The Supreme Court, Suffolk County (Hon. Denise M. Molia) has granted summary judgment to a seller on a breach of contract action over the downpayment, in Fryer v. Murphy.   The action involved a contract to purchase property in Water Mill, NY.  The purchaser refused to close on the purchase, citing an alleged finding of mold as her excuse.   The seller brought an action to recover the down payment as “liquidated damages” and moved for summary judgment on the ground that the purchaser agreed to take the property in “as is” condition and did not negotiate for any mold-free clause in the contract.  Justice Molia agreed with the seller, found the purchaser in breach of the contract, and awarded the seller the full amount of the down payment as liquidated damages.

The Supreme Court, Suffolk County (Hon. Carmen Victoria St. George) has dismissed an action against a cooperative community’s Board, in Bonati v. Primiani.  The plaintiffs were homeowners in the community and shareholders of the corporation that owned all the community, and they claimed that the community’s governing Board breached its fiduciary duty to them by failing to follow the community’s regulations.   Justice St. George concluded that the plaintiffs could only have brought their claims in a “derivative” capacity, as shareholders, but instead they incorrectly brought the action in their individual capacities.  The action was dismissed in its entirety.

On July 6, 2020, Governor Andrew Cuomo signed Executive Order 202.48.  This Order ended the directives contained in Executive Order 202.28 regarding prohibition on residential eviction and foreclosure proceedings.  Executive Order 202.48, however, did not affect the protections for commercial tenants and commercial mortgagors which were put into place under Executive Order 202.28.  Thus, the moratorium on commencing a commercial eviction or commercial foreclosure proceeding against tenants/mortgagors who are eligible for unemployment insurance or benefits under federal or state law or otherwise facing financial hardship due to COVID-19 remains in place until August 20, 2020.

As to residential eviction proceedings, a landlord may commence an action for non-payment against a tenant, whether the tenant is experiencing a COVID-19 financial hardship or otherwise.  Tenants experiencing a COVID-19 financial hardship, however, can now raise such financial hardship as an affirmative defense in the eviction proceeding under the protections of the Tenant Safe Harbor Act (the “Act”).  The Act was signed into law by Governor Andrew Cuomo on June 30, 2020 and it provides that, “No court shall issue a warrant of eviction or judgment of possession against a residential tenant or other lawful occupant that has suffered a financial hardship during the COVID-19 covered period for the non-payment of rent that accrues or becomes due during the COVID-19 covered period.”  The Act goes on to define the “COVID-19 covered period” as commencing March 7, 2020 and ending on the “the date on which none of the provisions that closed or otherwise restricted public or private businesses or places of public accommodation, or required postponement or cancellation of all non-essential gatherings of individuals of any size for any reason in Executive Orders 202.3, 202.4, 202.5, 202.6, 202.7, 202.8, 202.10, 7 202.11, 202.13 or 202.14, as extended by Executive Orders 202.28 and 202.31 and as further extended by any future Executive Order, issued in response to the COVID-19 pandemic continue to apply in the county of the tenant’s or lawful occupant’s residence.”  In the context of the NYForward reopening guide, the end of the COVID-19 covered period described in the Act equates to the time in which a County enters Phase 4 in the reopening of the economy.

In determining whether a tenant has experienced a COVID-19 financial hardship, the Act provides for several factors which shall be considered by the court, e.g. the tenant’s lawful income prior to COVID-19 versus the tenant’s lawful income during the COVID-19 covered period, the tenant’s liquid assets, and their eligibility to receive cash assistance, disability and/or unemployment benefits from New York State.  If the tenant successfully illustrates the COVID-19 financial hardship, the landlord cannot obtain a warrant of eviction or judgment of possession.  Such landlord, however, if successful in their petition, can obtain a money judgment against the tenant.

