Christine Perrucci Smith
Southampton Business Alliance hosted a presentation on the Housing Stability and Tenant Protection Act of 2019 on November 19 at the Southampton Inn. SHERYL HEATHER
Tenant’s rights advocates have hailed the Housing Stability and Tenant Protection Act of 2019, which was signed into law by Governor Andrew Cuomo in June, as landmark housing reform that was necessary and overdue, but the omnibus bill has also been criticized as vague and as swinging the pendulum too far in favor of tenants over landlords.
To address the implications of the law and point out which questions remain unanswered, the Southampton Business Alliance hosted a presentation by East End law firm Esseks, Hefter, Angel, Di Talia & Pasca LLP at the Southampton Inn on November 19, with members of the real estate community in attendance along with other businesspeople who benefit from a robust seasonal rental industry on the South Fork.
Christine Perrucci Smith, a partner in the law firm, said the law may have the effect of disincentivizing landlords from engaging in the rental market, which will reduce the availability of rentals.
Ms. Smith noted that the law is new, and it is unclear how local judges will interpret its provisions.
“This just came through,” she said. “There is a lot of confusion surrounding what the laws say and how they are going to play out.”
When the bill was signed on June 14, most of its provisions went into effect immediately. “Some provisions went into effect in July, others in October, but now we are past those dates and the law is in full force and effect,” Ms. Smith said.
Ms. Smith and others pointed out that leases cannot waive or limit any of the provisions of the law. That means that even if a tenant agrees to give up certain rights when signing the lease, those rights will remain intact anyway.
“No matter what is in the lease no matter what you put in the lease, no matter what anybody signs, you cannot ask the tenant to waive any of these rights,” said Mitch Pally, the chief executive officer of the Long Island Builders Institute, who joined the presentation to add the perspective of the lobbying organization he leads.
One of the biggest concerns on the East End about the law is over security deposits and advances.
“There’s no more collecting first and last month’s rent plus a security, which is so common in residential leases,” Ms. Smith said. “More importantly, it appears that it is no longer permissible to collect the entire rent for a seasonal rental upfront.”
State Assemblyman Fred W. Thiele Jr. of Sag Harbor said previously that the law was not intended to affect seasonal rentals. He said he expects that an exception for seasonal rentals will be made when the State Legislature convenes again in January.
Mr. Pally said the security deposit issue is also affecting international students at Stony Brook University, who have no credit history, because landlords in the past were collecting several months of rent upfront from such students.
“This is probably one of the largest changes in the landlord-tenant relationship ever made by the New York State Legislature, and if you think they’re going to change it, you are sadly mistaken,” Mr. Pally said of the law as a whole. “This is going to be the law. There may be some tweaks, and that’s what we’re working on now with the New York State Senate delegation to try to find three or four small pieces, starting with the security deposit issue, which is the cause célèbre.”
The suggestion that a landlord could get around this provision by charging a large amount for the first month, and then say the rest of the seasonal rental period is free, was shot down by the presenters.
Lisa Ross, counsel at Esseks, Hefter, Angel, Di Talia & Pasca LLP, explained that the new law creates delays in removing tenants, and those statutory delays could, in fact, be much longer in reality because of the court calendars on the East End.
“Like most of these provisions, the idea behind them was protection of the tenant, which unfortunately turns into more problems for the landlords at this point, because almost all of these provisions turn into delay for landlords,” Ms. Ross said.
Either the landlord or the tenant may request a 14-day adjournment of an initial court date, but, in Southampton Town for instance, there are four justices who rotate weekly, she said. “So a 14-day adjournment is not actually a 14-day adjournment, because the justices keep that case on their calendars. So that first adjournment is now an automatic four-week adjournment. So that becomes your problem. Now, that’s only the first time, and it basically doesn’t leave any guidelines on what you have to show in order to get an adjournment. It seems pretty straightforward — just request the adjournment.”
Ms. Ross said a second adjournment could mean another month, and if the tenant is not paying rent over a dispute, that’s two months a landlord has not been paid.
“For a landlord who maybe is depending on that rent to pay a mortgage, you’re just making more and more problems for them,” she said. “It’s creating a situation in which some people are not going to be able to actually rent properties anymore.”
Ms. Ross said another change in the law is that the issuance of an eviction warrant no long cancels the landlord-tenant relationship. “Now the tenant, literally, can show up with money in hand right up till the time that the eviction occurs. As long as they have the full amount — they are able to pay it — then the landlord has to accept it. Then that’s another problem that can occur, because it’s possible that tenants may play this out and push it right to the end. And the landlord is the one who has laid out the money to get the eviction — evictions aren’t free. The fees are about $350 just to get the eviction rolling; I’m not talking about legal fees.”
And a provision that she called “a very scary one” allows a court to grant a stay of eviction for up to one year. The tenant must make due and reasonable efforts to find similar housing in the neighborhood for similar cost. If the tenant cannot find comparable housing, the tenant can show that there would be extreme hardship if a stay is not granted. Hardship could include having a child who would be pulled out of school if the tenancy ends.
