NYS Bill Exempts Co-Ops from Certain Landlord-Tenant Laws

On June 10, 2021, the New York State Legislature passed Assembly Bill A350 / Senate Bill S5105C (“Bill”) which set forth exemptions for cooperative housing corporations (co-ops) in relation to their tenants who are unit owners, purchasers, or shareholders. Once signed by the Governor, the Bill takes effect immediately.

While unit owners, purchasers, or shareholders of co-op units are generally considered “tenants” under their respective proprietary leases or occupancy agreements, if the bill becomes law, co-ops will be exempted from the usual landlord-tenant requirements and prohibitions set forth below:

• Security Deposit or Advance (GOL §7-108): A co-op will be allowed to collect more than one month’s rent for a deposit or advance from tenants who are unit owners, purchasers, or shareholders of owner-occupied units;
• Notice of Non-Renewal or Notice of Rent Increase (RPL §226-c): A co-op is no longer required to provide the RPL §226-c Notice of Non-Renewal or Notice of Rent Increase to tenants who are unit owners or shareholders of the co-op;
• Application Fees (RPL §238-a): A co-op may demand any payment, fee, or charge necessary to compensate a managing agent and/or transfer agent for processing, reviewing, or accepting a tenant’s application where such tenant would become prospective unit owner or shareholder;
• Credit and Background Check Fees (RPL §238-a): A co-op may charge more than $20, but such fees should not exceed the actual cost;
• Monthly Maintenance Fees for Late Payments (RPL §238-a): A co-op may charge up to 8% of the monthly maintenance fee for the late payment of such fee if provided for in the proprietary lease or occupancy agreement;
• “Rent” in a Summary Proceeding (RPL §702): A co-op may demand more than the rent in a summary proceeding against a unit owner or shareholder provided that the proprietary lease or occupancy agreement allows for the recovery of other fees, charges, penalties or assessments in a summary proceeding;
•  5-Day Notice of Non-Payment (RPL §235-e(d)): A co-op may provide another method of sending notice by mail other than certified mail as long as it is set forth in the proprietary lease or occupancy agreement; and
• Attorneys’ Fees upon a Default Judgment (RPL §234(2)): A co-op may be awarded attorney’s fees in the event of default judgment against a unit owner or shareholder if the recovery of such fees are set forth in the proprietary lease or occupancy agreement.

Essentially, the Bill aims to correct the unintended effects of the Housing Stability and Tenant Protection Act of 2019 towards unit owners or shareholders of co-ops who are “tenants” only because of their proprietary leases or occupancy agreements.

Do you agree with the Legislature’s corrections? Is it too little, too late?

For pending litigation, it sure seems that this new law affirms that co-ops that previously breached the Housing Stability & Tenant Protection Act as applicable to tenants, are liable, no?

NYS Cannabinoid Hemp Licensing May Became Much More Challenging to Obtain

Those looking to apply for Cannabinoid Hemp Licensing in NYS to process, sell, or distribute cannabinoid hemp products may have to jump through several more hoops in the application process due to new proposed regulations.

If adopted, the regulations will require that licensing applications to manufacture cannabinoid hemp products in NYS be accompanied by: 

1. A summary and description of the products the applicant intends to make; 
2. Proof of liability insurance;
3. Evidence of good manufacturing practices; and 
4. Copies of organizational documents. 

Similarly, an application to sell cannabinoid hemp products will be required to be accompanied by: 

• A summary and description of the type of product intended for sale;
• The name and country of origin of the distributor; and 
• Verification that the applicant will not sell inhalable cannabinoid hemp products to consumers under 21.   

Additionally, even if an cannabinoid hemp processor application is approved, the applicant must still submit numerous items in order to receive a final license (e.g., copy of certificate of occupancy for facility, evidence of Good Manufacturing Practices Audit, and proof of product liability). 

Do you think these additional hurdles in the cannabinoid hemp licensing application process will scare away entrepreneurs from applying for a license?  

If you don't agree or think these proposed regulations are too onerous, you can make your voice heard until July 19, 2021 by emailing: regsqna@health.ny.gov - use I.D. No. HLT-45-20-00002-RP in your subject. 

Are you going to make your voice heard?

The Supreme Court Limits Employers Ability to Prevent Unauthorized Use of its Computers.

As a result of a recent United States Supreme Court decision, employers can no longer use the Computer Fraud and Abuse Act of 1986 ("CFAA") as a tool to prevent unauthorized use of its computer systems. 