As to residential foreclosure proceedings, Governor Andrew Cuomo signed a new law into effect on June 17, 2020 which offers permanent protections for certain residential mortgagors facing COVID-19 financial hardship during the COVID-19 covered period as defined above.  The law does not apply to all mortgage loans; for instance, it does not affect mortgage loans made by any agency or instrumentality of the United States or any government sponsored enterprise, such as FHA loans.  For those qualifying mortgagors, the law requires the lender to offer different forbearance options to the mortgagor for mortgage payments missed during the COVID-19 covered period for up to a period of 180-days with an option to extend for an additional 180-days.  For example, the mortgagor can chose to extend the term of the loan for the period of forbearance and tack on the miss payments to the end of the loan; they can chose “to have the arrears accumulated during the forbearance period payable on a monthly basis for the remaining term of the loan without being subject to penalties or late fees incurred as a result of the forbearance,” or they can defer the missed payment(s) as a non-interest balloon payment payable at the maturity of the loan.  The lender must illustrate that it adhered to the provisions of this law and made these different forbearance options available to the mortgagor before the lender can commence a foreclosure action arising from missed payments during the COVID-19 covered period.  A mortgagor may raise the lender’s failure to comply with this new law as a defense to the foreclosure action.

Posted April 3, 2020

Last updated July 9, 2020

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020.  Title I (“Keeping American Workers Paid & Employed Act”) addresses two types of loans available to small businesses, both of which greatly expand SBA loan eligibility.  The SBA has issued several Interim Final Rules, with the most recent published in the Federal Register on June 26, in connection with the Paycheck Protection Loan Program described below.  The SBA has provided additional guidance to address borrower and lender questions through its Frequently Asked Questions (“FAQs”), which are updated periodically.  Borrowers and lenders may rely on the guidance provided in the FAQs.  The FAQs can be accessed at  https://www.sba.gov/document/support–faq-lenders-borrowers

Congress passed the Paycheck Protection Program Flexibility Act (PPPFA) on June 3, 2020, which the President signed into law on June 5.   The PPPFA provides more flexibility for borrowers under the Paycheck Protection Program discussed below and makes it easier for such borrowers to qualify for loan forgiveness for a greater portion of their loans.  The PPP loans section below (most notably the “Forgiveness” section) has been updated to reflect the provisions of the PPPFA.  The changes to the CARES Act made by the PPPFA are retroactively applicable as if they were included in the original CARES Act, except for the change to the term of the loan (see “Term” below).

A brief summary of each of the two types of loans is provided below.

Paycheck Protection Program under Section 7(a) of the Small Business Act- to help employers maintain payroll to prevent job loss & small business failure; 100% federally guaranteed; $670 billion made available for loans; for more information go to https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-7

• Eligibility: in addition to small business concerns, any business concern, nonprofit organization, veterans organization, or Tribal business concern with not more than 500 employees, including sole proprietors, non-profits, and eligible self-employed individuals; eligible companies must have been in operation on February 15, 2020 and have had employees for whom it paid salaries & payroll taxes or paid independent contractors as of such date; the borrower must certify in good faith that the loan request is necessary, taking into account their business activity and their ability to access other sources of liquidity; any borrower that received a loan for less than $2 million will be deemed to have made the required certification in good faith; SBA will review all loans made in excess of $2 million (see “forgiveness” below)
• Application: small businesses and sole proprietorships could apply beginning Friday, April 3; independent contractors and self-employed individualscould apply beginning Friday, April 10; apply directly with SBA-approved lender by August 8, 2020 (the president signed a new law on July 4 extending the deadline, which had previously been June 30); the Department of Treasury has authorized FDIC-insured banks and credit unions, certain Farm Credit System institutions, and certain other depository or non-depository financing providers to provide loans in addition to already approved SBA lenders; applicants are advised to contact all lending institutions with whom they do business to gauge such institution’s readiness to provide application and process the loan; applicant may apply with only one bank, however; all lender & borrower fees are waived
• Coverage Period: February 15, 2020 to December 31,
• Loan Amount: Maximum amount of loan is the lesser of $10 million or 2.5 times the average monthly payroll costs based upon the prior year’s payroll
• Interest Rate: 1% fixed
• Permitted Uses for Loan:

1. Payroll Costs (including costs related to healthcare benefits and premiums, payments for vacations and sick, family and medical leave (to the extent a credit is not allowed under the Families First Coronavirus Response Act), salaries (salaries of over $100,000/year are capped at $100,000), wages, commissions, tips and similar compensations, state and local taxes on compensation (NOT available for federal employment taxes imposed or withheld from 2/15/2020-6/30/2020, including FICA, Railroad Retirement Act taxes and income taxes required to be withheld from employees);
2. interest payments on mortgage obligations;
3. rent (lease must have been in force as of February 15, 2020);
4. utilities for which service began prior to February 15, 2020

