LIEB BLOG

How current events impact business & real estate

Showing posts with label Contracts. Show all posts
Showing posts with label Contracts. Show all posts

Tuesday, June 29, 2021

New Law All NY Contractors with Government Contracts Should Know About To Get Paid Faster

Public work projects involving New York State entities are lengthy, extensive, chaotic, and often result in a variety of disputes based on timeframe, requisition for payments, and when payments are due.


Consequently, NY amended a previous law that changes the definition of how contractors get paid to make it an easier and quicker process. 

Substantial completion is now defined as the completion of "work or major portions thereof as contemplated by the terms of the contract.

Based on this new definition, it's time for contractors to revise the terms of the government contracts with this new language. 


For reference, the new NYS law amends State Finance Law §139-f and General Municipal Law §106-b, which require contractors working on a public work project to submit requisitions for payment of completed work that is "substantially completed" to a public owner. The amendments clarify the meaning of  "substantial completion" in public work projects.  


Previously, Senate Bills S.7664 and and A.9117 amended section 139-f of the state finance law to define "substantially completed" work on a public work project as "the state in the progress of a project when the work required by the contract" is completed. 


The new law supersedes both Senate Bills S.7664 and A.9117 with its new definition of "substantial completion.


Based on this narrow and concise definition of "substantial completion,", this amendment will undoubtedly create far less chaos, confusion, and turmoil during the course of an ongoing public works project. 




Monday, November 02, 2020

New Debt Collection Law Starting on OCT 30, 2021

There are new laws about debt collecting starting on October 30, 2021. 

Specifically, amendments to Regulation F (12 CFR Part 1006), which implements the Fair Debt Collection Practices Act (FDCPA), were published on October 30, 2020 in the Federal Register and when these amendments become effective, on October 30, 2021, the entire debt collection industry in the United States will be forever changed.

These changes mainly concern updating the FDCPA with respect to its application to modern forms of communication via technology, inclusive of a safe harbor for communications via text or email. However, the final rule is 653 pages so it's far more extensive than that simplistic understanding and should be reviewed, at length, by any industry participant. 


To navigate the rule, it's recommended that you utilize the table of contents. The main sections of the amendment, which should be studied, are as follows:

  1. Communications in Connection with Debt Collection;
  2. Acquisition of Location Information;
  3. Harassing, Oppressive, or Abusive Conduct;
  4. False, Deceptive, or Misleading Representations;
  5. Unfair or Unconscionable Means;
  6. Other Prohibited Practices;
  7. Disputes and Requests for Original-Creditor Information;
  8. Sending Required Disclosures; and 
  9. Record Retention

As background, the FDCPA was enacted in 1977 because "[t]here [was] abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors" whereas these practices "contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." According to the Consumer Financial Protection Bureau "[d]ebt collection is estimated to be a $12.7 billion-dollar industry employing nearly 123,000 people across approximately 7,800 collection agencies in the United States." 


Make no mistake, these regulations are particularly important because "[c]onsumers... file thousands of private actions each year against debt collectors who allegedly have violated the FDCPA." Available damages in these lawsuits include up to $1,000 plus attorneys' fees for individuals and up to $500,000 or 1% of the net worth of the debt collector for class actions (15 USC 1692k). As a result, debt collectors who are unfamiliar with these amended rules, when they become effective, are in for a world of hurt. 

 

By the way, there is going to be another rule on this topic in the nearterm and it will address the required disclosures when debt collectors are pursuing time-barred debts (A/K/A, outside the applicable statute of limitations for suit). Stay tuned. 




Thursday, May 21, 2020

Commercial Personal Guaranties Deemed Unenforceable in NYC Council’s COVID-19 Relief Bill – Litigation to Follow if Enacted


On May 13, 2020, the NYC Council approved Int. No. 1932-A, which makes substantial changes to personal guaranties in commercial leases. The bill is on the Mayor’s desk to be enacted.

The bill’s purpose is to provide relief to NYC commercial tenants impacted by COVID-19. It temporarily prohibits the enforcement of personal liability provisions in commercial leases or rental agreements. It would amend the Administrative Code of the City of New York by adding Section 22-1005 and adding Paragraph 14 to Subdivision a of section 22-902 of the NYC Administrative Code.

If enacted, the bill would render guarantee provisions unenforceable against natural persons who are not a tenant in commercial leases or other rental real property. The law would only impact liability for the payment of rent and other charges caused by an occurrence of default, and subject to the following conditions:
1. The tenant must satisfy at least one of the following:
a)     The tenant was required to cease serving patrons food or beverage for on-premises consumption or to cease operation under EO 202.3;
b)     The tenant was a non-essential retail establishment subject to in-person limitations under guidance issued by the NYS Department of Economic Development pursuant to EO 202.6; or
c)     The tenant was required to close to members of the public under EO 202.7; and

2. The default or other event which caused the natural person to become personally liable for such obligation occurred between March 7, 2020 and September 30, 2020, inclusive.

Under the bill, an attempt to enforce a personal liability provision that the landlord knows or reasonably should know is unenforceable, pursuant to the above, shall be deemed commercial tenant harassment, which could result in compensatory and punitive damages and attorneys’ fees and court costs. See N.Y.C. Admin. Code § 22-903.

Sounds too good to be true for many tenants and often when it’s too good to be true, it’s untrue. Expect this law to be challenged on constitutional grounds should it be enacted. Specifically, the bill seems to impair the Contracts Clause of the United States Constitution because it retroactively affects personal guaranties entered into prior to the bill’s passing. For such a claim to succeed, the initial inquiry under the impairment of contracts clause contains three components:
  1. Whether there is a contractual relationship;
  2. Whether a change in law impairs that contractual relationship; and
  3. Whether the impairment is substantial. U.S.C.A. Const. Art. 1, § 10, cl. 1; American Economy Ins. Co. v. State, 30 N.Y.3d 136 (2017).
While tenants will surely argue that the bill doesn’t substantially impair the parties’ contractual relationship, as the bill only covers rent and payments for the period of March 7, 2020 to September 30, 2020, landlords will counter that the personal guarantee was a material term of the lease and a substantial reason that the landlord agreed to enter into the contract.

For analogy, the Court of Appeals has previously struck down similar government interference in contacts. In Patterson v. Carey, the Court of Appeals struck down a law which curtailed toll authority bondholders’ ability to increase their tolls for Jones Beach State Parkway on constitutional grounds. 41 N.Y.2d 714 (1977). 

If the NYC bill passes, it would likely undergo similar challenges and review as the law in Patterson and be deemed unconstitutional. The bill’s impairment to contractual rights agreed upon by landlords and guarantors would be substantial, especially considering that the bill does not merely delay a landlord’s right to enforce the guarantee during the period stated in the bill, it extinguishes it altogether.

Mayor DeBlasio has until June 12, 2020 to either sign, veto, or do nothing. If the Mayor signs the bill or does nothing, the bill will automatically become law. If the Mayor vetoes the bill, it is sent back to the Council. The Council can then override the Mayor’s veto with a 2/3 vote.

In the meantime, both landlords and tenants should contact their attorneys to ensure that their interests are protected and to prepare for expected lawsuits to follow. For ideas on how to creatively resolve lease issues due to coronavirus and for tips on important lease provisions when renegotiating, listen to our podcasts HERE and HERE.