Real Estate Industry Alerts Tracker – July 2, 2020 Issue

SDNY Rules Against New York Landlords

A group of Westchester County landlords sued Governor Cuomo in federal court, claiming that he overstepped his authority in issuing an executive order granting a 60-day moratorium on evictions during the pandemic. The lawsuit challenged two provisions of the Governor’s executive order, which temporarily blocked landlords from pursuing eviction proceedings and gave renters the option to apply their security deposit toward their rent payment. The landlords argued that Governor Cuomo’s actions were legislative in nature and overstepped his authority under New York’s Executive Law. Additionally, the landlords were precluded from asserting their contractual remedies under their leases while still being obligated to pay their carrying costs and expenses, which the landlords claim constituted a taking. In a 37-page opinion, U.S. District Chief Judge Colleen McMahon of the Southern District of New York disagreed. Chief Judge McMahon found that federal courts do not have jurisdiction to determine whether Governor Cuomo violated New York state law by enacting his May 7, 2020, executive order pausing evictions through August 19, 2020. She noted that, “[w]hile it may be the case that [the] governor has overstepped his authority under New York’s Executive Law, curing those alleged harms would require this court to ignore the doctrine of state sovereign immunity and principles of federalism embodied in the Eleventh Amendment.” Chief Judge McMahon found that the executive order did not violate the Takings Clause because landlords are in a heavily regulated area of the economy and the executive order was not inconsistent with the regulatory scheme. The order merely postponed the landlords’ ability to collect (or obtain a judgment for) the full rent, but it did not take it away. The Chief Judge also rejected the landlords’ Contract Clause claim, finding that the order postponed but did not eliminate the contractual remedies available to the landlords for the tenants’ breach of the leases.

Additional information may be found here.

New York Governor Cuomo Signs Partial Eviction Moratorium Bill

This week, New York Governor Andrew Cuomo signed the Tenant Safe Harbor Act, legislation that passed in the New York State Senate and Assembly in late May. The legislation, S. 8192B, prohibits residential landlords from evicting tenants for unpaid rent accrued between March 7, 2020, and the complete reopening of their area, as long as a tenant can prove in court that they experienced financial hardship during that period. However, a judge can still issue a money judgment against the tenant. The legislation has drawn criticism from residential landlord groups who are still restricted from evicting tenants, but also from residential tenant groups concerned that it does not go far enough to protect tenants who will still…

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