Recent Court Cases Void Restrictions on Evictions and Enforcement of Lease Guarantees, But Window is Still Open
NY State and federal courts recently voided some of the more extreme measures taken by New York City and Albany during the COVID emergency.
“Eviction for Good Cause” Law Voided in City of Albany. In 2021 the city of Albany passed a law requiring landlords to offer renewal leases to tenants unless the tenants violated one of ten enumerated conditions (the “Eviction for Good Cause” law), ostensibly to address “the negative impacts of no-cause evictions on public health.” Those conditions included (for example) a failure to pay rent, but a rent increase greater than 5% created a presumption that the increase was “unconscionable” and hence void. A landlord group challenged the law and won in trial court. The City of Albany appealed.
The appeals court ruled that the City of Albany was barred from adding conditions for an eviction that contradicted those already contained in state law. For instance, state law allows landlords to evict tenants after their lease has expired or they have failed to pay rent. Albany could not further limit those rights by imposing stricter conditions, such as forcing landlords to prove that a 5% rent increase was not unconscionable; the local laws were “preempted” by the state.
However, the City was not barred from requiring registration of rental properties with the City as a condition of starting evictions. That condition merely “supplemented” existing law, without contradicting it. The difference is subtle.
Our state legislators have repeatedly introduced similar bills that limit how much landlords can increase rents, and requiring landlords to offer renewal leases to tenants unless the tenants have violated certain additional conditions. These “Eviction for Good Cause” bills have gained momentum over the past few years. They need to be carefully monitored or community associations may one day find themselves subject to state-imposed restrictions on increasing maintenance charges or requiring lease renewals in their buildings.
New York City Law Prohibiting Landlords from Enforcing Personal Guarantees of Certain Commercial Leases Invalidated. In the earliest days of the COVID emergency, New York State required “non-essential” businesses and restaurants to close. New York City passed a law prohibiting the enforcement of personal guarantees of those types of leases for rent accruing between March 2020 and June 2021 (the “Guaranty Law”). The federal court in the Southern District of New York has ruled that the Guaranty Law is unconstitutional, since it prohibits the enforcement of obligations that the guarantors of the affected commercial leases had contractually agreed to and bargained for.
This ruling may help numerous co-ops and condos in Soho and Tribeca who had lost a huge percentage of their income when their commercial tenants failed to pay rent. Most associations needed to make major accommodations at the time to deal with the shortfall. Even though this ruling comes two years later, it may still allow associations to be compensated for some of the foregone rent. However, we expect the ruling to be appealed, so we have not heard the last word.
COOPERATOR SEMINAR ON MAY 10th; “Problems with Transfers: Transfers to Trusts, Transfers by Estates, New Laws Affecting Purchase Applications and Rejections.”
Please come to our Seminar on May 10th at 2:30 at the New York Hilton (Midtown) as part of the Cooperator Expo! We will review ongoing Board problems with transfers: When to allow transfers to entities instead of individuals; how to deal with transfers by estates when no one shows up for the decedent; exercising and waiving rights of first refusal for problematic purchasers; latest updates on disclosure laws affecting rejections of purchasers and review of purchase applications, and threatening bills that are gaining momentum in the State legislature.