New York City faces an uncertain future once the eviction moratorium ends on August 31, 2021. The possibility of a post-moratorium eviction apocalypse looms, with potential ramifications for landlords and tenants.
This article not only explores potential post-eviction moratorium outcomes. It also discusses strategies landlords and tenants can utilize to mitigate the negative impact and navigate the challenging times ahead.
It is crucial for all parties involved to remain informed and prepared as they face the potential consequences of the end of the moratorium. By proactively exploring available resources, landlords and tenants can strive to weather the impending storm.
Worst Case Scenarios
The Ugly
First and foremost is the ugly post-eviction moratorium scenario. If the government does not extend the moratorium,
the consequences could snowball. A surge of eviction petitions could flood the Center Street courthouse. Then, landlords will aggressively initiate the lengthy legal process of dispossessing non-paying tenants.
Moreover, given the high volume of filings, serving the petitions to tenants is expected to be more challenging and time-consuming. As a result, there may be increased challenges to service, potentially causing further delays.
The courthouse could see a significantly overcrowded calendar, even by city standards. Moreover, the court may also need extra security to manage the angry and concerned crowds of commercial and residential tenants. As we have witnessed in the past, tenant protests, provocative speeches from activists, and negative portrayals of landlords in the media are all possibilities.
As the courts issue judgments and warrants, removing tenants may become overwhelming for city marshals in this post-moratorium eviction scenario. Consequently, law enforcement officers may be called upon to assist in maintaining order. In addition, private or court-appointed lawyers representing tenants will likely utilize every available legal delay tactic to prolong their clients’ tenancy. Similarly, lawyers for landlords will challenge tenants’ claims of hardship to avoid delays and non-payment of rent.
Calling this potential scenario a colossal mess is an understatement.
The Bad
Unfortunately, a disturbing outcome of the post-eviction moratorium era is the potential for violence. Courtroom fights and resulting arrests are possible, and there may be instances where tenants and tenant interest groups attempt to “invade” landlord offices. Regrettably, lawyers representing landlords may face threats or physical attacks.
Landlords could also incur high costs from intentional damage caused by irate tenants. Expect this upheaval to also significantly increase demand for private security services and office renovation contractors.
Moreover, the incidents occurring in civil court could eventually spill over into the criminal courts. As a result, various regulatory agencies in the city could see an influx of valid and spurious complaints.
Solution #1: The Emergency Rental Assistance Program (ERAP)
Despite the legitimate concerns surrounding post-moratorium evictions, tenants and landlords can take advantage of positive developments and solutions to address the challenges ahead. One such solution is the Emergency Rental Assistance Program (ERAP), scheduled to commence on June 1, 2021.
The ERAP could provide economic relief to approximately 200,000 low and moderate-income households at risk of homelessness from post-moratorium eviction. Moreover, it represents a significant step towards mitigating the financial pain experienced by too many.
To qualify for ERAP, tenants must meet specific criteria. First, their current income must sit 80% below the area median income (AMI) figure. They also could also receive unemployment benefits, demonstrate financial hardship due to COVID-19, or have rental arrears on their primary residence after March 13, 2020. They must also demonstrate a risk of becoming homeless or housing unstable.
The program offers up to twelve months of arrears payments and up to three months of additional rent assistance if the tenant pays 30% or more of their gross monthly income for rent. Additionally, up to twelve months of utility assistance is available.
However, lands must agree to certain conditions before receiving ERAP payments. For instance, the payment fully satisfies the tenant’s rent obligation for the covered time period. So, landlords cannot collect late fees. Additionally, landlords cannot raise rent for one year after receiving the ERAP payment. The exceptions are landlords with four or fewer units or those whose family intends to occupy one of the units as a primary residence.
To ensure tenants understand this benefit, landlords should communicate the ERAP and offer assistance with applications wherever possible.
Solution #2: Paying Tenants to Voluntarily Move Out
If your tenants do not qualify for ERAP, you can still find ways to manage the situation. One option is to offer tenants money to voluntarily vacate the property. However, before doing so, it is important to seek legal counsel. It’s vital to ensure that your offer complies with current laws and regulations, particularly if the units are rent-controlled or rent-stabilized.
In eviction court, you can settle with the tenant by giving them a specific amount of time to move out. However, it is crucial to enter into a stipulation agreement that prevents the tenant from filing further orders to show cause concerning the proceedings.
