On May 7, 2020, Governor Andrew Cuomo signed Executor Order No. 202.28, which extends the stay of evictions and foreclosures from June 20, 2020 through August 20, 2020, limits a landlord’s authority to charge late fees, and gives tenants the right to use their security deposit for payment of rent.
Effect on Evictions and Foreclosures
The Order extends the stay of evictions and foreclosures from June 20, 2020 – when the stay would have expired – to August 20, 2020, with some new limitations. There can be no initiation or enforcement of either: (1) evictions of commercial or residential tenants for the nonpayment of rent or (2) foreclosures of any residential or commercial mortgages for the nonpayment of the mortgage, under the following circumstances: the property is owned or rented by someone who is eligible for unemployment insurance or benefits under state or federal law or is otherwise facing financial hardship due to the COVID-19 pandemic.
Thus, with respect to evictions, eviction proceedings can apparently be commenced against commercial and residential tenants for breaches of the lease unrelated to nonpayment. However, the bar against commencement of evictions based on nonpayment of rent remains in place, at least to the extent the tenant is eligible for unemployment or “facing financial hardship,” a phrase that is not defined but capable of being broadly interpreted. A landlord may not know whether the tenant falls within this category, so it is possible that financial hardship may be viewed as a defense to an eviction, not just an impediment to commencement of the proceeding. From a practical standpoint, due to the current closure of most landlord-tenant courts and the restrictions on commencing any new actions in Supreme Court except for emergencies, no new eviction proceedings or foreclosure actions can be brought at this time. Still, assuming the landlord tenant courts reopen before the August 20, 2020 deadline, the courts will have the opportunity to interpret the meaning of this Executive Order.
Use of Security Deposits
The Order permits landlords and tenants of residential properties to enter into a written agreement by which a security deposit, plus any interest accrued, can be used to pay rent that is in arrears or will become due. Execution by counterpart via email constitutes sufficient execution. If the amount of the security deposit is less than the full amount due, there is no waiver of the total amount due and owing to the landlord. However, to enter into such an agreement, the tenant or licensee must be eligible for unemployment insurance or other benefits under state or federal law, or must otherwise be facing financial hardship due to the COVID-19 pandemic.
It is the option of the tenant/licensee to enter into such an agreement. The landlord is not permitted to act in any manner to compel the tenant/licensee to enter into such an agreement.
Any security deposit used for payment of rent must be replenished by the tenant/licensee at the rate of 1/12th the amount used per month. The payments to replenish the security deposit become due and owing no less than 90 days from the date the security deposit was used for rent. The tenant/licensee may retain insurance to provide relief to the landlord, in lieu of the monthly security deposit replenishment, which the landlord must accept as replenishment.
Late Fees
The Order modifies Real Property Law §238-a(2) to the extent that no landlord, lessor, sub-lessor or grantor can demand or be entitled to any payment or fee for the late payment of rent for the period from March 20, 2020 through August 20, 2020, with respect to any residential dwelling.