There is a specter haunting New York City, and it’s the coming eviction apocalypse that may be happening after the end of the August 31, 2021 moratorium on residential and commercial evictions.
In today’s article, I am going to be discussing the good, the bad, and the ugly of what might be coming at the end of the summer. There will be some dark times ahead for both residential and commercial landlords and tenants, but there will be some hope as well as some strategies that might mitigate the damage, and help both landlords and tenants weather the coming storm.
Post-Moratorium Evictions Will Stress New York’s Judicial System
First; the ugly. Assuming that there will not be an extension of the moratorium, there will be a tsunami of eviction petitions hitting the Centre Street courthouse, as landlords scramble for their place in line to commence what will be a very lengthy legal process for dispossessing non-paying tenants.
Service of petitions on tenants will likely be more difficult and take more time, given the volume of filings. Challenges to service, at least for dilatory value, will likely increase.
Courthouse calendars will be immensely overcrowded, even for the city, and no doubt extra security will be required to handle the angry and worried crowds of commercial and residential tenants. We have already seen, and likely will see again, protests by tenants in our streets, inflammatory speeches by the pro-tenant community and political leaders, and the press casting landlords as the villains in this unfolding drama.
When judgments and warrants finally issue from the courts, city marshals will likely become overwhelmed with the challenging duty of removing tenants, and will likely need to call in the assistance of law enforcement officers to hopefully keep the peace. Lawyers, either private or appointed to represent the tenants will of course, use every available delay tactic to keep the tenants in place and use the deluge of filings to the benefit of their tenants. Lawyers for landlords, will as far as may be permitted in hearings, challenge the claims of hardships by tenants seeking to stay, delay, and not pay their rent.
In short, it will be a colossal mess.
Now; the bad. Unfortunately, there will be numerous incidents of violence. There will be fights in the courtrooms, and it’s likely that some arrests will be made. It is not unlikely that landlords may have their offices “invaded” by tenants and tenant interest groups, and it is possible because it has happened elsewhere, that lawyers representing landlords may be threatened and attacked. We will likely see a booming business for the private security industry, and also eventually for apartment and office renovation contractors who will be repairing the intentional damage caused by irate tenants, which will create additional costs for landlords. The incidents in landlord-tenant court will spill over into the criminal courts, and various regulatory agencies of the city will be inundated with complaints against landlords, real and spurious.
Now; the good. There is hope, and there are strategies and tactics which both tenants and landlords can use to bring more light and less heat to this difficult situation.
First, let’s look at what’s happening, starting June 1, 2021. A program that might help up to two hundred thousand households is coming.
Tips for Residential Landlords and Tenants
New York has initiated the Emergency Rental Assistance Program, or ERAP, to provide economic relief to low and moderate-income tenants at risk for housing instability, or in plainer terms, homelessness brought on by an eviction. The parameters base income on what is called the AMI or area median income, which differs by household size and county. If the tenant’s income is currently 80 percent below that AMI figure, they can qualify for ERAP. If, after March 13, 2020 a member of the household received unemployment benefits, or experienced a financial hardship due to Covid, either directly or indirectly, they may qualify. They might also qualify if there are rental arrears on a primary residence after March 13, 2020. The tenant must demonstrate a risk of becoming homeless or what the government calls “housing unstable”. There is a priority among applications, and for the details, you can follow the link below:
Up to twelve months of arrears may be paid, up to three months of additional rent assistance might be offered if the tenant is paying 30% or more of gross monthly income for rent. There is also up to twelve months of utility assistance available. The good news for landlords is that payments will be made directly to them. Landlords will need to provide copies of leases, documentation of arrears, and a W-9 tax form. Also, banking information for direct deposits of rent.
But it’s not all sugar and spice for the landlord. The landlord will have to agree that the ERAP payment is in full satisfaction of the tenant’s rent obligation for the time period covered. So, it’s certain, and it’s specified, that things like late fees, aren’t going to be collectible. Furthermore, the landlord can’t increase the monthly rent above the amount due at the time of application, for one year after receipt of the ERAP payment. This is not applicable to landlords having four or fewer units, and if the property owner’s family intends to occupy one of the units as a primary residence.
One of the things that a landlord can do to help themselves as well as their tenants is to make sure that they communicate this existing benefit to their tenants, and indicate that management stands ready to assist them in the application for ERAP, if that is at all practicable.
Additional Residential Landlord Strategies
Now, if you’re a landlord with tenants who won’t qualify for ERAP, there are still things that you can do to help yourself. You might wish to consider offering your tenant money to move out willingly, payment upon vacation of course. Check with your lawyer to make sure that your offer complies with the current laws and regulations, especially if the units are rent controlled or rent stabilized.
If you are in eviction court, you could try to settle with a tenant, giving them a certain amount of time to move out, provided that this is secured by the granting of a judgment and warrant, and the stipulation you enter into provides that tenant shall not file any further orders to show cause with respect to the proceeding. This is something that you obviously have your lawyer handle, and don’t be surprised if a housing judge doesn’t approve of the part about further orders to show cause – it’s worth a try regardless.
Cuomo’s legislation also puts a moratorium on foreclosures against landlords owning ten or fewer dwellings, until August 31, 2021.
Strategies for Commercial Landlords and Tenants
For commercial tenants, the moratorium has been extended for businesses with under 50 employees that can show hardship. For commercial landlords, the moratorium on foreclosures has likewise been extended until August 31, 2021. Tax lien sales are likewise put on hold until that date.
These moratoria give landlords and tenants time to try and work things out, so if it isn’t exactly going to be a win-win, it will be at least “lose less-lose less.”
So, as a commercial landlord, what can you do now, and post-moratorium to lighten your burden? First, consider taking all security available towards rent arrears, which is something you are not obligated to do, but can, and then giving the tenant a schedule to replenish security, while staying current on rent, or if that isn’t possible, at least additional rent items like contributions to taxes, common area maintenance, and if your lease provides, insurance costs.
If your lease does not yet provide for it, to partially—and I do mean partially—secure rent arrears, you should consider taking a security interest along with a UCC-1 filing on all of the tenant’s furniture, fixture, and other items, that they would likely otherwise take with them upon vacation of the premises. This can be especially useful if you have a health club or restaurant tenant because if they either vacate, or are evicted, you now have all of the equipment in place. This would allow you to offer a turnkey opportunity to a new tenant, assuming you ever want to have a gym or restaurant tenant again.
For commercial tenants, one of the greatest concerns is any personal guarantee that might exist, and the specific wording of the Good Guy Guarantee Clause in your lease. Your good guy clause may only obligate you personally to guarantee timely payment of rent for actual occupancy periods. But if you have violated that due to an inability to pay, a properly drafted good guy clause from the landlord’s point of view, will make you responsible for the rent due the entire lease term, which if there is, and there usually is, an acceleration clause upon tenant default, you could wind up with a massive judgment against you—personally. You might try to negotiate your voluntary vacation of the property for the release of the personal guarantee. This will save the landlord legal and marshal fees. Obviously, if you have a next-to-nothing net worth, and the landlord knows that (and they should know that), this becomes easier to negotiate.
Landlords and tenants are not always, and not necessarily adversaries. It would behoove both to sit down and try to work out temporary or permanent accommodations to avoid the likely hell that will be eviction proceedings in the Fall. New York will survive this, and New Yorkers, both landlords and tenants are tough enough and smart enough to work things out in these trying times. Smart tenants will engage the services of an experienced tenant broker to help them navigate the waters of this flood, and wind up successfully on dry land, safe and sound. We are here to help. You can contact Metro Manhattan Office Space at: (212) 444-2241 or use our online Contact Form.