On May 7, 2020, in an effort to help those impacted by COVID-19 address their rent obligations, Governor Cuomo issued Executive Order 202.28, which modified the security deposit law. Relief is available from the date of the Order but significantly only through June 6, 2020.
In December 2019, Gov. Andrew Cuomo proposed new Fair Housing rules which were adopted this month and go into effect June 20, 2020. Under the newly adopted state rule, real estate agents and brokers must notify prospective buyers, sellers, renters and landlords about anti-discrimination laws and prominently display the fair-housing disclosure form in their offices which provides information about how customers can file complaints with the New York State Division of Human Rights. The rules also require groups that provide state-mandated fair-housing training to make audio and video recordings of their classes. The state can impose fines or suspend or revoke licenses of agents or brokers who violate the regulation.
The Housing Stability Tenant Protection Act of 2019 (“HSTPA”) eviscerates many Owner’s rights that have been in effect since the Omnibus Housing Act of 1983 (the “OHA”) became effective on April 1, 1984. With regard to the issue of preferential rents, the HSTPA provides that if the tenant is being charged and is paying a rent lower (preferential) than the legal regulated rent, the rent to be charged on a renewal until there is a vacancy is the lower preferential rent plus any guidelines increase.
In a prior post, we covered the issue of the COVID-19 pandemic and commercial property insurance coverage. We advised that all businesses review their commercial property insurance policies to determine if they potentially have coverage for any of the actual, or anticipated, losses. In that prior post, we examined, among other areas of coverage, Business Interruption Insurance.
The COVID-19 pandemic forced the Governor to take drastic measures to slow the spread and “flatten the curve”. Those drastic measures included prohibitions against public gatherings, shutting restaurant eat-in services, and ordering 100% of non-essential workers to work from home thereby shuttering all non-essential storefront business operations. The financial impact of these measures may not be totally realized for months. All businesses should review their commercial property insurance policies to determine if they potentially have coverage for any of the actual, or anticipated, losses.
On April 1, 2020, the Empire State Development (“ESD”) agency clarified that residential home and commercial office showings along with back office real estate work, residential appraisal services and home inspections are essential real estate functions effective immediately. The declaration from ESD does specify that: “Essential Businesses must continue to comply with the guidance and directives for maintaining a clean and safe work environment issued by the Department of Health and every business, even if essential, is strongly urged to maintain social distance to the extent possible.”
The Court of Appeals, on April 2, 2020, ruled in four separate cases, in a 57 page decision with a 53 page dissent, that with regard to the retroactive application of the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”), "the overcharge calculation amendments cannot be applied retroactively to overcharges that occurred prior to their enactment." In Pastena, the First Department shocked real estate lawyers by issuing a decision wherein it stated that paragraph “38” of the proprietary lease at issue in that case, which paragraph bestowed special rights on Holders of Unsold Shares, was void as a matter of law.
Cooperative Offering Plans and Proprietary Leases typically grant Holders of Unsold Shares greater rights than other tenant-shareholders. For example, a Holder of Unsold Shares in a cooperative is often exempt from board approval and fee requirements for sublets. The Appellate Division, First Department in Pastena v. 61 W. 62 Owners Corp., 169 A.D.3d 600 (1st Dept. 2019), rendered a decision wherein the Court issued the following dictum (i.e. a gratuitous assertion of law made by a court that, in the end, is not material to the holding): A proprietary lease, which purportedly exempts Holders of Unsold Shares in a Cooperative from certain expenses and fees assessed by a cooperative, is void as a matter of law. In Pastena, the First Department shocked real estate lawyers by issuing a decision wherein it stated that paragraph “38” of the proprietary lease at issue in that case, which paragraph bestowed special rights on Holders of Unsold Shares, was void as a matter of law.
Daniels Norelli Cecere & Tavel PC has been proudly serving the real estate industry for over 30 years. The coronavirus pandemic has created circumstances that neither our firm nor our clients have ever dealt with before.
Often included in commercial leases is what is legally known as a force majeure clause. A force majeure clause becomes legally significant when a commercial tenant is unable to perform its contractual obligations under the lease because of circumstances beyond the tenant’s control, such as fire, flood, war, or acts of God, and seeks to be excused from the lease and its obligations thereunder. Significant now is the fact that the state is shutting down many businesses as a result of COVID-19. Force majeure clauses will become of critical importance in the upcoming immediate months and the matter of litigation for at least the next decade.
