Legal Analysts

Thursday, March 11, 2021

New Commercial Mortgage Foreclosure Relief Law Signed

On March 10, 2021, Governor Cuomo signed the COVID-19 Emergency Protect our Small Businesses Act of 2021 (“Act”). The Act provides additional relief to commercial tenants from evictions and to owners of commercial property from foreclosure proceedings. In summary, the Act provides owners of commercial properties with an opportunity to submit a Hardship Declaration as published by the Office of Court Administration which effectively stays the enforcement or commencement of commercial foreclosure proceedings until May 1, 2021.

  • The Act applies to owners or mortgagors of commercial properties who:
    • owns 10 or fewer commercial units (directly or indirectly; units may be in more than 1 property or building as long as total units are occupied or available for rent);
    • is a business that is a resident in New York State;
    • is independently owned and operated;
    • is not dominant in its field; and
    • employs 50 or fewer persons.
  • The Act does not apply to mortgage loans backed by a state corporate governmental agency.

Hardship Declaration
  • The Act requires the Court or the foreclosing party (depending on the status of the foreclosure proceeding) to provide the borrower with a statement of protections available under the Act in 14-point type (“Hardship Declaration”).
  • More importantly, the borrower must complete the Hardship Declaration and provide it to the foreclosing party to be afforded relief under the Act, if the borrower is suffering a financial hardship including, but not limited to:
    • a significant loss of revenue;
    • a significant increase in necessary expenses related to providing protective equipment to prevent transmission of COVID-19;
    • moving expenses and difficulty securing alternative property; or
    • a commercial tenants’ default on a significant amount of rent since March 1, 2020,
  • The borrower’s submission of the Hardship Declaration is a rebuttable presumption of a financial hardship for purposes of establishing a defense.

New Commercial Foreclosure Proceedings
  • If the borrower provides a Hardship Declaration to the foreclosing party/foreclosing party’s agent, the foreclosing party is prohibited from commencing any foreclosure proceeding until May 1, 2021.
  • If the borrower does not provide a hardship affidavit, the lender is required to file the following to commence a foreclosure proceeding:
    • affidavit of service of the Hardship Declaration in; and
    • affidavit of the foreclosing party / foreclosing party’s agent attesting that the foreclosing party or his agent did not receive a Hardship Declaration from the Borrower.
  • If the Court determines that the foreclosing party failed to provide the Hardship Declaration to the borrower, the court shall stay the foreclosure for at least 10 days to allow the borrower to complete the Hardship Declaration.

Pending Commercial Foreclosure Proceedings / Pre-Judgment
  • Refers to proceedings commenced before March 7, 2020 or commenced within 30 days of March 10, 2021.
  • Stayed for at least 60 days to May 9, 2021, or to such later date the Court deems necessary to provide borrower time to complete and submit the hardship declaration.
  • Court shall issue stay and mail copy of the Hardship Declaration to the borrower.
  • If the borrower provides a completed Hardship Declaration to the court or lender, the foreclosure proceedings are stayed until May 1, 2021.

  • In any foreclosure proceeding in which a judgment of sale has already been issued, execution is stayed until the court holds a status conference with the parties.
  • If the borrower provides a Hardship Declaration, the execution of the warrant is stayed until May 1, 2021.