• Forgiveness: amounts spent during the Covered Period (the period beginning on the date of origination of a covered loan and ending the earlier of (A) the 24-week period beginning with the origination date or (B) December 31, 2020, unless such borrower shall elect to keep the Covered Period at 8 weeks, as the Act initially provided) on rent, payroll costs, mortgage interest & utilities may be forgiven; 60% of the qualified spending must consist of Payroll Costs, including payments to furloughed employees and bonuses or hazard pay to employees during the Covered Period, not to exceed $100,000 cap (no more than 40% of amount forgiven may be for non-payroll costs); amount forgiven may be reduced if the borrower reduces the number of full-time employees or salaries and wages during the Covered Period; borrowers may seek forgiveness for payroll costs for the applicable covered period beginning on either:  (i) the date of disbursement of the loan (i.e., the start of the Covered Period) or (ii) the first day of the first payroll cycle in the Covered Period; amount forgiven reduced in proportion to reduction in number of employees & reduction in total salary or wages of employee in excess of 25% (excluding employees with salaries greater than $100,000);  reduction penalty does not apply to the extent the borrower restores their workforce count and salaries/wages by December 31 , 2020 during the period from February 15, 2020 to December 31, 2020 the amount of loan forgiveness shall be determined without regard to a reduction in the number of full-time equivalent employees if the borrower is (A) unable to rehire an individual who was employee on or before February 15, 2020, (B) able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020 or (C) able to demonstrate an inability to return to the same level of business activity as the business was operating at prior to February 15, 2020); must apply to lender for forgiveness and include documents verifying the number of full-time equivalent employees and pay rates, along with payments on eligible mortgage, lease and utility obligations; borrower may apply for forgiveness any time on or before the maturity date of the loan (including before the end of the Covered Period) if the borrower has used all of the loan proceeds for which it is requesting forgiveness; must apply within 10 months after the end of the Covered Period; lender must make decision on loan forgiveness within 60 days and then issue such decision to SBA; amount forgiven may not exceed the principal of the loan; amount forgiven is not included in gross income; SBA will review all loans in excess of $2 million following submission of the borrower’s loan forgiveness application; if SBA determines that the borrower lacked an adequate basis for the required certification, SBA will seek repayment of the outstanding loan balance and will inform the lender that the borrower is not eligible for loan forgiveness; if the borrower repays the loan, SBA will not pursue administrative enforcement; SBA will be issuing further guidance on loan forgiveness
• Term: to the extent not forgiven, 2 years if the loan was originated before June 5; 5 years if the loan was originated June 5 or later; lenders and borrowers may mutually modify the 2-year term of existing PPP loans
• Deferral: deferral period begins on loan date and ends on the date that the SBA remits the amount of forgiveness to the lender; if borrower does not apply for forgiveness within 10 months after the last day of the Covered Period, the deferral period ends on that date
• Guarantees/Collateral: no personal guarantee or collateral required
• The PPPFA provides that borrowers may now defer 50% of the employer’s share of payroll taxes until 2021 and the remaining 50% until 2022

Economic Injury Disaster Loan Program under Section 7(b) of the Small Business Act (“EIDL” Program)- existing program but expanded by CARES Act with $10 billion of additional funding for emergency grants, expansion of entities eligible for such loans and waivers of certain requirements; for more information go to https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance

• Eligibility: in addition to already eligible small business concerns, private nonprofit  organizations, and small agricultural cooperatives, sole proprietors, independent contractors, and any cooperative, ESOP or tribal small business with 500 or fewer employees; must have suffered “substantial economic injury” from COVID-19; usual EIDL requirement that borrower must demonstrate it is unable to obtain credit elsewhere is waived
• Application: through the SBA website at: https://covid19relief.sba.gov/#/
• Coverage Period: January 31, 2020 to December 31, 2020
• Loan Amount: based upon company’s actual economic injury as determined by the SBA up to $2 million
• Interest Rate: 3.75% fixed rate for small businesses; 2.75% for nonprofits
• Permitted Uses for Loan: payroll, to cover increased costs due to supply chain interruption, rent and mortgage payments, obligations that cannot be met due to revenue loss
• Term: up to 30 years
• Grants: any entity applying for such a loan may request an advance of up to $10,000 to pay allowable working capital needs; the advance is to be paid by the SBA within 3 days of administrator’s receipt of application, subject to verification that entity is eligible under program; is not required to be repaid, even if the application for the loan is denied (but amount of advance must be deducted from any loan forgiveness amounts under a Paycheck Protection Program Loan)
• Guarantees: no personal guarantees required for loans up to $200,000; SBA must make determination that applicant has ability to repay the loan; can be based solely upon applicant’s credit score (submission of tax returns not required)

