5-8-20 Client Alert: COVID-19 Landlord-Tenant Update

In one of our earlier COVID-19 Client Alerts we notified you that all commercial and residential evictions had been suspended for 60 days to June 20, 2020. That suspension was extended yesterday by Executive Order 202.28 for another 60 days to August 20, 2020. Specifically, Governor Cuomo's Order provides that, "There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under federal or state law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020."

Admittedly, the wording is awkward. Except for sole proprietorships, a commercial tenant is not eligible for unemployment benefits but the catchall language, "or otherwise facing financial hardship" is certainly vague enough to capture almost every commercial business in its net. So whether you are a commercial or residential landlord or a commercial or residential tenant, the ability to lawfully evict or be evicted is still on pause until August 20, 2020. That does not mean, however, that the payment of accruing rent has been suspended. For commercial tenants, late fees, penalties and interest are still enforceable terms of your lease and personal or corporate guarantors are still on the hook for any unpaid rent and other charges. Therefore, if need be, seek to negotiate any outstanding payment terms with your landlord while remembering that your landlord also has a business to run with its own associated expenses and hardships. Already we have prepared several forbearance agreements and lease amendments for landlords and tenants and expect this need will continue.

As for residential tenants, yesterday's Executive Order provides them with some additional relief not available to commercial tenants. First, while any unpaid rent will still be owed, Governor Cuomo's Executive Order bans "any payment, fee or charge for late payment of rent" between March 20, 2020 and August 2020. However, the word "interest" is not used. It is unclear whether this was an accidental oversight.

Finally, yesterday's Executive Order allows a residential tenant to apply his or her security deposit and any accrued interest from it toward any unpaid rent or future rent obligation, but only if the tenant requests it. If the security deposit and any accrued interest is insufficient to cover the unpaid rent or future rent, the tenant will still be responsible for the difference. The tenant is also responsible for replenishing the security deposit, but not for 90 days and only in monthly increments equal to 1/12 of the amount that was applied. In the alternative, a residential tenant may choose to retain insurance in lieu of replenishing its security deposit, which a landlord must accept. Any agreement with respect to applying the security deposit to the tenant's account and its replenishment must be in writing and can be signed in counterpart by email.

Woods Oviatt LLP has a long and distinguished landlord/tenant practice group with the skill and expertise needed to assist you in these challenging times. We look forward to helping you whenever you need it.

Please contact your Woods Oviatt attorney or the attorneys listed below regarding this or any COVID-19 related issues.

For more information regarding Coronovirus (COVID-19) or to access all of our client alerts go to:

https://www.woodsoviattgilman.com/covid19

COVID-19 Multidisciplinary Crisis Group Co-Leaders