Too Many Cooks in the Kitchen?

We wanted to update you on the two recent bills passed by the NYS Legislature and sent to Governor Cuomo for signing which are designed to provide relief to NYS residential tenants facing eviction for rent arrears arising during the COVID-19 period.

The first of these is Senate Bill 8192B which was passed by the NYS Legislature on May 27, 2020.   The main portions of this bill are:

1.  No court shall issue a warrant of eviction or judgment of possession against a residential tenant or other lawful occupant that has suffered a financial hardship during the COVID-19 period for the non-payment of rent that accrues or becomes due during the COVID-19 period;

2.  A tenant or lawful occupant may raise financial hardship during the COVID-19 covered period as a defense in a summary proceeding; and

3.  This act shall not prohibit any court from awarding a MONETARY judgment for the rent due and owing to a successful petitioner in a summary proceeding.

For those who wish to view the text of the bill in its entirety, you can click this link: https://legislation.nysenate.gov/pdf/bills/2019/s8192b

The second of these bills is Senate Bill 8419 which was passed by the NYS Legislature on May 28, 2020.

This Bill also known as the Emergency Rent Relief Act of 2020:

1. Earmarks $100 million of the federal CARES Act monies to the New York State Division of Homes and Community Renewal for the purpose of providing rental assistance to eligible (define ELIGIBLE WITH A LINK) households in the form of a voucher paid directly to the owner of the dwelling and 

2. Tasks DHCR with prioritizing households with the greatest economic and social need.  The factors the agency shall consider at a minimum includes: historical household income compared to area median income, the rent burden (defined as the amount of the contract rent that exceeds 30% of the household income), the percentage of income lost during COVID-19,  and  the risk of eviction.

For those who wish to view the text of the bill in its entirety, you can click this link: https://legislation.nysenate.gov/pdf/bills/2019/S8419.

What is notable is that these bills have obviously gained traction, having been passed and making it to Governor Cuomo for signature; while those bills proposing rent waivers/forgiveness have foundered.  Does this indicate the Legislature acknowledging that waiving payment obligations under contracts, such as lease and mortgages, may constitute an unlawful taking by the government and will be met with hostility by the real estate industry and maybe the courts as well?  Or maybe it’s an acknowledgment that vouchers, as opposed to rent waivers, are a form of relief that does not break the rental real estate cycle which provides needed housing to tenants, rent to landlords, mortgage payments to banks, and taxes to the government

It will also be interesting to see how 8129B plays out in light of its conflict with Executive Order 202.28 which provides in part:

There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent… rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020.

Bill 8192B is in direct conflict with EO 202.28 as the new bill provides that even with a COVID hardship a non-payment case can proceed and the landlord may obtain a non-possessory money judgment for those monies, while the EO states there shall be no initiation of a proceeding against someone facing a COVID related hardship.  Further, the bill clearly shifts the burden of proof onto the tenant claiming COVID hardship, which is not in the EO and which the courts attempt to address in court directives (more on that below).  One will also note that the EO addresses a financial hardship due to the COVID-19 pandemic while the Bill addresses an occupant that has suffered a financial hardship during the COVID-19 period – a subtle yet important distinction under the bill as the hardship no longer needs to be connected to COVID but merely occur during the COVID period. For those who wish to view the text of the Executive Order in its entirety, you can click this link: https://www.governor.ny.gov/news/no-20228-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency

The language of the 8129B also conflicts with DRP Nos. 209-211 which are NYC Civil Court directives issued by the court itself.  As previously stated, these three orders attempt to interpret Executive Order 202.28 and require landlords to file affidavits of investigation attesting that to the best of the landlord’s knowledge, after an investigation, the tenant is not on unemployment, eligible for benefits, or suffering a COVID-19 related economic or health harm and the Landlord seeks to either a) commence a new nonpayment action (DRP209), b) obtain a default judgment on an existing case (DRP210) , or c) seek to evict on an existing warrant of eviction (DRP211).   If the bill is signed, owners would breathe a sigh of relief to the extent that 8192B makes COVID economic harm an affirmative defense to be affirmatively asserted by the tenant as a defense to a non-payment proceeding, instead of the owner having to pry into a tenant’s personal life asking about their health and economic situation and filing an affidavit with the court.  In addition, the Supervising Judge of the Civil Court has indicated that if 8129B was signed by the Governor, the courts would withdraw DRPs 209-211; however this would still leave the Governor to resolve the conflict between the relief granted by the legislature under 8129B and the moratorium relief under his EO 202.28.

Lastly, it will be interesting to see how these bills play out if both are signed.  Specifically, in the past, the Housing Resource Administration would not issue what is commonly known in the industry as “One Shot Deals” to pay for a tenant’s arrears that were relegated to non-possessory money judgments; but only for arrears subject to a possessory judgments in order to save households from eviction.  If 8192B relegates arrears accruing during the COVID-19 period to money judgments only with no warrants of evictions based thereon, will DHCR issue a voucher for those same arrears when under the bill it is mandated to prioritize households for relief based on the threat of eviction as one of the factors and there is no threat of eviction from a money judgment?  

With three branches of government all crafting their own relief for tenants that are currently in conflict with one another, at least for now we clearly have too many cooks in the kitchen and more work must be done prior the courts reopening.

Stay well and stay tuned…