New York State Legislature Considers COVID-19 Rent And Mortgage Relief Bill

Morrison & Foerster LLP

Morrison & Foerster LLP

The Rent and Mortgage Cancellation Act of 2020, introduced on July 10, 2020 by Assemblymember Yuh-Line Niou (D) and Senator Julia Salazar (D), proposes to cancel residential rent payments and mortgages for small homeowners (owners of residential properties with six or fewer units) accrued between March 7, 2020 and the end of New York’s ongoing state of emergency, plus an additional 90 days.

The bill would prohibit typical consequences for residential tenants’ nonpayment of rent, including fines or fees for nonpayment; termination of tenancy, eviction proceedings, or civil judgments; accrual of debt; and reporting to a tenant screening agency or consumer reporting agency. Nonpayment of rent would not adversely impact tenants’ credit scores, and it would not be grounds for denying any future application for rental housing. The bill would prohibit similar consequences for small homeowners’ nonpayment of mortgage payments of principal or interest. Small homeowners would not be subject to foreclosure actions due to nonpayment, and would not incur fees, penalties, or additional interest during the COVID-19 cancellation period.

The bill would create a government-funded repayment scheme for landlords and mortgagees. Residential housing cooperatives and affordable housing operators that can demonstrate they lost maintenance or rental income during the COVID-19 cancellation period would be able to apply to the state to recoup those amounts. The bill would establish a “landlord relief fund” to reimburse landlords for all cancelled rent payments, contingent on a five-year freeze on rent increases for tenants, and a commitment not to evict tenants without good cause. The bill would also establish a “public housing relief fund” to reimburse public housing authorities for unpaid rent and COVID-19-related expenses. Both funds and reimbursement processes would be administered by the State Commissioner of Housing and Community Renewal.

Unlike Senate Bill 8125-A, which was introduced by Senator Michael Gianaris (D) in March but ultimately did not make it onto the floor for a vote, the Rent and Mortgage Cancellation Act does not place hardship qualifications on the cancellation of rent or mortgage payments. The proposed bill would issue a blanket cancellation of rent or mortgage payments in the designated COVID-19 period.

The Tenant Safe Harbor Act, which was recently signed into law, protects tenants who have experienced financial hardship during the pandemic from eviction on the grounds of nonpayment of rent. The Rent and Mortgage Cancellation Act would go further by also protecting tenants from other consequences like adverse impacts on credit scores and future housing applications.

Tenants’ rights groups such as Housing Justice for All have expressed support for the bill. Landlord trade groups, including the Community Housing Improvement Program and the Real Estate Board of New York, expressed doubts regarding the feasibility of financing the bill and concerns about how small building owners could survive losing months of rent. The legislators who introduced the bill expect opposition from Governor Andrew Cuomo, who has preferred more moderate approaches like the Tenant Safe Harbor Act.

Given the controversial nature of the bill, if enacted, the Rent and Mortgage Cancellation Act would likely be challenged by a number of stakeholders and would possibly be subject to a constitutionality challenge. 

We will continue to monitor the progress of this bill and any changes to it, and will provide a further update if it passes.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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