“What this creates is a situation where a landlord is forced to keep a tenant on,” Ms. Ross said.
This could drive up rental prices, she said, because landlords will have no other choice than to make sure they are charging comparable rent to others in the area.
“Landlords have the tendency, occasionally, to give somebody a good deal; like their tenant; don’t raise the rent,” Ms. Ross said. “And what happens when this tenant goes into court? The rent is so low … there are no rentals anymore for that price in the town, that neighborhood, that school district.”
The only good news for landlords, she said, is that the court will require payment for use and occupancy during the court’s stay.
In order for a landlord to end a tenancy — whether the tenant has a lease or a month-to-month arrangement — the landlord has to give 30 days’ notice if the tenant has occupied the dwelling for less than a year. If the occupancy is between one and two years, the notice requirement becomes 60 days, and if it’s more than two years, 90 days. Ms. Smith noted that even if a tenant is there on a month-to-month basis, the tenant could have what amounts to a 90-day lease when the landlord asks them to move out.
On the topic of seasonal rentals, Ms. Smith said her firm is still advising clients to give 30 days’ notice. “We’re saying that it just has to be treated as any other lease.”
“A written lease is not required to establish a landlord-tenant relationship,” Ms. Ross noted. “If a landlord accepts rent from a tenant on a monthly basis, that becomes a month-to-month tenancy. And when a lease is ended, if the landlord continues to accept rent, that also has always become a month-to-month tenancy.”
Now, under the law, that automatically happens at the end of a lease term if the landlord did not terminate the tenancy, Ms. Ross added.
If the tenant leaves a lease prematurely, the landlord now has an obligation to attempt to re-let the space for the same rent the former tenant was paying or for fair market value, whichever is lower. Ms. Smith pointed out that, before this new law, the landlord could go after the tenant for lost rent without having to try to find a new occupant.
The law also prohibits blacklists of tenants. That means, Ms. Smith explained, that a landlord is not allowed to find out if a potential tenant has been involved in past or pending actions or summary proceedings and then use that information as a basis not to rent to that person. Also to prevent blacklisting tenants, courts are prohibited under the new law from selling court proceedings data to third parties.
“It’s one of those provisions that kind of flies in the face of common sense a little bit and limits the landlord’s ability to conduct the kind of due diligence they deem necessary,” Ms. Smith said, “and it shows you how tenant-friendly these protections are.”
Landlords cannot charge any more than $20 for an application fee or the cost of conducting a credit or background check, whichever is less, and a copy of the results must be given to the applicant in order to collect the fee.
Landlords are barred from collecting a payment, fee or charge before the beginning of the tenancy, except for those background checks and credit checks.
The law provides tenants an automatic five-day grace period on paying rent and limits late fees to $50 or 5 percent of the monthly rent, whichever is less. But the landlord must send a notice of late payment via certified mail to collect the fee. “If they don’t pay, now you have a requirement to send a second notice,” Ms. Ross said, and that notice needs to be personally served.
Landlords are required to grant the tenant an inspection upon vacating and the landlord has 14 days to provide an itemized statement specifying repairs and cleaning fees if the landlord does not return 100 percent of the deposit.
“I want you to be aware that there’s tenant protection websites out there already and some of them have links directly to the New York Department of State to make a complaint about real estate brokers who fail to comply with the act,” Ms. Ross said. “So just be very aware, as much as everybody wants to help people coming in, that there could be repercussions, especially with professional licenses, by not following the law.”
Aram Terchunian, a board member of the Southampton Business Alliance, asked if there is the possibility of a federal action.
“It’s clear that the State of New York has abandoned us,” Mr. Terchunian said. “They have chosen sides, and we’re out.”
However, Mr. Pally said that federal courts have indicated, in a variety of ways, that the landlord-tenant relationship is a state matter.
Michael Daly, a real estate agent for 21 years as well as the founder of the affordable housing advocacy group East End YIMBY, asked if vacation rentals could be carved out of the law.
“I support the little guy, and this is clearly something created to counteract predatory landlords,” Mr. Daly said. “But out here in the 21 years, I’ve seen more predatory tenants in the vacation industry than I have landlords. I can count on one hand the number of predatory landlords that I’ve experienced.”
Mr. Pally said it’s possible, but those with concerns will have to make a “very, very, very strong case” that the law has a dramatic and detrimental effect on the seasonal rental market on the East End and elsewhere in New York.
Diana Weir, the director of housing & community development for Southampton Town, was concerned the law would undermine efforts to create affordable accessory apartments.
“We’re struggling to provide affordable housing out here, and a lot of what we’re doing is building homes with an accessory apartment,” Ms. Weir said. “The home goes to a person who is income qualified. They’re a low-income person. The rent helps them to be able to afford that. If they get into a situation, that’s going to be very detrimental to a lower-income person.”
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