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New York Extends Eviction and Foreclosure Moratorium

Foreclosure

New York Extends Eviction and Foreclosure Moratorium

Governor Kathy Hochul of New York extended the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (CEEFPA) in September 2021. CEEFPA, which became effective in December 2020, allows tenants facing eviction or mortgage foreclosure to halt those proceedings by claiming a hardship related to the COVID-19 pandemic.

New York passed the law to tenants and property owners who suffered financial losses due to the Covid-19 pandemic. Additionally, it increased the available hardship funds for tenants and landlords from $100 million to $250 million and established a $25 million fund for legal services for renters facing eviction.

Key Provisions of NY’s Moratorium Extension

Until January 15, 2022, the bill enables tenants and homeowners to avoid eviction and foreclosure by submitting a hardship declaration form. SB 50001, on the other hand, now offers new protections to landlords, as well.

These are a few more key provisions that renters, property owners, and businesses should know.

Small Businesses Receive Protection

The extension prohibits commercial evictions and foreclosure proceedings against small businesses with 100 or fewer employees that demonstrate financial hardship. Additionally, the bill enables landlords with fewer than ten dwellings to avoid foreclosure by filing a hardship declaration form with their mortgage lender, another foreclosing party, or a court.

New laws require commercial landlords to include a copy of the Commercial Hardship Declaration form with all default notices sent to tenants, along with their contact information.

When for eviction, the landlord must now include an affidavit stating that they:

  • Have not received a Commercial Hardship Declaration from the tenant
  • Have received the form, but the tenant is causing significant damage
  • Believes the tenant does not have a COVID-19-related hardship.

The notice of petition must also state that the proceeding will stay unless and until the landlord objects to the tenant’s Commercial Hardship Declaration. Additionally, when the law enforcement serves an eviction warrant, the tenant may respond by filing a Commercial Hardship Declaration, which will bring the landlord and tenant to court for further proceedings.

This requirement applies to newly filed actions and pending actions. There appears to be minor relief for commercial landlords whose tenants are delinquent on their rent payments.

Extension of ERAP

The new legislation extends the COVID-19 Emergency Rental Assistance Program’s (ERAP) eviction protections and funds the program. Additionally, applicants for ERAP are automatically protected from eviction during the application process and will receive a year of eviction protection if they qualify for assistance.

These amendments seek to assist state and local governments in distributing the remaining approximately $2.4 billion in funds earmarked to provide eligible renters with up to 12 months of past-due rent directly to landlords. According to recent reports, the state has disbursed only about $200 million through the program since it began on June 1, 2021.

Acknowledges SCOTUS Decision

SB 50001 also recognized the recent United States Supreme Court decision invalidating New York’s self-certification financial hardship process for tenants. The Supreme Court held that allowing tenants to self-declare financial hardship under New York law while precluding landlords from contesting such declaration violated the landlord’s constitutional right to due process. As a result of the decision, the bill establishes a process for mortgage lenders and owners to contest a tenant’s or homeowner’s hardship request.

History of CEEFPA Extensions

CEEFPA was initially set to expire on May 1, 2021. However, the state extended the hardship period until August 31, 2021, in May 2021, as that period was about to expire. The new law extends the duration of the stay until January 15, 2022.

Following the May extension of the CEEFPA, a group of New York landlords filed a lawsuit challenging the law as unconstitutional. Landlords sought a preliminary injunction to prevent the stay period from taking effect through the new deadline. The court denied the initial request, and the appeals court affirmed this decision.

How the SCOTUS Decision Affects the Moratorium

On August 12, 2021, however, the Supreme Court of the United States (SCOTUS) reversed, in part, the denial of the injunction, effectively prohibiting the stay period. The Supreme Court determined that if a tenant self-certifies financial hardship, CEEFPA generally precludes a landlord from contesting the certification and denies the landlord a hearing.

Main Issue

This scheme violates the court’s long-established principle that no one can be a judge in their own case. The current CEEFPA extension incorporates an amendment to the previous law in response to the Supreme Court’s decision. The newly added sections enable the landlord to bring a motion to dismiss an adverse party’s hardship claim.

When a court receives such a challenge, the law requires the court to grant the parties a hearing to decide whether the tenant’s or mortgagor’s hardship claim is valid. The challenge must be founded on a reasonable belief that they have not encountered financial hardship.

Challenges

These circumstances may be challenging because the respondent does not need to specify a specific hardship in the declaration, only experiencing lost income or increased expenses due to the COVID-19 pandemic. It will not be easy to demonstrate a good faith belief that none of those circumstances exist in a particular case. Obtaining a final resolution before January 15, 2022, may be even more difficult.

Other Legal Issues Associated with the Moratorium Extension

Another concern is the right of a tenant. In some situations, a person occupies a dwelling space but is not a tenant in the traditional sense, as they may lack an oral or written lease and are not liable for rent.

These outcomes may arise when a family member who owns a property rent-free allows another family member to live there. Another scenario is an unmarried couple in which one individual owns the property while the other does not. If the couple divorces, the owner may seek to evict the non-owner, despite having no formal landlord-tenant relationship.

Finally, occupants of a property may remain following a foreclosure action. For instance, a lending bank may foreclose on a homeowner’s property. Following a foreclosure sale, the bank acquires title to the property and requires the previous owner to vacate.

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Peter Spino

Peter Spino, Jr., Esq., is an attorney that has a general law practice but specializes in residential and commercial real estate. His business and real estate experience make him uniquely qualified to represent you in any legal matter you may be faced with. Over the past five years Peter Spino, Jr., Esq., has assisted over a thousand homeowners with loan modifications, foreclosure defense, short sales, deeds in lieu, settlement of second mortgages and bankruptcy.

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