New York State Passes Law to Extend Eviction and Seizure Measures for Commercial Property of Small Businesses | Morrison & Foerster LLP

On March 9, 2021, New York Governor Andrew Cuomo enacted New York State Law COVID-19 Emergency Protect Our Small Businesses Act of 2021 (S471A / A3207) (the deed “). After a full year of commercial tenants and commercial mortgages relying on Governor Cuomo’s executive orders requiring moratoriums on evictions and foreclosures as their primary source of protection, this law provides for certain measures to relief to protect eligible small businesses suffering from COVID-19 hardship. Currently, the law covers small businesses that submit a standard hardship report of:

(i) eviction, if the small business is a commercial tenant who (a) has 50 or fewer employees, (b) resides in New York City, (c) is independently owned and operated, and (d) does is not dominant in its field, or

(ii) foreclosure, if the small business (a) owns, directly or indirectly, in total 10 or fewer business units (of which 10 or fewer units may be in more than one property or building as long as the number total total of no more than 10 units are currently occupied by a tenant or are available for lease), (b) employs 50 people or less, (c) resides in New York, (d) is independently owned and operated , and (e) is not dominant in its domain.

Protection against expulsion: Under the Act, (i) landlords cannot take self-help measures to remove qualifying commercial tenants from possession of their premises before May 1, 2021, (ii) landlords cannot initiate a eviction proceedings for non-payment of rent or for detention after the expiration of the tenant’s lease against these commercial tenants before May 1, 2021, if the tenant submits a declaration of hardship (described below) to the landlord (otherwise, the landlord is required to file an affidavit with the court stating that the landlord has provided but has not received a hardship statement from the tenant), (iii) any eviction proceedings filed on or before May 7, 2020 within 30 days of the effective date of the Act shall be suspended for at least 60 days, or such later date as the Chief Administrative Judge determines is necessary, (iv) a deportation warrant or judgment possession that has been issued but not executed cannot be executed until at least May 1, 2021 (subject to the submission of a hardship statement), and (iv) owners cannot serve a notice of petition or subpoena and complaint related to a foreclosure action to tenants without including a hardship statement and landlord contact details (mailing address and email) where the tenant can return the hardship statement. Notwithstanding the foregoing requirements, small businesses can still be evicted for unreasonably engaging in behavior that seriously interferes with the use and enjoyment of other tenants or poses a significant risk to the safety of others. .

Foreclosure protections: In accordance with the Law, (i) foreclosure actions pending on March 9, 2021 (including actions pending before March 7, 2020) or commenced within 30 days thereafter are stayed for at least 60 days (and the courts are required to send mortgage debtors a hardship statement), (ii) lenders must provide a hardship statement to the mortgagee with every foreclosure notice and the lender cannot take any foreclosure action until May 1, 2021 , if an eligible mortgagee returns a hardship statement, and (iii) previously rendered sale or foreclosure judgments cannot be enforced until a status conference with the court (and if the mortgagor provides a hardship statement). difficulties, enforcement must be suspended until at least May 1, 2021).

The hardship statement states that while the commercial tenant or mortgagor has (1) suffered a significant loss of income during the COVID-19 pandemic, (2) incurred a significant increase in necessary expenses related to COVID protective equipment -19, or (3) incurred moving expenses and had difficulty finding alternative commercial property, which resulted in difficulties for the business to relocate during the COVID-19 pandemic, or (4) if one or several tenants of the company have been in default of payment of a significant amount of their rent since March 1 May 2020, the owner or the lender cannot initiate an eviction or foreclosure action before at least May 1, 2021, if the tenant or mortgagor confirms these difficulties related to the pandemic by signing and returning the declaration of difficulties to the owner or lender, as in force. A hardship statement creates a rebuttable presumption that the tenant or mortgagor, as the case may be, is in financial hardship. Courts are required to seek confirmation that the mortgagor has received a hardship statement and the mortgagor has not returned it. If the court determines that a mortgagor has not received a hardship statement, it will stay the proceedings for a reasonable period, at least 10 days, to ensure that the mortgagor has received and fully considered the declaration of difficulties. Commercial tenants will benefit from similar protections under the Act.

The law further provides for a moratorium on actions to seize overdue taxes or sell a tax lien relating to commercial property until May 1, 2021, if the small business submits a hardship report. In addition, the law prohibits discrimination in determining whether to grant credit to any small business that owns commercial property or to report negatively to a credit reporting agency because that small business is ‘is granted a stay of any mortgage foreclosure, tax foreclosure, or sale of tax lien.

The above protections will be in place at least until May 1, 2021. Governor Cuomo Press release because the law indicates that he has entered into an agreement with the New York State Legislature to extend the protections provided by law. The intention is for the law to cover small businesses with up to 100 employees and any business with up to 500 employees that has been closed to “in-person operations by order or direction of the Department of Health for two weeks or more between. May 15, 2020 and May 1, 2021.

This law is the companion law covering commercial tenants and mortgage debtors at the COVID-19 Emergency Evictions and Seizure Prevention Act, 2020 enacted by Governor Cuomo in December 2020 and offers similar protections to residential tenants. The New York legislature noted in its rationale for extending similar protections to small businesses and their business owners that since small businesses are the backbone of our economy and communities and have been disproportionately affected by the COVID-19 pandemic, they need protections similar to those offered to vulnerable residential tenants and their landlords. According to the New York legislature, this law “seeks to give these small businesses a chance to come out of this pandemic by helping both the business and its small business owner.”

We will continue to monitor this legislation and related efforts and provide updates.

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Jamie Collins

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