Sketchy landlords beware! 

New York's Real Property Actions and Proceedings Law Article 7-C has been added by A3241 to give tenants and municipalities a new tool in their arsenal to address persistent unsafe conditions that are neglected by their landlords. 

Applicable in both residential and commercial mixed use properties, the new law, which is immediately effective, allows for receivership proceedings where a landlord has failed to remedy “conditions dangerous to life, health, or safety.” Basically, this means a court may appoint an independent “receiver” who is empowered to manage and redirect rent deposits towards fixing an issue that a landlord has neglected to sufficiently address.

However, what's interesting is the flip side of the law. It's yet another reminder that tenants should not unilaterally withhold rent or make repairs, outside of their rights in their specific lease, when there are habitability issues at the premises. Instead, they should follow the law and have their rental money deposited with the Court. Doing it otherwise is technically a grounds for eviction. Simple stated, there is a procedure when a landlord doesn't fix property and you, as a tenant, can't decide to just not pay when it's not being fixed. 

This procedure of depositing rent into Court and having a receiver appointed was formerly available only in New York City, but now applies statewide. 

A new law on landlord's ability to collect legal fees was signed by Gov. Hochul on December 21, 2021 and is effective immediately. The law, S2014, means a lot to owners and landlords in New York. The Bill prohibits owners and landlords from charging lessees any legal fee, surcharge, or other charges for legal services in connection to operating or renting a residential unit, unless the owner/landlord has the legal authority to do so. A lessee is only responsible to pay legal fees if directed by a court order. However, you only get a court order if you go to court and do not resolve issues beforehand. As a result, legal fees for out-of-court negotiations, lease drafting, amendments, and the like are no longer recoverable.

Do you think that owners and landlords will be less likely to resolve disputes without going to court if they can't recover their legal fees? 

It’s no secret that legal work can be costly. So, it is typical for landlord-petitioners to try and recoup the money that they spend retaining an attorney and all of the expenses that come with legal work and legal actions. Aside from legal representation, additional legal fees can include court fees, notary public charges, and administrative charges, to name a few. This bill is aimed at the costs of lease preparation, pre-litigation negotiations, and all the work that landlords need in order to avoid a court case. 

Co-ops are technically landlords to their residents and as a result, all legal fees imposed by the Board for sales, document review, and the like may no longer be recoverable based on this law.  There is no carveout for Co-ops and that needs to be addressed. Perhaps, Governor Hochul should have told the legislature to get it right before she signed the Bill into law.

This is just another obstacle for owners and landlords, which increases the cost of business, and eventually, the rent paid by tenants.

Effective October 26, 2020, HUD implemented a new disparate impact fair housing standard.

Disparate impact discrimination occurs when housing practices have an unjustified discriminatory effect even though they were not motivated by a discriminatory intent. 

The new standard exists at 24 CFR 100.500 and it makes a claim of disparate impact discrimination far harder to bring and even harder to prove as compared to the prior HUD standard.

Previously, the regulation did not contain an express pleading standard and instead, only required the plaintiff to prove "that a challenged practice caused or predictably will cause a discriminatory effect." 

Now a plaintiff must "sufficiently plead facts to support each of the following elements: (1) That the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law; (2) That the challenged policy or practice has a disproportionately adverse effect on members of a protected class; (3) That there is a robust causal link between the challenged policy or practice and the adverse effect on members of a protected class, meaning that the specific policy or practice is the direct cause of the discriminatory effect; (4) That the alleged disparity caused by the policy or practice is significant; and (5) That there is a direct relation between the injury asserted and the injurious conduct alleged."

With respect to the 3rd element, that is a very heavy burden for a plaintiff to satisfy at the pleading stage of litigation because the requisite evidence is often unavailable until the parties have engaged in the discovery process. 

Moreover, while the prior regulation provided that a defendant would then have to rebut the claim by "proving that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests[,]" a defendant now can just rebut the first element "by producing evidence showing that the challenged policy or practice advances a valid interest (or interests) and is therefore not arbitrary, artificial, and unnecessary." Changing the term from a "substantial" interest to "a valid interest" results in the defendant's burden seemingly being far lower.

Moreover, under the new standard, once the defendant rebuts the first element, "the plaintiff must prove by the preponderance of the evidence either that the interest (or interests) advanced by the defendant are not valid or that a less discriminatory policy or practice exists that would serve the defendant’s identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant." Previously, this was the defendant's burden. 

Regardless, there are now also 3 express defenses available, including that "(i) The policy or practice is intended to predict an occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practice does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class, with respect to the allegations under paragraph (b). This is not an adequate defense, however, if the plaintiff demonstrates that an alternative, less discriminatory policy or practice would result in the same outcome of the policy or practice, without imposing materially greater costs on, or creating other material burdens for the defendant. (ii) The plaintiff has failed to establish that a policy or practice has a discriminatory effect under paragraph (c) of this section. (iii) The defendant’s policy or practice is reasonably necessary to comply with a third party requirement, such as a: (A) Federal, state, or local law; (B) Binding or controlling court, arbitral, administrative order or opinion; or (C) Binding or controlling regulatory, administrative, or government guidance or requirement."

