New Legislation to Protect Small Businesses from Eviction and Foreclosure Due to COVID-19

New Legislation to Protect Small Businesses from Eviction and Foreclosure Due to COVID-19

On March 9, 2021, the government of New York signed the COVID-19 Emergency Protect Our Small Business Act of 2021 (S471A/A3207) (the “Act”). The bill was signed by Governor Andrew M. Cuomo. The Act will directly impact commercial landlords, tenants, mortgagors, and mortgagees. Not only this, the legislation primarily focused on tenants and homeowners who are facing economic difficulties due to COVID 19. The Act covered the actions in relation to eviction proceedings wherein a tenant has employed more than fifty people [Section 471—A, Part A]. The Act also talks about any action to foreclose a mortgage related to commercial real property, provided the owner of such property directly or indirectly owns ten or fewer commercial units and employs fifty or fewer persons. The ten or fewer commercial units may be in more than one property or building as long as the total aggregate number of ten units are currently occupied by a tenant or are available for rent. [Section 471—A, Part B, Subpart A]. The Act also applies to (i) certain actions to foreclose on delinquent taxes or sell a tax lien relating to commercial real property [Section 1 of 471—A, Part B, Subpart B]; and (ii) discrimination in credit decisions and credit reporting by lending institutions. [Section 1, 471—A, Part B, Subpart C].

As per Section 2 of 471—A, Part A, no commercial tenant shall be removed from the possession prior to May 1, 2021, except by an eviction proceeding.
Secondly, Section 3 of 471—A, Part A talks about pending eviction proceedings. It says, any eviction proceeding pending on the effective date of the Act or commenced within thirty days of the effective date of the Act shall be stayed for at least 60 days. Whether or not an eviction warrant or judgment of possession has been issued, if the tenant provides a hardship declaration, the eviction proceeding shall be stayed until at least May 1, 2021.

In Section 4 of 471—A, Part A (pre-eviction notices), duty has been imposed on the landlord. A landlord shall include a Hardship Declaration with every written notice required by the commercial lease or tenancy agreement, law or rule to be provided prior to the commencement of an eviction proceeding, and with every notice of petition or summons and complaint served on a tenant.

Section 5 of 471—A, Part A, Prohibition on initiation of eviction proceeding. If there is no pending eviction proceeding and a tenant provides a hardship declaration to the landlord or an agent of the landlord, there shall be no initiation of an eviction proceeding against the tenant until at least May 1, 2021, and in such event any specific time limit for the commencement of an eviction proceeding shall be tolled until May 1, 2021.

Section 8 of 471—A, Part A, Post warrant of eviction-where an eviction warrant or judgment of possession or ejectment has been issued prior to the effective date of the Act, but has not yet been executed as of the effective date, (a) the court shall stay the execution of the warrant or judgment until the court has held a status conference with the parties; and (b) such warrant or execution shall not be effective as against the occupants unless, in addition to other requirements under law, such warrant or execution contains various statements required by the Act.

Section 11 of 471—A, Part A, Rebuttable presumption. A hardship declaration shall create a rebuttable presumption that the tenant is experiencing financial hardship, in any judicial or administrative proceeding that may be brought, for the purposes of establishing a defense under an executive order of the governor or any other local or state law, order or regulation restricting the eviction of a tenant suffering from a financial hardship during or due to COVID-19, provided that the absence of a hardship declaration shall not create a presumption that a financial hardship is not present.

Few sections of the Act are not applicable to the tenant if the tenant is persistently and unreasonably engaging in behavior that substantially infringes on the use and enjoyment of other tenants or occupants or causes a substantial safety hazard to others.

The Act further talks about pending foreclosure actions. Any action to foreclose a mortgage pending on the effective date of the Act, or commenced within thirty days of the effective date of the Act, shall be stayed for at least sixty days. Whether or not a judgment of foreclosure and sale has been issued, if the mortgagor provides a hardship declaration, the foreclosure action shall be stayed until at least May 1, 2021. [Section 3 of 471—A, Part B, Subpart A]. The foreclosing party shall include a hardship declaration with every notice required provided to a mortgagor prior to filing an action for foreclosure. Such notice shall also include details of landlord such as mailing address, telephone number and active email address. [Section 4 of 471—A, Part B, Subpart A]. Once the mortgagor provides a hardship declaration to the foreclosing party there shall be no initiation of an action to foreclose a mortgage against the mortgagor until at least May 1, 2021. [Section 5 of 471—A, Part B, Subpart A]. If a judgment of foreclosure and sale has been issued before the effective date of the Act, but has not yet been executed as of the effective date, (a) the court shall stay the execution of the judgment until the court has held a status conference with the parties. [Section 8 of 471—A, Part B, Subpart A].