Friday, May 08, 2020

Tenants' New Rights: Residential / Commercial Distinction in Fine Print

On May 7, 2020, Governor Cuomo signed Executive Order 202.28 which tackled major changes to landlord-tenant matters in light of the COVID-19 pandemic, including an extension to the eviction moratorium, the usage of security deposits towards rent, and the prohibition on charging late fees.

1. Eviction and Foreclosure Moratorium Extended to August 20, 2020 for Tenants Who Are Unable to Pay Rent or Mortgage Payments due to COVID-19.
On March 7, 2020, Executive Order 202.8 previously ordered an eviction moratorium from March 7 to June 20, 2020. Executive Order 202.28 extends that moratorium to August 20, 2020. Specifically, no proceedings or enforcement may be initiated for residential or commercial tenants on the basis of nonpayment of rent due to the COVID-19 pandemic.

Similarly, foreclosure proceedings of any residential or commercial mortgage for nonpayment of such mortgage due to COVID-19 is also prohibited until August 20, 2020.

It is important to note that unlike the Executive Order  202.8 which ordered a moratorium on ALL evictions and foreclosures until June 20, 2020, the extension of the eviction and foreclosure moratorium to August 20, 2020 under Executive Order 202.28 only applies to residential or commercial tenants who are unable to pay their rent and are eligible for unemployment insurance or benefits under state or federal law, or otherwise facing financial hardship due to COVID-19. Thus, eviction proceedings based on breach of material terms under the lease other than nonpayment may start beginning June 20, 2020.

2. Residential Landlords May Apply Security Deposit towards Rent upon Written Agreement.

In addition to the extension of the eviction moratorium, residential landlords, with the tenant’s consent, are now allowed to apply the security deposit and any interest accrued to pay rent in arrears or rent that will become due through a written agreement. If the security deposit is less than one month’s rent, the consent does not constitute the landlord’s waiver for the remaining rent. Executive Order 202.28 expressly allows execution of this written agreement by email. Landlords and tenants should contact counsel prior to making any agreements to ensure that their interests are protected.

Any security deposit used as payment of rent must be replenished by the tenant at the rate of 1/12 the amount used as rent per month and such payments begin 90 days from when the security deposit was used as rent. Alternatively, tenants may retain insurance that provides relief for the landlord in lieu of monthly security deposit replenishment. However, like the extension, the above relief in relation to security deposits only applies to tenants eligible for unemployment insurance or benefits or are otherwise facing financial hardship due to COVID-19.

3. Late Charges for Residential Tenants Prohibited for Periods beginning March 20, 2020 to August 20, 2020.

Executive Order 202.28 also prohibits landlords from demanding or being entitled to any payment, fee, or charge, for late payment of rent pursuant to RPL 238-a occurring from March 20, 2020 to August 20, 2020. This provision only applies to residential properties but take note that it is not limited to tenants who were unable rent to pay due to COVID-19.