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Renters not paying rent until August 20th, COVID-19 Order

Discussion in 'Rental Agreements & Subleases' started by Michael Wechsler, May 21, 2020.

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  1. Michael Wechsler

    Michael Wechsler Law Topic Starter Administrator Staff Member

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    Jurisdiction:
    New York
    As a result of New York Governor Andrew Cuomo's Executive Order in response to coronavirus are a number of renters representing that they are entitled to not paying rent until August 20th without penalty and without any remedy to the landlord whatsoever. There has been confusion generated surrounding this Order since it forbids fees for late rent payments.

    There is also confusion as to how this applies to co-ops and condos, which a number of law firms state that it does. There is uncertainty as to what remedies a co-op has if co-op shareholders themselves don't pay maintenance fees to the building and whether the corporation must float their "rent" aka maintenance payments for several months. This is because co-op shareholders receive a "proprietary lease" to reside in their apartments and technically are tenants of the corporation in which they own shares. The "rent" they pay is for the "maintenance" of the premises.

    None of this seems to change the fact that if a tenant does not pay rent, the landlord has a right to evict. However, the landlord might need to pay for attorneys fees and may not be able to recover them under the lease agreement , depending upon how attorneys fees may be defined. And with regard to co-ops, the "eviction" process is quite different given the impact of the equity investment.

    We will also see how landlords may react once the time arrives for the tenant's lease renewal,

    While there isn't movement now because of the uncertainty that exists and the courts being closed, I am watching with a careful eye what will happen once they do . Even when the primary coronavirus concern may slowly subside, I'm wondering about whether whether we'll see a wave of legal issues arise .

    No. 202.28: Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency

    Sections 7-103, 7-107 and 7-108 of the General Obligations Law to the extent necessary to provide that:
    • Landlords and tenants or licensees of residential properties may, upon the consent of the tenant or licensee, enter into a written agreement by which the security deposit and any interest accrued thereof, shall be used to pay rent that is in arrears or will become due. If the amount of the deposit represents less than a full month rent payment, this consent does not constitute a waiver of the remaining rent due and owing for that month. Execution in counterpart by email will constitute sufficient execution for consent;
    • Landlords shall provide such relief to tenants or licensees who so request it that are eligible for unemployment insurance or benefits under state or federal law or are otherwise facing financial hardship due to the COVID-19 pandemic;
    • It shall be at the tenant or licensee’s option to enter into such an agreement and landlords shall not harass, threaten or engage in any harmful act to compel such agreement;
    • Any security deposit used as a payment of rent shall be replenished by the tenant or licensee, to be paid at the rate of 1/12 the amount used as rent per month. The payments to replenish the security deposit shall become due and owing no less than 90 days from the date of the usage of the security deposit as rent. The tenant or licensee may, at their sole option, retain insurance that provides relief for the landlord in lieu of the monthly security deposit replenishment, which the landlord, must accept such insurance as replenishment.
    • Subdivision 2 of section 238-a of the Real Property Law to provide that no landlord, lessor, sub-lessor or grantor shall demand or be entitled to any payment, fee or charge for late payment of rent occurring during the time period from March 20, 2020, through August 20, 2020;
    IN ADDITION, by virtue of the authority vested in me by Section 29-a of Article 2-B of the Executive Law to issue any directive during a disaster emergency necessary to cope with the disaster, I hereby issue the following directives for the period from the date of Executive Order through June 6, 2020:
    • There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020.
     
  2. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Good post Michael,

    I have a question. How does

    Subdivision 2 of section 238-a of the Real Property Law to provide that no landlord, lessor, sub-lessor or grantor shall demand or be entitled to any payment, fee or charge for late payment of rent occurring during the time period from March 20, 2020, through August 20, 2020;


    not amount to a violation of the takings clause of the 5th amendment?
     
  3. Michael Wechsler

    Michael Wechsler Law Topic Starter Administrator Staff Member

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    Good question.

    I'm looking into some of the issues when I have time, including all the #cancelrent bills being floated with wild popular support, which is not surprising. There is a lack of clarity coming from our politicians and news media as to what any of these bills mean and what are the ultimate consequences to all of us.

    Here is an excerpt from the The New York Times #CancelRent is the New Rallying Cry for Tenants. Landlords are Alarmed

    Representative Alexandria Ocasio-Cortez, a New York Democrat, offered a fervent endorsement of the campaign, encouraging her progressive base to embrace a movement to upend the housing market. “It’s not that it’s impossible to do and it’s not that we can’t do it,” Ms. Ocasio-Cortez said in a live video on her Facebook page on Monday. “We lack enough politicians with political will to actually help people who are tenants and actually help people who are mom-and-pop landlords.”

    To cancel rent and mortgage payments, the federal government would have to take sweeping and possibly unconstitutional intervention in the housing and financial markets, interceding in private contracts and ordering banks and landlords not to collect money.

    So it seems that the NY Times is saying that Ocasio-Cortez is claiming that she needs political help to pass this cancel rent / cancel mortgage provisions but also acknowledging that this bill isn't being prevented from passing by other Democrats and Republicans but by the Constitution itself.

    So I glanced at this letter sent from Ocasio-Cortez and several NY politicians and it seems to state that the "cancellation" of rent obligations might be better understood as the government assuming the responsibility of paying your rent to the landlord. So now everyone is made whole, everyone's happy, problem solved. It would seem obvious as to who would ultimately funding the government's $1 trillion landlord relief fund.

    And then I look at the bill introduced by Ilhan Omar, backed by Alexandra Ocasio Cortez and several others and I'm unsure of what this means. There are no restrictions on income or means or rent amounts. And if landlords must bear the entire risk of loss or, in order to take advantage of this fund, they must agree to 5 year rent freeze and 10% equity interest? On the surface, I don't know how/if this can pass constitutional muster.

    Emergency Rent and Mortgage Cancellation Legislation Sponsored by Rep. Ilhan Omar (MN-05)

    The moratorium will be made retroactive to cover April 2020 payments and will constitute a full payment forgiveness, with no accumulation of debt for renters or homeowners. The federal government will provide relief funds to landlords and lenders, allowing them to recoup their losses, so long as they agree to abide by a set of fair renting and lending practices for a period of five years. Additionally, the federal government will create an optional buyout fund to fully finance the purchase of private rental properties by non-profits, public housing authorities, cooperatives, community land trusts, and states or local governments. This fund will be designed to mitigate the loss of viable homes in the wake of an economic downturn, to mitigate the risk of real estate speculation, and to increase the availability of affordable and low-income units in the market.

    Requirements – Landlords who receive relief funds through the HUD program must agree to the following fair renting terms for a period of 5 years:
    i. a rent freeze;
    vi. provision of 10 percent equity to tenants; and

    So in the end, I'm not sure how to come close to answering the original question.
     
  4. mightymoose

    mightymoose Moderator

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    Anyone hoping to have all those months rent simply forgiven are in Fantasyland. They will end up paying one way or another, or eventually evicted once the stay is lifted.
     
  5. Michael Wechsler

    Michael Wechsler Law Topic Starter Administrator Staff Member

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    I agree with you , the question primarily being WHEN to pay . Even if they still have their jobs and can afford to pay without issue, they want to take advantage of an almost 4 month interest free loan which is subsidized by the landlord. They have more incentive not to pay because they don't want to give up the free money the politicians floating these bills are promising , paid by the federal government. It's a strange time.
     
  6. adjusterjack

    adjusterjack Super Moderator

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    Aren't landlords getting some relief with their mortgage payments?
     

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