Will New York Cancel Rents and Commercial Mortgage Payments?

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As New York’s number of coronavirus cases climbs to 75,000 statewide, the big question on many people’s minds is whether the state government will suspend rents and commercial mortgage payments for the tens of thousands of New Yorkers who have been laid off and for the businesses shuttered. So far, the answer appears to be no.

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State Sen. Michael Gianaris, who represents western Queens, has proposed a bill that would offer 90 days of rent relief for both residential tenants and small businesses that have lost income or been forced to close because of state-ordered restrictions issued in response to the coronavirus outbreak. The rent would be completely waived rather than deferred. 

The bill also offers a break on mortgages to property owners — owners of both residential and commercial buildings — who are facing financial hardship as a result of lost rents during this 90-day period. The legislation offers forgiveness on commercial mortgages up to the dollar amount of lost rent over the three months during which the bill is in effect. 

New York City, which has emerged as the center of the state and the country’s outbreak, with 43,000 positive coronavirus cases as of Tuesday afternoon, has 5.4 million renters. A large number of them may not be able to pay their rent as long as the state keeps most retail businesses, hotels and construction sites closed.

An analysis released yesterday by NYU’s Furman Center found that nearly a third of New York City’s households rely financially on someone who will likely lose income due to layoffs and closures caused by the pandemic. New Yorkers working in these “vulnerable occupations” are overwhelmingly living on a low income and are people of color, the report noted.  

Meanwhile, Gov. Andrew Cuomo decided to address the issue by issuing a 90-day moratorium on residential and commercial evictions throughout the state. 

The governor has been asked about suspending rent twice in the last two days and demurred both times. During his Monday press briefing, he told a reporter, “You can pay all the rent, none of the rent — you can’t be evicted. I think our policy answers it.” He added, “Even people to whom you pay the rent have to pay the rent. And they have expenses.” When he was asked today about New Yorkers being unable to pay rent after the 90-day eviction moratorium expires, he replied, “We’ll deal with that when we get there. I hear you. There has to be some smoothing.”

In other words, the governor has not yet voiced support for the bill, which now has 22 sponsors in the state senate. Gianaris hopes to pass it this week, along with the state budget.

Currently, neither the state nor the federal government is offering mortgage relief or forbearance to multifamily landlords or other kinds of commercial property owners, except for those with federally backed mortgages through the Federal Housing Finance Agency, Fannie Mae or Freddie Mac. However, the state Department of Financial Services has ordered state-chartered lenders to allow homeowners who have suffered financial hardship as a result of COVID-19 to defer mortgage payments for 90 days. It also sent a letter urging lenders to work with customers and businesses impacted by the virus.

Many landlord attorneys have raised questions over whether it’s constitutional to forgive rent for an extended period of time. The measure could violate the takings clause in the U.S. Constitution’s Fifth Amendment, which broadly curtails the government’s ability to regulate private property.

“How could this be constitutional?” asked Luise Barrack, a real estate lawyer who heads the litigation department at Rosenberg & Estis. “You would completely abrogate private [lease] contracts. If there’s no aid from the government, who’s going to cover the shortfall?”

Sherwin Belkin, one of the founding partners at Belkin, Burden & Goldman, said the bill “raises real constitutional issues. The state can’t just step in and say 25 percent of a year’s rent obligation is wiped out.” He added that many other cities and states have passed measures that defer rent for a few months, rather than waiving it entirely. Los Angeles, for example, recently passed an ordinance that allows renters to defer their rent during the outbreak but requires that they pay it back within a year.

But Gianaris, who is an attorney, said he and his staff have done the legal research to confirm that it would be constitutional. A government action does not qualify as a taking — or violate property rights — if it aims to protect the “health, safety and welfare” of the public, according to a series of U.S. Supreme Court cases decided in the late 19th and early 20th centuries. 

“I’m confident it’s completely constitutional,” said the Queens Democrat. “There is longstanding jurisprudence that at times of emergency, rents can be regulated by the states under police [government] power. There is a balancing test that gets into whether the taking clause can be overridden, and the questions are: Are you in an emergency? And is it temporary?” He noted that the bill fulfills both those requirements.

“The humanitarian crisis that’s about to crash down on us is only a few days away,” explained Gianaris. “The rents are not going to get paid regardless because people don’t have money. If we don’t put some regulatory structure around it, we’re going to have a wave of foreclosures and evictions three months from now.”

Ellen Davidson, a longtime tenant attorney at the Legal Aid Society, said she hadn’t yet had the time to “parse the research necessary to come up with a legal opinion.” However, she emphasized that thousands of New Yorkers are at risk of losing their homes once the eviction ban expires.

“While the eviction moratorium is welcome, we’re about to hit a crisis that we could never have imagined once the stay is lifted,” said Davidson. “A lot of people in our city have lost income and will not have access to unemployment benefits, and they will not be able to pay their rent. There has to be something that prevents tens, if not hundreds, of thousands of people being thrown from their homes when this is lifted.”

She added that if the virus returns, “We will have families living on the street with nowhere to go when the virus comes back in the fall. Because we have this moment of pause it doesn’t seem like there’s a sense of urgency from our state and federal electeds about what we’re going to do. You can’t address a pandemic if everyone’s homeless. You can’t socially isolate in a shelter and you can’t socially isolate on the streets.”