Although the Coronavirus is a global and national challenge, states and localities are taking their own steps to try and stem some of the economic fallout from the virus. To address the mounting financial challenges posed by the pandemic and New York’s executive order closing all non-essential businesses,[i] the New York Legislature is considering legislation that would waive rent and mortgage payment obligations from certain residential and small business commercial tenants for ninety days. This legislation would also provide some related limited relief for landlords affected by the proposed rent freeze. The legislation (a pair of identical bills in the New York State Senate and Assembly)[ii] is being considered in addition to the current moratorium on residential and commercial evictions and foreclosures in New York State. The Legislature has yet to vote on these bills, and New York’s Governor Cuomo has yet to approve the legislation, but there is significant public discussion of these bills, particularly in New York City where two thirds of residents are renters.[iii]
If enacted, the legislation 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.”[iv] The proposed New York Senate Bill also provides that rent during the ninety-day freeze period would be “waived” and cannot be collected, nor can late fees be accrued and collected. In addition, the Bill states that affected residential and small business commercial tenants would be entitled to automatic renewal leases at the current rent charged if their leases expire during the ninety-day freeze period.[v]
Importantly, the Bill defines “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.”[vi] “Residential tenant[s]” are defined under the Bill to include any 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.”[vii]
The proposed legislation likewise aims to provide some relief for landlords by providing that “[a]ny person or entity 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.” And, just as with suspended rent, forgiven mortgage payments would be deemed “waived.”[viii]
Pearl Cohen has significant experience in helping both large and small businesses across different industries navigate through legal challenges. The twin proposed bills continue to evolve and move through the New York legislature and may still face opposition and potential court objections. Our team will be closely watching further developments and provide additional updates here.
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[i] See https://coronavirus.health.ny.gov/new-york-state-pause.
[ii] The New York State Senate is considering Senate Bill 8125, introduced on March 23, 2020. See https://www.nysenate.gov/legislation/bills/2019/S8125/amendment/A?utm_campaign=bill_alerts&utm_source=ny_state_senate&utm_medium=email. The New York Assembly is considering the substantively identical Assembly Bill 10224, introduced the next day, March 24, 2020.
[iii] See United States Census, available at: https://www.census.gov/quickfacts/fact/table/newyorkcitynewyork,NY/PST045219
[iv] Senate Bill 8125 at § 1(a).
[v] Id. at § 1(B)(ii).
[vi] Id. at § 2(d).
[vii] Id. at § 2(a).
[viii] Id. at §§ 1(b)(i), 1(b)(ii).