Housing participants should be particularly interested in the third available defense in the form of a controlling administrative opinion or binding regulatory guidance. It is strenuously suggested that every housing industry participant seeks such opinion or guidance as a necessary incident of any business plan covering a new product or service. To fail to do so is just reckless in a world where such a defense exists. 

That being said, it is noted that this regulation only pertains to a federal housing discrimination claim and states and locales may offer increased protections to their citizens. So, these other laws must also be analyzed for housing participants to the extent that they afford disparate impact claims (e.g., NYC Admin. Code). 

• Proceedings Commenced Prior to March 17, 2020:
• The court must conduct a status or settlement conference wherein the court reviews the procedural history of the case, any effect of the COVID-19 pandemic, if any, upon the parties, any other relief or protection available to the tenant, among others. Thereafter, the court may take further steps it deems appropriate, including allowing the matter to proceed and allowing the enforcement of warrants of eviction. 

• Proceedings Commenced After March 17, 2020: 
• All residential eviction matters (nonpayment and holdover) may proceed subject to: 
• Current or future federal and state laws affecting evictions; 
• For evictions based on nonpayment of rent: 
• FHA, Fannie Mae, Freddie Mac borrowers are prohibited from starting nonpayment evictions and are encouraged to seek forbearance and other options with their lenders; 
• The CDC also halts evictions for nonpayment of rent until December 31, 2020. You can read more about it and the penalties HERE. 
• The individual court’s scheduling requirements as affected by health and safety concerns due to COVID-19. 

• Nonpayment proceedings are subject to the Tenant Safe Harbor Act: 

• Courts are prohibited from issuing a warrant of eviction or judgment of possession against a residential tenant or other lawful occupant who suffered a financial hardship during the COVID-19 period and is being evicted for non-payment of rent due during such period. 
• Currently, the COVID-19 period runs from March 7, 2020 to January 1, 2021, as extended by Executive Order 202.66 and subject to any further extensions. This means that courts will only issue money judgments (no warrants of evictions and judgments of possession) on eviction proceedings based on nonpayment of rent due during the COVID-19 period. 

• Proceedings Commenced Prior to March 17, 2020:
• May proceed in the normal course subject to:
1. Any existing prohibition on the prosecution or enforcement of evictions (as of this writing, there are none); and
2. The suspension of statutory deadlines until November 3, 2020 per Executive Order 202.67.

• Proceedings Commenced After March 17, 2020:
• Eviction proceedings for nonpayment of rent are prohibited until October 20, 2020 per Executive Order 202.64 and subject to any further extensions.
• Holdover eviction proceedings may be commenced but remain suspended until further order of the court per Administrative Order 160A/20. This means the petition may be filed and the tenants may file an answer, but the proceedings shall remain suspended. However, if all parties are represented by counsel, the matter may be eligible for calendaring virtual settlement conferences with the court.

• All proceedings will be conducted remotely whenever appropriate.
• Mediation and other alternative dispute resolution methods are encouraged where either all parties are represented by counsel; or all parties are unrepresented by counsel.
• All petitions must include the Notice to Respondent Tenant.
• Filing and service may be done through NYSCEF, if available and by mail, if not.

Evicting a tenant – especially a residential tenant – in New York is a slow, cumbersome and extremely tenant-favorable process, especially when compared to analogous procedures in other states.

Governor Cuomo did nothing to impede the commencement of holdover proceedings… Nor does EO 202.28 suspend[] the landlords’ right to initiate a common law breach of contract action in the New York State Supreme Court to redress a tenant’s failure to perform its payment obligations under his or her lease.

Tenants will continue to accrue arrearages, which the landlord will be able to collect with interest once the Order has expired.

One who chooses to engage in a publicly regulated business… by so doing surrenders his right to unfettered discretion as to how to conduct same.

The expected costs of foreseeable future regulation are already presumed to be priced into the contracts formed under the prior regulation

New York landlords do not enjoy a constitutional right to realize a profit from their rental properties – let alone all the profits contemplated in each of their individual rental agreements.

If the tenant uses the security deposit to pay a month’s rent, and the tenancy ends before the deposit is fully replenished, the landlord can obtain a judgment for the amount expended in repairs.

To secure an eviction warrant from the housing courts, a New York landlord must serve the tenant a notice of nonreceipt of payment, and give the tenant one final chance to pay by making a demand of payment within 14 days. If the landlord is still owed payment after two weeks have passed, he may commence what is known as a summary proceeding by filing a petition in the civil court, returnable by the tenant within 10 days. If the tenant does not respond in ten days, the court may (but rarely does) issue an eviction warrant immediately. However, if the tenant does respond, however, a trial is set for eight days hence. The trial may be adjourned up to ten additional days if the parties so require in order to produce their witnesses. If, after trial, a judgment is entered for the landlord and the court issues a warrant for eviction, the Sheriff must give the tenant 14 days’ notice in writing prior to execution. There are the usual provisions for appeal and stays issue routinely so that non-defaulting tenants are not evicted before their cases are fully reviewed. But even if the evidence supports a judgment for the landlord, the housing court is not required to order the tenant’s immediate eviction. A tenant may obtain a stay of the issuance of the warrant for up to one year by showing that ‘it would occasion extreme hardship to the tenant or the tenant’s family if the stay were not granted’. Such stays are far from uncommon.

