Courts to Begin Limited In-Person Operations on Long Island

On May 18, 2020 the New York State Court System resumed limited in-person operations in upstate counties. Today Chief Judge Janet DiFiore announced that in-person operations will expand to Dutchess, Orange, Putnam, Rockland and Westchester Counties on May 27, Ulster and Sullivan Counties on May 28, and Nassau and Suffolk County on May 29. 

These re-openings are consistent with Phase 1 re-opening guidelines set by the Governor's Office and can be expanded as Phase 2 and further guidelines are met. 

Phase 1 operations permit judges, chambers staff, and some other limited personnel to return to their physical offices while operating in a manner consistent with current health and social distancing guidelines. Public in-person appearances will be limited to filings of emergency applications and the adjudication of matters that were previously identified as essential. In-person appearances for non-emergency and non-essential matters will be deferred to the courts' expanded virtual capabilities. 

Our court system is more capable than ever. Virtual conferences and the clearing of pending motions has put the courts in a position to handle the influx of new cases that will be filed now that non-essential matters can be commenced and in-person operations are returning. Chief Judge DiFiore has signaled that the expanded use of virtual court operations will be maintained by the courts for the foreseeable future as courthouses look to push as many public visitors as possible away from its doors and onto their computers screens. 

The Court System's official press release can be found HERE. The transcript of Judge DiFiore's latest message can be found HERE. A summary of the current state of online and in-person operations can be found HERE.

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.

New York Courts Opens Electronic Filing of New Non-Essential Matters

Beginning May 25, 2020, litigants will finally be able to commence new actions. The acceptance of electronic filing for new non-essential matters represents the clearing of the the penultimate hurdle for the court system's remote operations. In effect, trials and hearings are the only civil court operations still on hold. Judge Marks May 20, 2020 memorandum can be found, HERE. 

It is important to remember that this memorandum does not supersede the Governor's executive orders which restrict certain actions, such as residential evictions, which may still be barred. 

FedEx Ground Agrees to Pay $3.3 Million to Settle Disability Discrimination Lawsuit

The Equal Employment Opportunity Commission ("EEOC") issued a press release today announcing that it entered into a consent decree with FedEx Ground to settle a disability discrimination lawsuit brought pursuant to the Americans with Disabilities Act ("ADA"). The federal lawsuit was filed on behalf of deaf and hard-of-hearing package handlers and applicants to those positions alleging that FedEx Ground denied deaf and hard-of-hearing package handlers reasonable accommodations and denied applicants employment because of their hearing related disabilities.

The consent decree entitles the 229 aggrieved individuals to a share of the $3.3 million settlement. In addition, the settlement requires FedEx Ground to provide accommodations to deaf and hard-of-hearing package handlers including access to live and video remote sign language interpreting, closed captioning on videos and provision of non-audible cues (i.e. vibration) on scanning equipment. Finally, the consent decree requires that FedEx Ground institute safety measures to protect hearing compromised package handlers including ensuring that motorized equipment include visual warning lights and providing personal notification devices that will notify hearing compromised handlers of an emergency.

This settlement should serve as a reminder to employers to ensure that procedures are in place for employees to request a reasonable accommodation and that accomodation requests are granted to the extent that they are reasonable and can assist employees in performing the essential functions of their positions.

Podcast | Real Estate Opportunities - How Bathroom Breaks May Determine the Next Trend in Real Estate for the Second Home Market

It's time to make lemonade out of those lemons and fill up your half cup of coffee! We have the technology to run businesses remotely and Coronavirus is the motivation for everyone to use it. This means the future will involve a drastic decline in daily office commuting with a corresponding uptick in new real estate investment opportunities. Trendsetters and HGTV Stars Tom and Mickey join us to explore New York's exurban areas that are poised to explode. Plus we break down when to invest and teach you how to time the market before 2021.

Show Breakdown (click on links below in order to listen to the full show)

Segment 1: How Changing Times Can Make You Money

Segment 2: The New LI Gold Coast Explored with HGTV Stars Tom and Mickey

Segment 3: Land Investing on the LI Sound with HGTV Stars Tom and Mickey

Segment 4: Real Estate Opportunities By Location in 2020 and 2021