Governor Cuomo enacted legislation that placed a moratorium on foreclosing against landlords who own ten or fewer dwellings until August 31, 2021. Additionally, the legislation extended the moratorium on foreclosing for commercial tenants with under 50 employees and can demonstrate hardship. Similarly, the moratorium on foreclosing for commercial landlords was extended until August 31, 2021. Furthermore, the legislation temporarily suspended tax lien sales until that date. These moratoria encourage landlords and tenants to collaborate and find solutions that may not necessarily be a win-win but can alleviate the burden for both parties.
Solution #3: Taking Security Towards Rent Arrears
Taking security towards rent arrears can be an effective strategy for landlords to maintain their cash flow and help tenants catch up on rent payments. This approach allows landlords to take available security from their tenants and provide them with a schedule to replenish it while staying current on rent. Additionally, landlords can consider additional rent items such as contributions to taxes, common area maintenance, and insurance costs.
Implementing this strategy benefits both landlords and tenants. Tenants can catch up on their rent payments and maintain their current status. At the same time, landlords can receive the necessary funds to meet their financial obligations.
However, it’s paramount to approach this strategy with caution. Before taking any action, landlords must review their lease agreements and consult with legal professionals to ensure they comply with applicable laws or regulations. In addition, it’s essential to confirm that taking security towards rent arrears is allowed and that the schedule for replenishing security is reasonable and realistic for the tenant.
Furthermore, landlords should consider their relationships with tenants before implementing this strategy. While taking security towards rent arrears can benefit both parties, it can also harm the landlord-tenant relationship if not handled properly. Therefore, communication with tenants and transparency about the process can help build trust and minimize the risk of conflicts.
Solution #4: Taking a Security Interest and Filing a UCC-1 Notice
It’s understandable if you’re concerned about rent arrears if your lease agreement doesn’t include provisions. So consider taking a security interest on your tenant’s furniture, fixtures, and other movable property. While it will only provide partial security, it can still help protect your interests. Additionally, filing a UCC-1 notice will help ensure your claim is recognized and protected against competing claims from other creditors.
This strategy can be particularly advantageous if leasing to a health club or restaurant tenant. These businesses often have expensive equipment and fixtures vital to their operations. If the tenant vacates or is evicted, having a security interest in their property can give you a head start in finding a replacement tenant. In addition, you’ll already have the equipment in place. Thus, it makes it easier to offer a turnkey opportunity if your new tenant is similar.
Overall, taking a security interest in your tenant’s property can provide added protection and peace of mind in the event of a default. Just be aware that this strategy has some limitations. Therefore, you should consult with a lawyer or other qualified professional to ensure you comply with all applicable laws and regulations.
Solution #5: Negotiate the Good Guy Guarantee
Personal guarantees are a major concern for tenants when it comes to commercial leases. In particular, the language of the Good Guy Guarantee Clause can significantly impact your financial obligations as a tenant.
If your lease only requires you to guarantee rent payments for periods of actual occupancy, that’s good news. Yet, if you cannot make the payments and your lease agreement incorporates a Good Guy Clause, you’re liable for the rent owed for the entire lease period. Worse, you could wind up facing a substantial personal judgment.
To mitigate this post-moratorium eviction risk, it may be worth trying to negotiate with your landlord to release the personal guarantee in exchange for your voluntary vacation of the property. Doing this helps the landlord avoid legal and martial fees, making it a potentially attractive option for both parties.
Of course, the success of such negotiations may depend on factors such as your net worth and the landlord’s perception of your ability to pay.
The Key Takeaway
In these unprecedented times, landlords and tenants must come together to find solutions that work for everyone. It’s not easy, but avoiding the potential hardship of post-moratorium eviction life is essential.
As we progress, it’s important to remember that New York is a resilient city, and its people are even more so. Both landlords and tenants have shown remarkable strength and adaptability during this challenging period, and we do not doubt they will continue to do so.
For tenants facing uncertain circumstances, enlisting the help of an experienced tenant broker can be a game-changer. These professionals understand the intricacies of the market. They can help you navigate the challenges of finding the right space at the right price.
At Metro Manhattan Office Space, we’re here to help. Whether you’re a landlord or a tenant, we have the expertise and resources to help you succeed and navigate post-moratorium evictions. If you need assistance with leasing, renting, or negotiating, don’t hesitate to contact us at (212) 444-2241 or use our online contact form.