Companies may obtain loans under both programs but cannot cover the same costs with both loans; may also apply for other SBA financial assistance as long as there is no duplication in the uses of funds

In addition to availability of the loans discussed above, the CARES Act allocates an additional $17 billion to subsidize certain existing loans guaranteed by the Small Business Administration under Section 7(a) of the Small Business Act; the Administration will pay principal, interest and fees on such loans for a period of six months and is encouraging lenders to provide payment deferments and extend maturity dates.

For more information on how to apply for assistance, visit the U.S. Chamber of Commerce website at https://www.uschamber.com/co/small-business-coronavirus

Posted:  March 27, 2020

Last Updated:  July 8, 2020

On March 19, 2020, Governor Cuomo signed Executive Order 202.7, which authorizes notarial acts to be performed remotely in New York State, and which executive order was extended by Executive Order No. 202.28, issued on May 7, 2020, Executive Order 202.38, issued on June 6, 2020 and Executive Order 202.48, issued on July 6, 2020.  This executive order allows notarization through video conferencing, which means that Powers of Attorney, Trusts, Affidavits and deeds may still be executed and acknowledged in accordance with New York state requirements.  Any such video conference must allow for direct interaction between the person signing the documents and the Notary, and the person signing the documents must be physically present in New York State.  A legible copy of the signed document must be transmitted by fax or electronic means to the Notary on the date it was signed.  This authorization is in effect until August 5, 2020.

If you do not have estate planning documents in place, you may want to consider having those prepared now.  If you do have an estate plan in place, you may want to review these documents to see if anything needs to be updated.  In light of the COVID-19 emergency and the quarantine measures being implemented by health care facilities, you may want to consider revising your health care proxy to authorize your agent to communicate with health care providers via telephone, video conference, e-mail or other means, and to permit health care providers to accept such indirect forms of  communication/directives.

If you have questions on any of these matters, please do not hesitate to contact us for a free video or telephone consultation—our attorneys are available for video-conferences through Facetime, Skype and Zoom.

Posted:  April 8, 2020

Last Updated:  July 8, 2020

On April 7, 2020, Governor Cuomo issued Executive Order No. 202.14, which, among other things, authorizes the act of witnessing certain New York estate planning documents utilizing audio-video technology.  This executive order was extended by Executive Order No. 202.28, issued on May 7, 2020, Executive Order 202.38, issued on June 6, 2020 and Executive Order 202.48, issued on July 6, 2020, and allows our estate planning attorneys to fully assist clients with their estate planning needs during the COVID-19 pandemic.  With remote witnessing permitted through this and prior executive orders, clients can execute a Last Will and Testament, a Statutory Short Form Power of Attorney (with gifting rider), Living Trusts, Living  Wills, Health Care Proxies and forms for an agent to control the disposition of remains.

The following conditions must be met in order to properly witness through audio-visual technology:

• if the person whose signature is being witnessed is not personally known to the witness(es), they must present valid photo ID to the witness(es) DURING the video conference;
• the video conference must allow for DIRECT INTERACTION between the person who is signing, the witness(es) and the supervising attorney (if applicable); and
• the witness(es) must receive a legible copy of the signature page(s) on the same date that they are signed by the person (may be transmitted via fax or electronic means).

The witness(es) may sign the transmitted copy of the signature page(s) and transmit the same back to the person who signed, and the witnessing of the original signature page(s) may be repeated as of the date of execution provided that the witness(es) receive such original signature page(s) together with the electronically witnessed copies within thirty days after the date of execution.

This authorization is in effect until August 5, 2020.

With Long Island’s entry into Phase 2 of New York Forward, our Riverhead and Southampton Offices have re-opened.  Please note that, in order to comply with the guidelines affecting professional offices, we are limiting access to visitors by appointment only.  You can reach all of our attorneys and staff through our main number, 631-369-1700, and through their individual email addresses.

Post Based on Article Originally Prepared for Southampton Business Alliance, updated as of May 29, 2020

Reopening for Business in New York— “NY Forward”

New York has begun the process of gradually reopening for business.  A summary of how the reopening process will be implemented statewide and locally, along with how individual businesses should prepare for reopening, is set forth below.

