THE CORONAVIRUS PANDEMIC AND ITS IMPENDING EFFECT ON LANDLORDS
By now, most states have instituted mandatory rules requiring non-essential people to work from home. In many cases, some workers have been afforded this convenience, however there are many that have lost employment. In all cases, one major concern has been the ability of many individuals and families to continuing making rent payments to landlords.
In New York, Governor Cuomo announced a measure that gave property owners a ninety (90) day waiver for paying mortgages and announced a three-month suspension on all commercial and residential evictions. Key to Governor Cuomo’s ninety (90) day waiver is that it only applies to single and two-family homes.
While this has been hailed as a positive step in assisting property owners and tenants, many argue the New York Governor has not gone far enough. In fact, some tenant advocates have suggested that the Governor should have ordered that all rent payments be forgiven during the time in which the Coronavirus pandemic continues. In effect, the argument is that tenants should not pay and would not be liable for any rents during the Coronavirus outbreak period, during which they are confined to their homes. It is also reported that New York State Senator Michael Gianaris plans to introduce a measure that would offer ninety (90) days of rent forgiveness to residential and commercial tenants if they lose work or are forced to close because of the COVID-19 outbreak. Senator Gianaris’ plan would also offer assistance to small building owners facing financial hardship if tenants are unable to make payments. As, no one can predict how long the epidemic will last, it is conceivable, although unlikely, that these breaks afforded tenants might be extended for the foreseeable future.
What is clear is that none of the proposed plans apply to big corporate landlords who operate multi-unit apartment structures, or small enterprises that are more than a single or two-family home. Corporate landlords are therefore still required to continue paying costs associated with the operation of large apartment complex enterprises. These costs may include mortgages, loans, salaries and taxes, to name a few. If Senator Gianaris’ proposed measure passes the State’s Assembly, landlords who do not fall into the narrow group to receive the waiver, will be left holding the bag, so to speak. While rents for a ninety (90) day period will be forgiven, largescale landlords will still need to pay all costs associated with their operations. These landlords will not be able evict tenants for missed rent payments that became due prior to the moratorium. Further, Landlords will have no recourse for rents lost during the ninety (90) day period if Senator Gianaris’ measure passes. Rents during this period will essentially be considered bad debts and written off, unless the legislature passes legislation that allows landlords to claim these debts when filing their tax returns.
Senator Gianaris’ proposal remains just that, a proposal. Should it pass the State’s Assembly, however, the impact on large scale tenancy operations will be significant. Should the Coronavirus epidemic continue for a period beyond the ninety (90) day moratorium period suggested by Governor Cuomo or the concurrent forgiveness period proposed by Senator Gianaris, landlords stand to lose a significant sum in forgiven rental income.
The information in this Client Alert is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
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