Twenty-four members of the New York State Senate on Jan. 27, 2021, introduced S-3082, and 43 members of the New York State Assembly on Feb. 19, 2021, introduced A-5573 (collectively, the bills), which 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" and housing accommodation applies to any residential premises, which would include condominiums and hotel occupants who stay for 30 days or more.
The bills, 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 including cooperatives, condominiums apartment houses and hotels. These bills apply to all residential real estate except rent-stabilized and rent-controlled apartments, and owner-occupied houses with less than four units.
Overview of the Bills
The bills provide 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." The bills indicate 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 and in 2020 was 1.2 percent for housing in New York City. It must be noted that every tenant must be offered a renewal rent at a not unreasonable rent (i.e., not more than a 3 percent increase).
That is correct. Every tenant and subtenant must be offered a renewal lease at a not unreasonable rent increase (i.e., presumed to be 3 percent per annum) and 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 is 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, however 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.
These bills essentially 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. The bills also mandate renewal leases and limit landlords from being able to regain apartments they own.
Considerations and Concerns
It should be noted that while the rent can only increase by 3 percent, for the past decade real estate taxes have been increasing by far more than 3 percent per year. Also, 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, will necessitate increases in operating costs that will be significantly more than 3 percent. This is not surprising because in the last 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, these bills mandate that co-ops cannot terminate the proprietary leases of shareholders and condominium boards cannot pursue condominium unit owners for nonpayments 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 and obtain increases of more than 3 percent per year regardless of how much their maintenance or common charges and real estate taxes increase. Tax increases are determined primarily by the city and state.
This 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 raises the question for owners as to 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?
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 probably 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.
It is hard to imagine how hotels will be able 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 Housing Security and Tenant Protection Act of 2019 permits judges to allow tenants to remain in occupancy for a year after a default in the event of a hardship while the owner has to continue making payments for real estate taxes, heat, insurance, repairs, etc.
Property owners that have any questions about the Senate and Assembly legislation and how they are expected to pay their bills should contact the sponsors of these bills, particularly if one of the sponsors is your state senator. The names of the sponsors are listed on the top of each bill, respectively.