Tenant Collections, Rent Strikes & More
Q & A with with Landlord tenant expert Matthew Schwarz from Geist Schwarz & Jellinek
How do you recommend structuring payment arrangements with tenants
The best thing for a Landlord to do during this crisis is to open up a line of dialogue with the Tenant. Efforts should be made to have this be done where a tenant has a specific person to discuss the situation with (rather than just calling/emailing a group) this will make sure consistency is being maintained in what is being said and agreed upon. Unless a law/executive order is issued the rent is due and owed and any reduction/modification or concession would be based upon the willingness of the parties to work together. What I recommend is an agreement be reached where the parties agree on an amount to be paid as a reduced rent for a set period of time 60-120 days and then after that the rent must resume being paid in full with additional payments toward the sum(s) not paid. However, before agreeing to this, I would suggest all Landlord’s request proof from the Tenant of the reason(s) why payment can’t be made. It is unfortunate but people are seeking to capitalize on the current situation to avoid payment. Once an agreement is reached, this should be reduced to writing with a confession of judgment for the amount to be repaid. This way, if a Tenant does not pay, the Landlord has recourse to obtain a money judgment without to much effort and then seek to garnish wages/assets.
Can nonpayment cases against tenants be started over the next 90 days
The Governor has suspended all Landlord & Tenant actions for a 90 day period, which such period may be extended. The only actions that are permitted to proceed in court as of April 10, 2020 are those actions deemed to be emergency or essential. Unfortunately, this excludes most Landlord & Tenant matters, other than illegal lockout and HPD matters, which are proceeding.
Preparing for nonpayment cases in 90 days +
The Governor has suspended all Landlord & Tenant actions for a 90 day period, which such period may be extended. The best thing a Landlord can do presently is to open a dialogue and attempt to negotiate a resolution/solution outside of the Court System as once the courts reopen they will certainly be overwhelmed and actions will proceed slowly. Thus if a deal can be made to avoid court that would be beneficial.
Is it possible to move forward non payment cases that were started prior to covid-19?
At this time all such actions are on hold. Even cases where the warrant has issued and served are suspended until such time as the 90 day period expires and assuming it has not been further extended or modified.
It has been rumored the courts will virtually open. Do you have any knowledge of this?
The Court system is holding virtual conferences. Initially this was solely for essential matters, but the Court System has recently expanded matters that will be conferenced to non-essential matters that the Court/Judge believes would benefit from a conference. Unfortunately, this appears to be limited to Supreme Court/County Court matters involving attorneys on both sides. This does not appear to apply to the City, Town and Village Courts. Judges have also been asked to review pending matters and issue decisions on those matters that are fully submitted, but is not accepting new filings unless the matter is essential.
Do you see rental assistance programs available to help tenants who fall behind on rent payments losing funding
I suspect that governmental programs that are established to avoid homelessness will receive increased funding in the near term given the current economic climate and efforts being made across the country to help everyone through this difficult climate. However, I could see the funding cuts coming in 2021 when this current crisis is over and budgets have to be reviewed and reductions implemented due to the decline in tax revenue.
Will a landlords insurance company cover a “loss of rent” claim
This would fall under business interruption coverage and from what I have seen/read thus far the insurance companies are denying coverage for business interruption as the virus is not a covered loss. Fire, Flood etc. are covered and if a building is rendered uninhabitable then claims can be made, but the issue is that the Tenants remain in possession, just don’t pay and that is not a covered loss
What is best way to negotiate rent arrears when purchasing a building in this market
In the current climate I would allow the seller to retain all rights to the money but have them agree not to pursue such rights for a period of 12-18 months. This way the new purchaser does not have to pay the seller for unpaid rents or undertake the collection efforts just to hand money to the prior owner. The 12-18 month period should be sufficient for this current economic climate to pass and then the former owner could start a plenary action to recover the money. This could of course impact the buyer down the road, but would be sufficiently far off to avoid any immediate risk/issue.
How do you recommend landlords protect themselves from a potential rent strike
Unfortunately, there is no way to avoid this if the Tenants organize against a Landlord. However, by opening a direct line of dialogue between the Landlord and Tenant the risks are reduced as the Tenants do not feel they are being ignored, overlooked or taken advantage of. Further, adopting a one-to-one approach avoids mass e-mails or communication that may result in the tenants obtaining names/contact for other tenants. A California landlord sent out such a mass e-mail and inadvertently provided the Tenants with contact information that was used to organize a rent strike. The key element here is keeping, to the extent possible, a professional but friendly relationship so that the Tenants feel you are trying to work with them while still collecting rent and running your business.
When requesting mortgage payment assistance from your bank what documentation should landlords keep
At this point I understand Banks are solely requesting a statement of hardship to agree to a deferral, but Landlords should be mindful Banks may adopt more stringent policies regarding assistance/modifications and it is best to document all efforts taken. I would encourage landlords to make sure all communication with tenants (and bank) is in writing, even if it is a follow up to a telephone conversation to reiterate and repeat what was discussed/agreed upon. This way if the Bank wants to change the policy, you can show them when it was discussed and the follow up communication. This would be mostly one sided exchange, but serves to memorialize the understanding and can provide basis to argue you relied upon it. Without such a writing done contemporaneously you would be in a situation of two competing statements and no way to demonstrate your understanding.
What do you expect the court system will look like once the 90 day prohibition on Landlord and Tenant proceedings are lifted?
Once the Court system reopens I expect that there will be considerable delays in the processing of matters. The Court will likely be overwhelmed with the volume of proceedings and will also likely implement procedures to limit the number of cases heard per day to encourage social distancing of the participants. I would expect systems that were already dealing with heavy caseloads to be even further burdened and result in longer waiting times for proceedings to be adjudicated. Unlike other Courts, Landlord & Tenant cases are primarily comprised of unrepresented litigants of limited economic means and thus the virtual court will not work well in this format. Courts outside of the City of New York that experience lower volumes will likely recover from this suspension more quickly by adding additional resources for a temporary period to address the increased in filings. But given this expected increase in proceedings the pace of resolution will be even slower.
For additional information on this topic or any other topic, please contact me at
Matthew Barbaccia
Partner
Brix Real Estate Advisors
914.300.4444
mat@brixadvisors.com
Matthew D. Schwarz, Esq.
Partner
Geist Schwarz & Jellinek, PLLC
914-644-8300
mschwarz@ssg-law.com