5. CAN A LANDLORD’S AGENT COLLECT A “BROKER FEE” FROM THE PROSPECTIVE TENANT? No, a landlord’s agent cannot be compensated by the prospective tenant for bringing about the meeting of the minds. NY RPL § 238-a(1)(a) provides, in part, “no landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the processing, review or acceptance of an application, or demand any other payment, fee or charge before or at the beginning of the tenancy, except background checks and credit checks….” The fee to bring about the meeting of the minds would be a “payment, fee or charge before or at the beginning of the tenancy” other than a background or credit check as provided in this section. Accordingly, a landlord’s agent that collects a fee for bringing about the meeting of the minds between the landlord and tenant (i.e., the broker fee) from the tenant can be subject to discipline. 

It is well settled that “[a]n agency's interpretation of its own regulation ‘is entitled to deference if that interpretation is not irrational or unreasonable’” &

“the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the  administrative agency and its interpretive regulations... And, of course, if the regulation runs counter to the clear wording of a statutory provision, it should not be accorded any weight.”

“A place of public accommodation, resort or amusement. . . shall upon request be required to have closed captioning enabled on all televisions that are located in the public area . . . during regular business hours.”

1. Gaining Repossession: Just because the term of the lease (a/k/a duration) is over does not mean that you, the landlord, automatically gets your seasonal rental property back. In many States, such as New York, the tenant must surrender possession of the property prior to the landlord retaking possession regardless if the lease period has ended. In best practice, a written lease agreement will provide not only when the term is over, but also the mechanism of how, when and where the tenant is supposed to surrender possession (e.g., tenant shall surrender possession by way of turning over the keys to the subject premises to the landlord, in-person, at the subject premises at 12:00 p.m. on September 30, 2014 or at such other time, date and manner as is mutually agreed upon by and between the parties in a signed writing). Such a surrender clause is particularly important for landlords because a landlord who engages in a self-help eviction (i.e., going into the property without the tenant’s permission and changing the locks) is exposed to a lawsuit by the tenant for treble damages for the tenant’s lost use and occupancy of the property. Beyond protecting oneself from a self-help claim, landlords should also motivate the tenant to leave on time by utilizing a holdover liquidated damages clause (i.e., predetermined monies due and owing in the case of a holdover tenant – staying after the expiration of the lease). Courts in many States, such as New York, will enforce this type of clause at a level of three times the previous rent due for the duration of the holdover period.
2. Damage Inspection: There are 4 steps to a proper damages inspection: (1) Establishing a baseline condition of the property when the tenant takes possession (i.e., countersigned and dated pictures should have been taken); (2) Distinguishing between actual damage and ordinary wear and tear (i.e., definitions should be included in the lease for each category); (3) Determining the condition of the property upon the tenant surrendering possession (i.e., tenant and landlord walk through the property while memorializing the condition in pictures that are countersigned and dated); and (4) Obtaining 2 estimates for repairs from licensed home improvement contractors to establish the cost of repairs.   
3. Refunding the Security Deposit: A landlord is a trustee for the tenant’s security deposit monies. Where a landlord wrongfully withholds the security deposit, the tenant may be able to sue for those monies on theories such as breach of contract, conversion and breach of fiduciary duty, among others. Additionally, many States, such as New York, provide a tenant with a reciprocal right to sue for attorneys’ fees whenever a lease provides the landlord with such a right (i.e., landlord’s right to attorneys’ fees in the event of breach is standard practice in leases). Consequently, a tenant can frequently hire an attorney, who will be paid for by the landlord, to recover their security deposit.
4. Lease Renewal: The best tenants continue to renew season after season. For the landlord, this not only makes your budget for operating the property predictable, but also avoids the landlord from having to continually make yourself or your agent available to show the property to prospective replacement tenants. The protocol for the tenant exercising a lease renewal option should be set forth in the current lease agreement, including how notice to renew should be rendered (i.e., mailing a certified mail return receipt letter to the landlord indicating that the tenant shall exercise its renewal option). Additionally, the lease should provide how the rental fee will be adjusted for future seasons by what is typically referred to as a rent escalation clause, (i.e., either at a percentage increase such as 3% or tied to an index such as the Consumer Price Index). Oral renewals and text messages should be avoided as they often result in litigating.   
5. Brokerage Agreement: Many real estate brokerage agreements provide for additional monies being due to the broker in the event of a renewal of the lease by the current tenant or a member of the tenant’s family. Additionally, smart brokers put a clause in their agreements that provides for a commission being due should the tenant purchase the rental property from the landlord. Reviewing the brokerage agreement that was applicable when the tenant first let the property is a great first step before lease renewal to know how a landlord’s net profits will be effected in future years.