COVID-19 CLIENT ALERT – LANDLORD-TENANT ISSUES
While the Governor has mandated that banks provide homeowners with “forbearance” regarding their home mortgage payments if the homeowner is facing financial hardships due to the COVID-19 pandemic, to date there has not been any corresponding requirement that landlords provide “forbearance” to tenants with respect to their rent obligations. The rights available to tenants may well be determined by two considerations: whether they are residential or commercial tenants; and the language in their leases.
Most residential leases are printed forms, prepared by the landlord, who generally does not negotiate the language of their lease. Most leases for residential premises contain clauses which excuse a tenant from paying rent if the premises become uninhabitable due to “fire or other casualty” and a “covenant of quiet enjoyment”, which excuses payment of rent if a tenant is “constructively evicted.” There is also a law which declares that all residential leases contain an implied warranty that residential premises shall be “fit for human habitation” and authorizes a rent abatement if the landlord does not meet this standard.
Such provisions will be of little benefit to a residential tenant who faces financial hardships due to the COVID-19 pandemic. A residential tenant would be hard-pressed to argue that they are “constructively evicted” from premises when they are living in, and possibly working remotely from, their residence.
In contrast, commercial leases are extensively negotiated and the language sometimes ends up a blend of drafting styles between the landlord’s and tenant’s attorneys. Commercial leases frequently contain a “covenant of quiet enjoyment,” but also provisions regarding business interruption due to fire, casualty, landlord disruption and a variety of other reasons. These clauses can sometimes be used by a commercial tenant in situations where they are, in effect, locked out of their business premises. At the moment, there is no judicial guidance about whether the COVID-19 pandemic constitutes a “casualty” or whether a landlord’s performance of a lease obligation is hampered by a “force majeure” or act of government.
All tenants will benefit from a recent Administrative Order issued by New York’s Chief Administrative Judge. AO/87/20 banned eviction of tenants, both residential and commercial, for 90 days, effective March 22, 2020. The same order banned the commencement of any new action or proceeding, or the filing of papers in connection with any pending action or proceeding. As a result, any pending eviction is stayed and no new eviction actions or proceedings can be filed.
Additional help may be on the way. NY State Senate Bill S8125A would waive rent payments for residential or commercial tenants for a period of 90 days from the effective date of the law. Whether the law will pass, or when, cannot be determined as of this writing. The bill will surely face opposition from landlord groups, commercial property owners, cooperatives, and owners of rented homes and condominium units. But it will be a significant piece of legislation with wide ranging impacts if it were to become law.
Help may be on the way for landlords also. Congress passed, and the President signed into law, the CARES Act, a $2.3 trillion dollar COVID-19 related financial relief act. The CARES Act creates a fund for small business losses, which can possibly turn into grants, when the losses result from the COVID-19 pandemic. Landlords who experience losses due to their tenants’ non-payment of rent are advised to apply for such small business loan to cover some or all of their losses.
Residential or commercial tenants who experience financial hardship due to the COVID-19 pandemic and who wish to maintain a good relationship with their landlord are advised to discuss with their landlord their need for short term relief from rent and other financial obligations.
Please understand that the COVID-19 pandemic is an evolving situation. Our best advice is to continue to monitor our website and government websites for new information. We will continue to update our website as further information becomes available.