1. Statewide Process

Beginning on May 15, Phase 1 industries began reopening in five regions (Central NY, Finger Lakes, Mohawk Valley, North Country and Southern Tier) of New York State.  Since then, four other regions — including Long Island — entered Phase 1, bringing the total to nine out of ten (with only New York City remaining).  These nine regions have met the seven metrics required for reopening businesses, which relate to having a sufficiently low COVID-19 infection rate (declines in total hospitalizations, deaths and new hospitalizations), capacity in the health care system to absorb a potential resurgence in COVID-19 cases (30% of hospital beds and 30% of ICU beds available and 90 days of personal protective equipment stockpiled for each hospital), sufficiently high capacity for COVID-19 testing (30 tests per 1,000 people per month) and a robust contact-tracing program in place (region-specific thresholds for number of contact tracers required).

Once a region has met the seven metrics, businesses in that region will re-open in four phases based upon industry, with at least two weeks between each phase of reopening.  Each region must appoint an oversight institution referred to as a “control room”, comprised of local elected officials, hospital, and state representatives, to monitor and oversee the reopening.

The industries identified in each phase are as follows:

Phase 1:  construction, manufacturing, wholesale trade, select retail for curbside or in-store pickup or drop off only, agriculture, forestry, fishing & hunting

Phase 2:  professional services, finance and insurance, retail, administrative support, real estate, rental and leasing, hair salons & barber shops

Phase 3:  restaurants and food services

Phase 4:  arts, entertainment, recreation, education

For more information regarding what types of businesses comprise each industry and for industry-specific guidance, go to https://forward.ny.gov/industries-reopening-phase

2. Reopening on the East End

The East End is part of the Long Island region, which encompasses all of Nassau and Suffolk Counties.  As of May 27th, the Long Island region had met all seven metrics for re-opening and entered Phase 1.  It will be up to the Long Island Regional Control Room (comprised of Suffolk County Executive Steve Bellone, Nassau County Executive Laura Curran, President of the Empire State Development Corporation Eric Gertler, President of the L.I. Federation of Labor John Durso, L.I. Regional Director of the NAACP Tracey Gertler and Chief Executive of the Long Island Association Kevin Law), and local officials to enforce social distancing and other state-mandated protocols throughout the region.  Now that Long Island is reopened, the Regional Control Room is required to meet every morning to review and monitor infection, testing and hospitalization in the region and determine whether to slow down the reopening process.  They are also looking to the regions that have already reopened for guidance on how to proceed and what measures may or may not be effective.

East End residents should be mindful that local municipalities will be issuing their own guidelines and regulations to supplement State- and County-level regulations.  For example, State beaches re-opened on Friday, May 22 with certain State-mandated guidelines in place.  The beaches must be below 50% capacity, group activities and sports will be prohibited, concession stands, playgrounds and other gathering areas will be closed, and beachgoers will be required to maintain social distancing.  Attendants will be present to enforce social distancing requirements.  It is up to local municipalities to decide whether to open their own beaches.  If they do decide to open, they must at a minimum adopt the State’s guidelines and requirements, and they may also impose additional regulations.  As with the beaches, local municipalities may implement their own measures to guide and facilitate business reopenings in addition to those imposed by the State.

3. Process for Individual Businesses

Each business must develop a written safety plan, outlining how they will prevent the spread of COVID-19 at their workplace.  This plan does not need to be submitted to a state agency, but must be maintained on the premises of the business and must be made available to the New York State Department of Health or local health or safety authorities in the event of inspection.  A business may develop its own safety plan or use the template found at:

https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/NYS_BusinessReopeningSafetyPlanTemplate.pdf

In addition to the industry-specific required guidelines set forth at https://forward.ny.gov/industries-reopening-phase (which each business must review for their specific industry before reopening- some are mandatory guidelines and some are recommended best practices), the template safety plan includes the following measures:

1. Physical distancing:

– ensure 6 foot distance between personnel;

-require face coverings to be worn when personnel are within 6 feet of one another or there is more than one individual in a tightly confined space;

-post social distancing markers;

-limit in-person gatherings as much as possible;

