- A bill introduced in the New York State Senate would preclude the owners of cooperatives, condominiums, hotels and rental buildings from being able to evict a tenant, subtenant, or someone without a lease or other occupancy agreement (broadly defined as a "tenant") unless the landlord can demonstrate good cause for the eviction.
- If enacted, the legislation would fundamentally change how someone owning real estate could treat an occupant of space regardless of whether the occupant had a legal right to occupy the space, which would seriously damage the economic viability of residential real estate such as cooperatives, condominiums and hotels.
- The legislation applies to all residential real estate except for rent-stabilized and rent-controlled apartments as well as single-family homes.
Twenty-four members of the New York State Senate on Feb. 7, 2020, recommitted to the State Senate Judiciary Committee S.2892-B (the Bill), which was originally introduced on Jan. 30, 2019, and would preclude the owners of cooperatives, condominiums, hotels and rental buildings from being able to evict a tenant, subtenant, or someone without a lease or other occupancy agreement (broadly defined as a "tenant") unless the landlord can demonstrate good cause for the eviction. Landlord is defined as a lessor, sublessor, or other person receiving or entitled to receive rent (defined as "any consideration") for the occupancy of a "housing accommodation." A housing accommodation applies to any residential premises, which would include condominiums and hotel occupants who stay for 30 days or more.
The Bill, if enacted, would fundamentally change how someone owning real estate could treat an occupant of space regardless of whether the occupant had a legal right to occupy the space, which would seriously damage the economic viability of residential real estate such as cooperatives, condominiums and hotels. The Bill applies to all residential real estate except for rent-stabilized and rent-controlled apartments as well as single-family homes.
The Bill provides that no landlord of a housing accommodation can evict a tenant, subtenant or occupant of a housing accommodation, including a hotel room, without showing good cause even if the occupant does not have a valid lease. The occupant cannot be evicted except with a court order and a showing of "good cause for removal or eviction." The Bill indicates that good cause includes failure to pay rent unless the tenant received a rent increase that was unreasonable. An unreasonable rent increase is presumed to be an annual increase of more than 3 percent or 1.5 times the increase in the consumer price index, which in 2019 was 2.5 percent for housing in New York City. It must be noted that every tenant must be offered a renewal lease at a not unreasonable rent increase (i.e., presumed to be 3 percent per year).The landlord's failure to do so would allow an occupant to remain in the space without paying for it, and the fact that the lease expired or the occupant never had a lease would be irrelevant.
Good cause would also be the occupant's refusal to allow the owner of the space access to the space for the purpose of making "necessary" repairs or improvements, but it would be up to a court to determine what would be considered a "necessary repair or improvement." As a result, a court would be asked to determine if a repair or improvement was necessary and, if the court did not think so, the occupant would not have to allow the owner into the apartment to make repairs and improvements. Moreover, the occupant could obtain an injunction stopping a nonpayment, objectionable tenancy or holdover proceeding for years while a judge determines if there is good cause for the eviction.
The Bill, if passed, essentially would cap rent increases in New York state at 3 percent per year regardless of the percentage increase in real estate taxes or other operating expenses and would give judges the power to decide if repairs and improvements are necessary in privately owned real estate. It also would mandate renewal leases and limit landlords being able to regain apartments they own.
Considerations and Concerns for Owners
It should be noted that although the rent can increase by only 3 percent per year, for the past decade real estate taxes have been increasing by far more than 3 percent per year. In addition, recently enacted laws and regulations by New York City and the state mandating actions that have to be taken to reduce a building's carbon footprint, combined with the new Local Law 11 regulations that require New York City buildings taller than six stories to have their facades inspected and repaired every five years, will necessitate increases in operating costs that will be significantly more than 3 percent. In the past few years, co-op maintenance and condo common charges have been increasing by 5 percent to 8 percent per annum throughout New York City. As a result, the Bill would maintain that co-ops cannot terminate the proprietary leases of shareholders and condominium boards cannot pursue condominium unit owners for nonpayment if they refuse to pay common charges and assessments above 3 percent, and rental landlords cannot increase rents by more than 3 percent regardless of their increased operating costs. Moreover, cooperative shareholders and condominium unit owners would not be able to rent out their homes and apartments at increases of more than 3 percent a year regardless of how much their maintenance or common charges and real estate taxes increase – increases that are primarily determined by the city and state.
The legislation is premised on the belief that owners of apartments and buildings can subsidize their neighbors indefinitely while the owners have to slowly work through the courts to be able to operate their properties. This has many owners questioning who is going to pay the bills while a tenant or occupant pays no rent maintenance or common charges, and may not even have the right to live there?
These issues are not theoretical. A number of years ago, the author represented the board of a very large cooperative housing development in doing a debt restructuring to facilitate the rebuilding of the infrastructure during a period when there were numerous shareholders in default. The work that had to be done prevented the buildings from collapsing but necessitated getting into apartments and increasing the maintenance fees. The co-op is now home to 25,000 New Yorkers, but if the Bill had been the law at the time, the board would have been mired in litigation with recalcitrant shareholders. At about the same time, the author represented the boards of developments in Brooklyn and Queens, among others, in upgrading the buildings and chasing after nonpaying shareholders. All are now successful, vibrant communities, but if the new Bill had been in effect, thousands of families would have had to wait a decade or more while the courts decided if the work was necessary and financing the improvements would have been impossible because they necessitated raising maintenance fees by more than 3 percent. The Bill seems to have little public policy consideration for boards that will undoubtedly find it more difficult and expensive to carry on their fiduciary duty to the shareholders and unit owners who elected them.
Just as shockingly, the owner of a residence cannot evict a squatter without being required to demonstrate to the satisfaction of a judge – and then perhaps an appellate court – that the owner of the apartment or unit has good cause in trying to reclaim the apartment or units. In addition, an employee who is provided housing (e.g., a superintendent) cannot be evicted after being terminated until the owner proves that the employment was lawfully terminated.
Imagine how difficult it would be for hotels to function if they are unable to recover a hotel room from someone staying more than 30 days without obtaining a court order, which can take months to achieve.
Moreover, the new legislation would be in addition to New York's Housing Security and Tenant Protection Act of 2019, which permits judges to allow tenants to remain in occupancy for a year after a default in the event of a hardship, all while owners must continue paying real estate taxes, heat, insurance, repairs, etc.
Property owners who have questions about the legislation and how they are expected to be able to pay for the new requirements should contact the Bill's original sponsors, which include State Sens. Julia Salazar, Toby Ann Stavisky, Jamaal Bailey, Alessandra Biaggi, Neil Breslin, David Carlucci, Michael Gianaris, Andrew Gounardes, Pete Harckham, Brad Hoylman, Robert Jackson, Brian Kavanagh, Liz Krueger, John Liu, Rachel May, Shelley Mayer, Velmanette Montgomery, Zellnor Myrie, Kevin Parker, Jessica Ramos, Gustavo Rivera, James Sanders, Luis Sepúlveda and José Serrano. Sen. Brian Benjamin was added as a co-sponsor in February 2020.
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