, the following conditions shall apply:
The agreement must be in writing.
If the security deposit does not cover the entire amount of rent due, the landlord is not deemed to have waived the remaining rent due.
The residential tenant must repay the security deposit at the rate of 1/12 the amount used as rent per month (i.e., in 12 equal monthly installments).
Monthly security deposit repayment shall not become due until at least 90 days after the security deposit is used to pay rent.
The residential tenant may opt to retain insurance that provides the landlord with relief, in lieu of making the monthly payments.
In addition to the option to apply security deposits toward rent payments, the Executive Order grants relief to residential tenants from incurring any late fees for failing to pay rent when due. Landlords are not permitted to charge residential tenants any fees or charges for late payment of rent during the period from March 20, 2020 through August 20, 2020.
The Executive Order has provided some relief for New York state tenants and property owners affected by COVID-19. There is currently legislation that has been introduced in the New York State Senate (Senate Bill 8125-A), and an identical bill in the New York State Assembly, which would provide further rent relief by suspending rent payments for 90 days for both residential tenants and small business tenants that have lost income or have been forced to close their businesses as a result of the government-mandated stay-at-home orders and nonessential business closures. If the legislation is passed, eligible tenants would not be required to pay rent for 90 days as of the effective date of the bill, nor would they be required to repay that rent at a later date. Similarly, if a commercial landlord suffers financial hardship due to its tenants’ not paying rent, the proposed bill would provide relief by suspending a fraction of the landlord’s mortgage payments for 90 days following the effective date of the bill. However, this legislation has not yet passed.
Despite the Executive Order, tenants that are experiencing difficulties in paying rent as a result of COVID-19 and government-ordered restrictions are encouraged to reach out to their landlords to discuss possible solutions that work for both parties. Some landlords are open to rent abatements or deferments for a fixed period of time as immediate relief in exchange for repayments of the abated/deferred rent at the end of the lease term and/or possibly extending the lease term for the number of months equal to the months in which an abatement or deferment was granted.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.