How to Comply with Order Extending Eviction Moratorium
We explain which tenants are protected and how to let tenants tap security deposits for rent.
On May 7, Governor Andrew Cuomo signed into effect New York State Executive Order No. 202.28, extending the eviction moratorium from June 20 through Aug. 20. The moratorium prevents owners from filing eviction proceedings for the nonpayment of rent against both residential and commercial tenants.
“The majority of people in the state live paycheck to paycheck, and all of a sudden the paychecks have stopped for these individuals but the rent bills keep coming in,” Governor Cuomo said in a press release. Extending the moratorium until August, Cuomo says, will “provide some relief to those New Yorkers who are struggling.”
In addition to the eviction moratorium extension, the most recent executive order helps renters by banning late fees for missed rent payments during the eviction moratorium and allowing renters facing financial hardship to use their security deposit as payment.
We’ll explain who qualifies for extended protection under the moratorium and how to allow tenants to use their security deposits for rent. We’ll also assess the outlook for post-moratorium rent collection.
Not All Tenants Qualify for Extended Protection
The eviction moratorium language in Governor Cuomo’s May 7 executive order differs from the prior order, which expires June 20. With the change in language, the final two months of the moratorium, beginning on June 20, come with some restrictions. From June 21 through Aug. 20, the ban applies to certain tenants only.
The governor’s previous order, which expires June 20, barred the “enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property.” The new order adds the restriction that the moratorium applies only to tenants or borrowers facing financial hardship from COVID-19 or those eligible for unemployment benefits. It also appears to expand the ban by forbidding the “initiation” of an eviction or foreclosure process for nonpayment of rent or mortgage. It’s unclear, though, what qualifies as an initiation.
Determining if a tenant is eligible for unemployment benefits is fairly straightforward. But proving “financial hardship” will be more difficult unless the state clarifies what qualifies as hardship. Most likely, owners and tenants will end up working out such disputes without going to trial.
In addition, logistically, initiating a nonpayment proceeding against a tenant who’s ineligible for unemployment insurance or not facing financial hardship due to the COVID-19 pandemic is difficult due to the restrictions currently in place. Housing Court has recently rolled out virtual court operations, but the existing ban on the filing of new “non-essential” matters remains in effect. This means these proceedings can’t be initiated anyway now due to the court’s refusal to permit the purchase of index numbers except in limited circumstances.
Ban on Late Fees Extended
From March 20 until Aug. 20 owners may not demand, and are not entitled to, any payment, fee, or charge for late payment of rent.
Use of Security Deposit for Rent
If a residential tenant is eligible for unemployment insurance or benefits under state or federal law, or is otherwise facing COVID-19 financial hardship, he may (at his sole option) request that the owner apply his security deposit (including any accrued interest) to pay past due rent or future rent.
According to the May 7 Executive Order, to use a security deposit for rent payments, owners and tenants must execute a written agreement setting forth the terms. If a qualified tenant asks to tap his security deposit for rent, you can adapt and use our Model Agreement: Use Agreement to Let Tenant Apply Security Deposit to Past Due Rent, to comply with the order.
The tenant will remain liable for any rent not covered by his security deposit. The order makes clear that it is solely the tenant’s option to enter into such an agreement, and the landlord may not threaten or coerce the tenant into that agreement.
Starting at least 90 days from the date the security deposit was first applied to a rent payment, the tenant must begin to replenish the security deposit at the rate of 1/12 of the amount used as rent per month. Alternatively, the Executive Order allows the tenant to purchase insurance that replenishes the security deposit—and the owner must accept that insurance as replenishment.
The eviction moratorium doesn’t cancel rent payments. So if a tenant doesn’t pay rent and can’t work out a payment plan, an owner eventually will be able to bring a nonpayment case against her once the moratorium is lifted.
However, local elected officials and housing advocates are applying pressure and calling for actions to address the economic fallout for New York City tenants caused by the COVID-19 pandemic. The concern is that thousands of New Yorkers could face eviction once the moratorium is lifted.
State Senator Michael Gianaris has introduced a bill that would forgive rent for residential and commercial tenants impacted by the COVID-19 pandemic for 90 days. The bill proposes to suspend rent payments and certain mortgage payments for 90 days for residential and/or commercial tenants that have lost income and/or have been forced to close their place of business as a result of government-ordered restrictions in response to the coronavirus outbreak. Additionally, the bill would allow for every residential or small business commercial tenant whose lease expires to have its lease automatically renewed at the existing rent rate.
For owners, Gianaris’s bill also proposes to forgive mortgage payments for those owners that face financial hardship from the loss of rent payments for commercial or residential property. Manhattan Assembly Member Yuh-Line Niou has introduced a version of the bill in that chamber.
Housing Justice for All, a statewide coalition, has called on the city and state to develop a $10 billion relief package that includes a moratorium on rent, mortgage, and utility payments. And at the city level, City Council Speaker Corey Johnson has introduced legislation that would ban court marshals and sheriffs from enforcing evictions and collecting debt for one month after the federal and state moratoriums on evictions are lifted—and would prevent city marshals and sheriffs from collecting debts and carrying out evictions on New York City residents impacted by COVID-19 until April 2021.
See The Model Tools For This Article
|Use Agreement to Let Tenant Apply Security Deposit to Past Due Rent|