In his most recent state address, New York Governor Andrew Cuomo indicated a desire to hold mortgage foreclosures, commercial evictions and foreclosures until May 1, 2021. On March 9, 2021, the governor’s wishes came true when Senate Bill S471A was passed by NYS signed Chapter 73 of the 2021 Acts known as the COVID-19 Emergency Protect Our Small Businesses Act of 2021 “).
Commercial Evictions
Although the stay of enforcement on evictions and foreclosures expired on February 26, 2021, tenants and mortgage lenders in residential areas had the option of simply filing a standardized hardship declaration form in order to apparently extend the eviction and foreclosure ban until May 1, 2021 commercial tenants and mortgage lenders are subject to enforcement. The law has now changed this and granted commercial tenants similar protection.
PROTECTION FOR RENTERS UNDER THE LAW
In relation to evictions, this legislation extends protection for certain commercial tenants, whether for non-payment of rent or for withholding after a lease has expired, simply by filing a standardized hardship form that the landlord must provide. In fact, landlords are now required to enclose this form with “any written notice required by the commercial lease or rental agreement”. as well as before the start of an eviction procedure; and with any notification of a petition or subpoena and complaint served on a tenant.
In order to continue, a landlord must additionally certify to the court that he has either not received a hardship statement from the tenant or that the tenant is “persistently and inappropriately committing a behavior that significantly violates the use and enjoys other tenants or residents or a significant safety risk for others . “
For the purposes of the law, a covered tenant is an independent and managed commercial tenant who is New York based, has fifty or fewer employees, and is not dominant in his or her area. By signing the hardship form, for which no confirmatory or supporting documents are required, such a tenant merely declares that he has lost significant income or significantly increased the necessary costs during the pandemic, which means that a longer evacuation stay up to at least May 1 is required is taken, 2021. Given the enormous backlog of evictions that have been prevented from filing, as well as cases pending for months in connection with newly reduced court capacities, it is of course unclear when a landlord can actually recover possession of their property by a sheriff or marshal, who will eventually face its own tsunamis of warrants to be executed.
While the form is a reminder to renters that unpaid rents are due, the harsh reality for many landlords will be renters who will simply walk away from their spaces – and their debts – once they’ve exhausted those legislative gifts. Or some find it advantageous at this point to finally give up the tenant company and continue operations elsewhere under a new, closely-knit company. In the meantime, landlords with a significant asset have no choice but to pay all real estate expenses, including those temporarily suspended, or the risk of possible loss of their real estate through foreclosure. While the law purports to “protect small businesses” and ensure that “small businesses can survive in this unprecedented time,” the bill sponsors and the governor don’t seem to realize that most landlords are small businesses themselves.
The law also automatically suspends all eviction proceedings filed on or before May 7, 2020 or started within 30 days after March 9, 2020 for at least 60 days or at a later date by order of the chief administrative judge. In any case in which an eviction order or a judgment on possession or deportation has already been issued but not yet enforced, including those issued before May 7, 2020, the law also provides that the courts must enforce at least up to a status conference was held with the parties.
This ever-changing landscape continues to transform the way landlords deal with defaulting tenants. Each situation is unique, and landlords are encouraged to consult with a knowledgeable attorney who is able to handle these complex and evolving enforcement requirements and to discuss options and resources necessary to restore possession of their property and can be used to collect overdue rents.
COMMERCIAL MORTGAGE AND TAX INSURANCE
Similar to the protections for commercial tenants (and the added burden of commercial landlords), the law protects mortgage lenders and small business owners from foreclosure actions that are initiated or continued for a period of sixty (60) days. Special hardship declaration forms have been created for both mortgage and tax foreclosure.
PROTECTION FOR MORTGAGOREN AND OWNERS UNDER LAW
With respect to commercial mortgage foreclosures, the courts have been instructed to provide commercial foreclosures defendants with a copy of the hardship statement to be returned and filed in the pending case. Notwithstanding this provision, it is recommended that in commercial cases, practitioners present the hardship statement to all commercial defendants. This will give rise to evidence that the hardship statement was actually sent. If a borrower is in default but no foreclosure proceedings are pending, mortgages must send a hardship letter to defaulted mortgage lender with each notice to the mortgage lender prior to filing. The law requires the mortgage borrower to provide an affidavit stating that the hardship was served and how it was served, as well as an affidavit that the hardship was not returned in order to initiate a foreclosure action.