The CFAA makes it illegal to "access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter."

In Van Buren v. United States, No. 19-783, the Supreme Court held that a police officer did not violate the CFAA when he ran an unauthorized license plate search in exchange for money. Relying on the language of the statute, the Court reasoned that the CFAA makes it illegal to access information an individual is not permitted to obtain, but does not prohibit improper use of information or databases which an individual has the authority to access. 

Justice Barrett used the following example to clarify the Court's holding: If an individual is authorized to access a specific folder on a computer, he/she does not violate the CFAA if he/she accesses the folder for an unauthorized purpose. However, if an individual accesses a separate folder on the computer to which he/she does not have authorized access, such conduct violates the CFAA.

In light of the Supreme Court's decision, employers should consider the following to protect against improper/unauthorized use of its computers/databases:

1) Strengthening policies regarding unauthorized use of computers/databases. While unauthorized use is no longer unlawful under the CFAA, employers are free to implement restrictive policies regarding unauthorized use of computers and discipline employees who violate the policies. 

2) Taking further steps (e.g. secure passwords) to safeguard documents/information to which employers do not want employees to access.

3) Entering into confidentiality/unauthorized use agreements with employees.

As the National Ban on Evictions will be Lifted in June, There Will be a Rise of Evictions

With about 11 million Americans reported to be behind on their rent, experts predict that the number of evictions will increase when the national ban on evictions will be lifted on June 30th. New York State has extended the eviction and foreclosure moratoriums on both residential and commercial properties to August 31st, 2021. (A.7175)

While some states are still struggling to distribute the $45 billion in rental assistance, many renters continue to be behind on their housing payments.

If you would like to apply for rental assistance in NY, follow this link.

Have you applied for rental assistance?

Co-op Loans At-Risk Based on Legislation that Passed the US House

A law that passed the House in May and is before the Senate (The Comprehensive Debt Collection Improvement Act or “CDCIA”) could force lenders to slam the breaks on issuing mortgages to co-op purchasers.

This law reverses a 2019 decision from the US Supreme Court, Obduskey V. McCarthy, and would cause the Fair Debt Collection Practices Act (FDCPA) to apply to businesses engaged in non-judicial foreclosures, which applies to co-op mortgage loans.

In other words, the CDCIA would hamstring co-op lenders' ability to utilize third-parties to collect their loans (e.g., the law limits the number of times a debtor may be reached, it requires that contact be ceased when the debtor so requests, it creates tons of exposure to damages and attorneys' fees, etc.). It would also suppress important information from a credit report, such as forbidding credit scoring models from using medical debt as a negative factor.

As you can certainly deduce, if the CDCIA passes the Senate and is signed by the President, lenders will likely have stricter qualification terms and may even raise rates on co-op mortgage loans that qualify.

Are the protections in the CDCIA worth the law's chilling effect on co-op loans? Should the Senate change the law? Should it just vote it down?

Do you think the CDCIA will lead to fewer co-op transactions?

Employees are Entitled to Use Paid Sick Leave to Recover from COVID-19 Vaccinations.

To provide further incentive for people to get vaccinated, The New York State Department of Labor recently issued guidance permitting employees to use paid sick leave to recover from side effects of the COVID-19 vaccine. The New York State legislature previously passed a law entitling employees to paid leave to receive vaccinations.

New York State law requires employers with five or more employees (or net income of more than $1 million dollars) to provide 40 hours of annual paid sick leave to its employees. New York Labor Law Sec. 196-b permits employees to use sick leave "for mental or physical illness, injury, or health condition, regardless of whether it had been diagnosed or requires medical care at the time of the request for leave." 

The DOL clarified that Section 196-b requires employers to "honor the employee's desire to use accrued sick leave for recovery of any side effects of the COVID-19 vaccination." 

Increased Fair Housing Enforcement is Coming Per President

According to today's White House Press Release, "President Biden issued a memorandum directing the U.S. Department of Housing and Urban Development (HUD) to address discrimination in our housing market." 

In doing so, the President has charged the Secretary of HUD to lead an "interagency initiative to address inequity in home appraisals" while citing to a study that found "homes in majority-Black neighborhoods are often valued at tens of thousands of dollars less than comparable homes in similar—but majority-White—communities."

Next week, HUD is publishing a new disparate impact discrimination rule in the federal register to address neutral housing policies that have a discriminatory impact on marginalized groups. 

Are you part of the problem or part of the solution? 

