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COVID-19: Update to Moratoria on Evictions and Foreclosures in New York

May 28, 2020

New York Executive Order 202.28

Following initial federal and state actions to assist landlords, tenants, and homeowners affected by COVID-19, discussed in our previous alert on Mortgage Forbearances and Moratoria on Evictions and Foreclosures, on May 7, 2020 Governor Cuomo signed Executive Order 202.28 extending a moratorium on evictions and foreclosures, as well as modifying certain parts of the General Obligations Law and Real Property law to provide further protections to tenants affected by the COVID-19 crisis.

Specifically, the Order imposes the following requirements on landlords, tenants, lenders and property owners:

  • An extension to August 19, 2020, of the moratorium on (i) evictions of residential and commercial tenants for nonpayment of rent and (ii) foreclosures of residential and commercial mortgages for nonpayment; however, this moratorium applies only to those eligible for state or federal unemployment insurance or benefits or otherwise facing financial hardship due to the COVID-19 pandemic. The Order is unclear as to what constitutes a “financial hardship due to the COVID-19 pandemic”.
     
  • A prohibition against residential landlords from demanding any payment, fee or charge for late payment of rent occurring during the time period from March 20, 2020 through August 20, 2020.
     
  • Upon the consent of a tenant of residential property, a residential landlord and tenant may enter into an agreement by which the security deposit and any accrued interest may be used to pay any rent that is in arrears or that may become due. If the tenant is eligible for state or federal unemployment insurance or benefits or is otherwise facing financial hardship due to the COVID-19 pandemic, the landlord must enter into this type of agreement upon the tenant’s request. If the security deposit is not sufficient to pay the rent, the tenant will still owe the remaining portion due for that month. The tenant must replenish the security deposit over the course of one year in equal monthly installments beginning no less than 90 days from the date that the security deposit was used as rent.

As discussed in our prior Connecticut alert regarding Governor Lamont’s Additional Protections for Residential Renters, the CARES Act may preempt state law, including the New York Executive Orders, in regard to property with federally backed mortgages, thereby prohibiting residential landlords from ordering tenants to vacate until August 24, 2020.

New York Mezzanine Loan Foreclosure Case

In addition, a recent decision of a New York trial court held that the moratorium on foreclosures does not extend to mezzanine loans. (See 1248 Associates Mezz II LLC v. 12E48 Mezz II LLC, case number 651812/2020, in the Supreme Court of the State of New York, New York County.) The decision explains that the foreclosure is on assets that were pledged under and pursuant to the Uniform Commercial Code (UCC), such assets being the equity interests in the property owner, and not a foreclosure on real property. New York laws, rules and statutes have explicitly provided for prohibitions on the sale of collateralized assets in the past and, while mortgage foreclosures are judicially ordered, foreclosures on pledged equity interests are governed by the UCC, which provides for public and private non-judicial sales. It appears that a notice of appeal has already been filed, so there may yet be more to come with respect to this issue.

New York City Housing Court Activity

Finally, despite the extension on the moratorium on evictions, New York City Housing Courts are scheduling and conducting virtual conferences presided over by judges in pending eviction cases where both parties are represented by counsel in an effort to facilitate settlements and reduce the number of pending cases given the anticipation of new eviction cases due to the COVID-19 pandemic. A settlement conference can be requested by any party represented by counsel in a pending eviction matter.

Shipman & Goodwin attorneys are available to help landlords, tenants and property owners navigate difficult situations in light of the ever-changing rules and orders being issued on the state and federal level during the COVID-19 pandemic. We will endeavor to analyze and explain the relevant law in these areas and related considerations, and update our Coronavirus Resource Center (specifically, the Real Estate Leasing page) periodically to include relevant Connecticut, New York, federal and local laws, rules and regulations that are enacted during this crisis, as well as court filings and relevant precedent or other topical information, which are being circulated on these matters.

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