As with the eviction hardship statement, the foreclosure hardship statement does not require the mortgage lender to provide evidence of actual hardship as a result of COVID-19.
Mortgage Foreclosures
Part B, Subpart A of the Act applies to “any foreclosure action on a commercial property mortgage provided that the owner or mortgage lender of that property directly or indirectly owns ten or fewer commercial units and is a company in which it is located Independently owned and operated New York is not dominant in its field and employs no more than fifty people. “In contrast to the Law on Maintaining Foreclosures on Residential Properties, which does not apply to vacant and abandoned properties, the law does not contain a corresponding provision for vacant commercial properties. Apparently, there is no requirement that the company is up and running or was in operation prior to the pandemic outbreak.
One confusing aspect of the new legislation is that the law will keep all commercial foreclosures on hold for “at least sixty days” from the date it went into effect on March 9, 2021. However, if a hardship declaration is returned, the case will persist until at least May 1, 2021 (less than 60 days). The law provides that in cases where the foreclosure and sale judgment has been issued but not enforced, the case will be suspended until the court has held a status conference with the parties. If a hardship declaration is returned, the execution will be suspended until at least May 1, 2021.
In particular, the hardship declaration creates a rebuttable presumption of financial hardship; Failure to submit a hardship declaration “does not give rise to the assumption that there is no financial hardship.”
Tax foreclosures
Part B, Subpart B of the Act applies to “any measure to foreclose delinquent taxes or to sell a tax lien in relation to commercial real estate, provided that the owner or mortgage lender of that real estate directly or indirectly owns ten or fewer commercial units and a company operating in Is resident, independently owned and operated, non-dominant in its territory, and employs fifty or fewer people. “This applies to the same owner or mortgage lender as the mortgage foreclosure.
The law’s treatment of tax foreclosure cases differs significantly from that of mortgage foreclosure. In the case of tax foreclosure, the enforcement officer or the person / entity performing the tax lien sale or foreclosure must inform the owner of the owner’s rights under the law and the availability of a hardship declaration. The Foreclosure Hardship Notice will be available on the New York State Department of Tax and Finance website. The notification of the availability of a hardship declaration must be made at least 30 days before the sale of a tax lien or after the filing of the application for enforcement of a tax lien.
Filing a hardship will be deemed to be a suspension of all tax lien sales and foreclosure measures that were initiated or could have been initiated prior to May 1, 2021. This also counts as a suspension against the initiation of future proceedings against delinquent taxes. The limitation period for the initiation of a lawsuit or the sale of a tax lien is subject to a fee until the end of the stay.
As with mortgage foreclosures, it is recognized that the hardship statement creates a rebuttable presumption of financial hardship; Failure to submit a hardship declaration “does not give rise to the assumption that there is no financial hardship.”
Prohibited Discrimination
Part B, Subpart C of the Act prohibits credit institutions from (a) discriminating against owners of commercial real estate in making credit decisions; or (b) reporting a negative credit to a credit reporting agency if the owner has been granted a postponement of a mortgage foreclosure or tax foreclosure or tax lien sale. The section also includes a hardship statement that is made available to commercial owners / mortgage lenders on the New York State Department of Finance website and should be made available by credit institutions, although not provided by law. If a hardship statement is filed with the lender, the lender is prohibited from (a) discriminating against commercial property owners in deciding whether to grant loans; or (b) reporting negative credit to a credit reporting agency.
The law is one of many legal efforts being made to protect New York businesses from the significant adverse effects of the COVID-19 pandemic. It is highly recommended that lenders, municipalities, and home mortgages consult a knowledgeable attorney who is able to handle these complex and evolving enforcement requirements and to discuss options and resources that can be used to enforce various commercial real estate rights.