Legal Update
Mar 27, 2020
Proposed Legislation in New York Would Suspend Some Rent Payments
The New York Legislature is considering a pair of bills that would provide relief for some of those residential or commercial tenants that have either lost their jobs or been forced to close during the current crisis. Specifically, the bills would temporarily suspend rent payments by certain residential tenants and commercial tenants who operate small businesses. The bills would also provide relief for landlords affected by the rent suspension, but only with respect to mortgage payments owed by those landlords.
Senate Bill 8125 was introduced in the New York Senate on March 23, 2020,1 and a substantively identical bill, Assembly Bill 10224, was introduced in the New York Assembly the following day.2 If enacted into law, the bills would provide that “any residential tenant or small business commercial tenant in the state that has lost income or has been forced to close their place of business as a result of government ordered restrictions in response to the outbreak of coronavirus disease 2019 (COVID-19), shall have all rent payments suspended for ninety days following the effective date of this act.”3 The bills would further provide that rent during that 90-day period is “waived” and cannot be collected, nor can late fees be accrued during that period and then later collected.4 The bills would also provide that if a residential or small business commercial lease expires during the 90-day period, the tenant is entitled to an automatic renewal of the lease at the current rent charged.5
The bills define “residential tenants” as a person “occupying or entitled to occupy a residential rental premises” pursuant to a lease or statute, or who “otherwise pay for the use and occupancy of a residential dwelling.”6 The bills define “small businesses” as businesses that are “resident in this state, independently owned and operated, not dominant in [their] field and employ[] one hundred or less persons.”7
The bills would also provide some relief for landlords of qualifying tenants, whom would have their rental income, obviously, interrupted. Specifically, the bills would provide that a landlord “who faces a financial hardship as a result of being deprived rent payments for property pursuant to this section shall receive forgiveness on any mortgage payments for such property for ninety days . . . up to the total dollar amount of lost rent.”8 As with the suspended rent, any landlords “qualifying for mortgage payment forgiveness” would not be required to ever make those payments, which would be deemed “waived.”9
Although mortgage relief would be available to landlords, the significant burden of the pending deadline for real estate taxes remains, which could still force landlords’ hands unless the state takes action similar to that being proposed with respect to mortgage payments. In New York City, the looming property tax deadlines10 mean that, if the current bills are enacted, property taxes will be coming due for property owners either during the rent suspension or, depending on the timing of enactment, right after the suspension ends.
The Assembly bill was referred to the Assembly’s Judiciary Committee on March 24, 2020, and the Senate Bill to the Senate’s Judiciary Committee on March 26, 2020. If enacted, the law could face constitutional challenges, for example, as a violation of the Due Process Clause or as an unconstitutional taking of property without just compensation. The New York real estate industry, and New York tenants, will be watching further developments closely.
1 SB 8125, available at https://www.nysenate.gov/legislation/bills/2019/S8125/amendment/A?utm_campaign=bill_alerts&utm_source=ny_state_senate&utm_medium=email.
2 AB 10224, available at https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A10224&term=2019&Summary=Y&Actions=Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y&Memo=Y&Text=Y&LFIN=Y&Chamber%26nbspVideo%2FTranscript=Y.
3 SB 8125 § 1(a); AB 10224 § 1(a).
4 Id.
5 Id.
6 NY RPL § 235-f(1)(a); SB 8125 § 2(a); AB 10224 § 2(a). The Senate bill would also include “person[s], other than a tenant or a member of a tenant’s immediate family, occupying a premises with the consent of the tenant or tenants.” NY RPL § 235-f(1)(b); SB 8125 § 2(a).
7 NY Econ. Dev. L. § 131; SB 8125 § 2(d); AB 10224 § 2(d).
8 SB 8125 § 1(b); AB 10224 § 1(b).
9 Id.
10 E.g., https://www1.nyc.gov/site/finance/taxes/property-due-dates.page.