-establish designated areas for pick-ups and deliveries

1. Workplace:

– provide employees with acceptable face covering at no cost to employee and have adequate supply of coverings; coverings must be cleaned or replaced after use or when damaged or soiled, may not be shared and should be properly stored or discarded

– limit the sharing of objects and discourage touching of shared surfaces or wear gloves or sanitize or wash hands before and after contact

1. Hygiene & Cleaning:

-adhere to hygiene and sanitation requirements from CDC (see below) and maintain cleaning logs on site that document date, time and scope of cleaning

-provide and maintain hand hygiene stations for personnel

-conduct regular cleaning and disinfection at least after every shift, daily or more frequently as needed

1. Communication:

-post signage throughout workplace to remind personnel to adhere to proper hygiene, social distancing rules, appropriate use of PPE and cleaning and disinfecting protocols

-maintain a log of every person entering the site (other than contactless deliveries and deliveries using personal protection equipment; customers may be encouraged to provide information but are not mandated to do so)

-if an employee tests positive for COVID-19, the employer must immediately notify state and local health departments

Businesses should also consult with any licensing entity that governs their particular business or industry, along with any associations with which they are affiliated to seek further guidance and suggestions.  Additionally, businesses should follow the guidelines and guidance to develop cleaning and sanitizing protocol issued by the Centers for Disease Control (CDC) at https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html and the Occupational Safety and Health Administration (OSHA) at https://www.osha.gov/Publications/OSHA3990.pdf

Businesses are also encouraged to implement mandatory health screening assessments before employees begin work each day; they may ask employees to complete a questionnaire asking whether they have symptoms of COVID-19, have been tested for it or have had contact with anyone who has been diagnosed or exhibits symptoms; they may also require measuring employees’ body temperatures before entering the workplace.

Other best practices include encouraging businesses to reduce density in the workplace by adjusting employees’ hours– workday hours may be staggered, or those employees who can continue to work effectively remotely should be encouraged to do so.  Barriers should be installed for receptionists and other employees located in high foot traffic locations.  Cleaning and disinfecting supplies should be maintained and ordered ahead.  The use of common refrigerators should be discouraged and employees should be encouraged to bring their own food.

As we navigate through these unprecedented times, the attorneys at Esseks, Hefter, Angel, Di Talia & Pasca, LLP remain available to guide businesses through the process of reopening, including preparation of their individualized safety plans, and to assist businesses with any other needs they may have.  For further information, please contact Lisa Tymann at ltymann@ehalaw.com.

On May 7, 2020, Governor Andrew Cuomo signed Executor Order No. 202.28, which extends the stay of evictions and foreclosures from June 20, 2020 through August 20, 2020, limits a landlord’s authority to charge late fees, and gives tenants the right to use their security deposit for payment of rent.

Effect on Evictions and Foreclosures

The Order extends the stay of evictions and foreclosures from June 20, 2020 – when the stay would have expired – to August 20, 2020, with some new limitations.  There can be no initiation or enforcement of either: (1) evictions of commercial or residential tenants for the nonpayment of rent or (2) foreclosures of any residential or commercial mortgages for the nonpayment of the mortgage, under the following circumstances: the property is owned or rented by someone who is eligible for unemployment insurance or benefits under state or federal law or is otherwise facing financial hardship due to the COVID-19 pandemic.

Thus, with respect to evictions, eviction proceedings can apparently be commenced against commercial and residential tenants for breaches of the lease unrelated to nonpayment.  However, the bar against commencement of evictions based on nonpayment of rent remains in place, at least to the extent the tenant is eligible for unemployment or “facing financial hardship,” a phrase that is not defined but capable of being broadly interpreted.  A landlord may not know whether the tenant falls within this category, so it is possible that financial hardship may be viewed as a defense to an eviction, not just an impediment to commencement of the proceeding.  From a practical standpoint, due to the current closure of most landlord-tenant courts and the restrictions on commencing any new actions in Supreme Court except for emergencies, no new eviction proceedings or foreclosure actions  can be brought at this time.  Still, assuming the landlord tenant courts reopen before the August 20, 2020 deadline, the courts will have the opportunity to interpret the meaning of this Executive Order.

