Extending The Eviction Moratorium and More: New Changes In Commercial Eviction Procedures in New York
Effective September 2, 2021, a new law extended New York’s moratorium on commercial and residential evictions to January 15, 2022, while also enacting several other significant measures of which all commercial landlords and managing agents should be aware.
In 2020, New York State enacted two statutes which essentially prevented the eviction of a tenant who self-certified that they had suffered a “hardship” during the defined COVID-19 emergency period. In August 2021, the US Supreme Court invalidated a portion of New York’s law, which had effectively prevented a landlord from challenging a tenant’s self-certified claim of a COVID-19 related hardship.
In response to the Supreme Court’s decision and the impending expiration of New York’s moratorium preventing evictions, the New York legislature responded. While most of the attention in the media has been focused on the extension of the eviction moratorium, the new law in fact goes much further, establishing new procedures for (i) evictions from residential property and commercial property, (ii) foreclosures of residential property and commercial property, (iii) expanding the state emergency rental assistance program (“ERAP”) and (iv) prohibiting tax sales of property.
Due to the many issues addressed in the new law and the complexities involved, this Alert addresses only commercial evictions.
The new law allows those who did not receive funding from a municipality which distributed its own federal rental assistance funds to apply directly to NY State. Similar to the prior law, the filing of an application for ERAP funds immediately stays any pending eviction proceeding until a determination of eligibility is rendered by NY State. If ERAP funds are awarded, they must be accepted by the landlord. Also similar to prior law, acceptance of ERAP funds by the landlord, even if such funds are insufficient to satisfy the tenant’s debt to the landlord, constitutes a full satisfaction of the tenant’s debt to the landlord and prevents the landlord from commencing an eviction proceeding based upon an expired lease or unpaid rent, and further prevents an increase in rent for the next 12 months. The landlord’s only grounds for eviction are where the landlord establishes that the tenant “intentionally causes significant damage to the property or is persistently and unreasonably engaging in behavior which is substantially infringing on the use or enjoyment of other tenants or occupants or causes a substantial safety hazard to others.”
The new law also creates a new Commercial Hardship Declaration applicable only to the owners or tenants of commercial property with less than 100 employees. A “hardship” is now defined as a “significant loss of revenue during the pandemic, significant increase in expenses … for providing personal protective equipment to employees or moving expenses and difficulty locating suitable alternative property.” The new law requires a commercial landlord to include with all default notices sent to a tenant a copy of the Commercial Hardship Declaration form with the landlord’s name, address, e-mail address and telephone number.
When filing an eviction petition, the landlord must now file an affidavit attesting that the landlord (1) has not received a Commercial Hardship Declaration from the tenant, or (2) has received the Commercial Hardship Declaration but the tenant is causing significant damage or is engaging the unreasonable behavior (see above) or (3) believes the tenant does not have a COVID-19 related hardship. The notice of petition must contain a further notice that the proceeding will not go forward unless the landlord challenges the tenant’s Commercial Hardship Declaration. Moreover, when the Marshal, Sheriff or Constable serves a warrant of eviction, the tenant may respond by filing a Commercial Hardship Declaration, which will then return the landlord and tenant to the court for further proceedings consistent with the new law.
The new law further requires that, once a Commercial Hardship Declaration is provided, the proceedings will be stayed until at least January 15, 2022, subject, of course, to the landlord’s right to challenge the tenant’s claim of COVID-19 related hardship. This requirement applies not only to all future filed proceedings, but also to pending proceedings, even if a judgment and warrant of eviction have been issued. Where a warrant of eviction has been issued based on the tenant having caused significant damage or is engaging in objectionable behavior, the new law requires that the matter be restored to the calendar for a hearing to determine whether the tenant continues to engage in this conduct.
In all, for commercial landlords whose tenants are not paying their rent, there appears to be little, if any, relief in sight. Despite the many obstacles and a legal system which has become legislatively bred for delay, a landlord with a tenant who is not paying their rent, whether due to hardship or for strategic reasons, may be better off starting the proceeding and “getting in the queue” for when the eviction eventually ends.
Bleakley Platt & Schmidt will continue to provide guidance to its clients as laws continue to evolve on the federal, state and local levels. If you have any questions regarding this alert, please contact James W. Glatthaar at JWGlatthaar@bpslaw.com or 914-287-6159.