Suing a Town for Discrimination? Case Says That You Better Notice Them Quickly or Your Case Will Be Dismissed

In a recent case of interest, Elco v. Aguiar (Supreme Court, Suffolk County), a town public safety dispatcher asserted that she was discriminated against by the town in her job when the town injected itself into her child custody dispute with another town police department employee. She alleged discrimination because of her gender/sex, disability, & familial status while also alleging that she was subject to a hostile work environment. 

Some specific factual allegations that she made of discrimination were as follows:

1. Refusal to accept domestic incident reports concerning child custody or family court orders;
2. Reassigned shifts; 
3. Harassment or stalking campaign against her;
4. Accusations levelled at her regarding her fitness as a mother;
5. Denied opportunities of earning overtime;
6. Denied an opportunity to participate in interviewing new hires & supervisees; &
7. Failure to process her insurance buyback forms.

That being said, the town moved to dismiss on a technicality in arguing that its "municipal notice of claim requirement residing in Town Law §67, [requires] the filing of a notice of claim within three months after her claim arose []as a condition precedent to the maintenance of this action against the defendants."

The Court agreed and granted dismissal. 

Moving forward, town employees better file a notice of claim within three months of the alleged discrimination or they will be out of luck in bringing an employment discrimination lawsuit.

Do you think that it's fair that town employees have three months to file whereas private employees have three years to file the same employment discrimination lawsuits? 

New Law Imposes Heavy Burdens on Employers to Prevent Exposure to Airborne Infectious Diseases in the Workplace

Governor Cuomo signed Bill 2681-B into law today, imposing extensive requirements on employers to mitigate exposure to "airborne infectious diseases" in the workplace. 

Establishing a Prevention Plan. The new law requires all employers to establish an airborne infectious disease exposure prevention plan by May 19, 2021. The plan must detail procedures for employee health screenings, regular cleaning and disinfecting of the workplace, personal protective equipment ("PPE"), accessible workplace hygiene stations and adequate break times to use the stations as well as other onerous requirements. The plan must be part of the employer's employee handbook and displayed in a prominent location in the workplace. While the law requires the Department of Health to prepare a model policy, there is no timetable for the arrival of the policy compelling employers to prepare their own policies prior to May 19, 2021. 

Forming Safety Committees. Employers must permit employees to form public safety committees and provide them with paid time to hold meetings and attend trainings. This provision of the law takes effect in 180 days.

Retaliation Prohibited. Retaliation is prohibited against employees exercising their rights under the new law. Notably, retaliation is prohibited against an employee who refuses to work based upon a reasonable belief that he/she is exposed to an unreasonable risk of contracting an airborne infectious disease in the workplace. 

Penalties. Employers may be penalized $50 a day for failure to adopt a prevention plan; $1,000 - $10,000 for failure to abide by the adopted plan; and $1,000 - $20,000 for a second violation within six (6) years. In addition, the law affords employees a private right of action to file a complaint in state court where he/she may be awarded damages including liquidated damages and reasonable attorneys fees.  

For more information on this new law, please listen to our podcast here. 

Do you think these requirements are reasonable for employers? Will this law cause more businesses to move out of New York State? 

Legislation Extending Eviction & Foreclosure Moratoriums to August 31, 2021 Signed by Governor

On May 4, 2021, the New York State Senate and Assembly passed legislation (A.7175) that extends the eviction and foreclosure moratoriums on both residential and commercial properties from May 1, 2021 to August 31, 2021. The legislation is now on the Governor’s desk for signature. UPDATE: The Governor signed the legislation on May 5, 2021.

If signed, eviction and foreclosure proceedings shall be stayed until August 31, 2021 for tenants and foreclosure defendants who submit a hardship declaration pursuant to the COVID-19 Emergency Eviction and Foreclosure Prevention Act and the COVID-19 Emergency Protect Our Small Businesses Act.

Also passed is legislation which expands the COVID-19 Emergency Protect Our Small Businesses Act to small businesses with up to 100 employees, or up to 500 employees if the business was shut down by Executive Order or Health Department directives for at least 2 weeks between May 15, 2020 and May 1, 2021 (A.7127).

As a result, landlords should resort to bringing breach of contract lawsuits against non-paying tenants as explained by the federal courts in Elmsford Apartment Associates LLC v. Cuomo. Do you think suing for a money judgment could result in a settlement where your non-paying tenant surrenders & leaves your property? Should the legislature block this too?