Use of Security Deposits

The Order permits landlords and tenants of residential properties to enter into a written agreement by which a security deposit, plus any interest accrued, can be used to pay rent that is in arrears or will become due.  Execution by counterpart via email constitutes sufficient execution.  If the amount of the security deposit is less than the full amount due, there is no waiver of the total amount due and owing to the landlord.  However, to enter into such an agreement, the tenant or licensee must be eligible for unemployment insurance or other benefits under state or federal law, or must otherwise be facing financial hardship due to the COVID-19 pandemic.

It is the option of the tenant/licensee to enter into such an agreement.  The landlord is not permitted to act in any manner to compel the tenant/licensee to enter into such an agreement.

Any security deposit used for payment of rent must be replenished by the tenant/licensee at the rate of 1/12^th the amount used per month.  The payments to replenish the security deposit become due and owing no less than 90 days from the date the security deposit was used for rent.  The tenant/licensee may retain insurance to provide relief to the landlord, in lieu of the monthly security deposit replenishment, which the landlord must accept as replenishment.

Late Fees

The Order modifies Real Property Law §238-a(2) to the extent that no landlord, lessor, sub-lessor or grantor can demand or be entitled to any payment or fee for the late payment of rent for the period from March 20, 2020 through August 20, 2020, with respect to any residential dwelling.

Posted March 27, 2020

The State of Emergency and COVID-19 crisis has created unprecedented concerns for New York landlords.  On March 20, 2020, Governor Andrew Cuomo signed Executive Order No. 202.8, which stays the enforcement of all residential and commercial evictions for a period of 90-days.  No eviction orders can be signed or executed, no default judgments can be granted and, if you had already obtained a judgment of possession and warrant of eviction prior to Governor Cuomo’s Executive Order, the sheriff cannot execute the warrant.  This essentially ties the hands of any landlord who finds himself or herself with a non-paying tenant or a tenant who has held over in possession upon expiration of the lease.  No judicial remedy can be sought for the next 90-days.  In addition to this moratorium on evictions, New York State Courts, including the lower District Courts where eviction matters are held, are physically closed and providing only “essential services.”  As to housing matters, “essential services” has been defined as including those issues related to landlord lockouts, serious code violations and repair orders, which are mostly prevalent in New York City.

At this time of year, many landlords on eastern Long Island may have already secured  tenants for their homes for the popular seasonal period of Memorial Day through Labor Day.  If those same landlords have also entered into a short-term rental agreement with a tenant escaping New York City for COVID-19-related reasons and such short-term tenant fails to vacate at the end of the lease, the current moratorium on evictions may prove it impossible for the landlord to remove the present tenant so that the seasonal tenant can move in.

In addition to this new uncertain reality, landlords are still grappling with the impact of New York’s Housing Stability & Tenant Protection Act of 2019 (the “Act”), which went into effect last June and brought with it sweeping changes to New York landlord/tenant law.  The Act both modified existing provisions under New York’s Real Property Law, Real Property Actions & Proceedings Law and General Obligations Law and created new law.  Its statewide regulations affect all residential lease agreements, including short-term, seasonal rentals.  To summarize a few key changes:

·       the Act limits the amount of late fees that a landlord can charge a tenant and when those charges can be imposed;
·       it creates new notice requirements for landlords in the context of late payments, rent increases and non-renewals; and
·       it limits the amount of rent and security deposit that a landlord can collect upon signing of a lease.

In particular, the Act provides that “no deposit or advance shall exceed the amount of one month’s rent” (see, General Obligation Law Section 7-108).  This restriction has created instability and uncertainty in the seasonal rental market of the Hamptons and other communities on the East End of Long Island, where the collection of the entire rent upfront was a paramount aspect of the seasonal lease.  In addition to disrupting this business model for East End seasonal rentals, the Act has made extensive modifications to both non-payment and holdover proceedings which will increase the amount of time it takes a landlord to get a court date and evict a tenant.  For example, where the statutory prerequisite notice requirement in a non-payment proceeding used to be 3-days, it is now 14-days under the Act.  Where the sheriff used to be able to serve a warrant of eviction to a tenant on at least 72-hours’ notice, now the sheriff is required to give 14-days’ notice.  In addition to extending various time periods, the Act gives judges broader discretion in issuing stays of eviction (in some cases, for up to 1 year) and it imposes a duty on residential landlords to mitigate damages .  Efforts are being made in the State legislature to exempt seasonal rentals, i.e. those for a period of 120-days or less, from the rent and security deposit restrictions under the Act.  EHADP will continue to monitor these efforts and will provide our clients with any legislative updates.