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The Upstate Landlord's Guide to the NY Tenant Protection Act of 2019

The Upstate Landlord's Guide to the NY Tenant Protection Act of 2019

The Upstate Landlord's Guide to the NY Tenant Protection Act of 2019

On June 14, 2019, Governor Andrew Cuomo signed into law a sweeping package of New York statewide rent regulations known as the "Housing Stability and Tenant Protection Act of 2019" (bill S6458), bringing about the largest swath of changes to Landlord-Tenant law in NY in nearly a century.  New York State has long been known to be unfriendly toward business owners and investors, but this new package of laws has managed to make it even more difficult and costly for Landlords and property managers throughout the state to comply with its laundry-list of regulations, further driving up administrative costs, halting investment in lower-income housing, and making it harder, not easier, for low-income tenants to obtain housing throughout the state.  

As property managers in the Capital Region, we fully understand that there are abusive and exploitative Landlords out there, and agree they must be stopped and laws in place to protect tenants.  We, like many other property managers and Landlords, pride ourselves in having great tenant relationships and being fair and honest, and our Google reviews from tenants reflect that; however, this new set of regulations has removed much of a Landlord's AND tenant's ability to be flexible regarding negotiated lease terms and approval criteria, which will only make it harder for tenants to qualify for housing, especially those with lower-income or poor credit.  As a result, we've already seen an uptick in vacancy rates as property managers and Landlords tighten their screening criteria, reduce capital budgets, and decline applicants that could have been approved in the past.  

Breaking Down the Law, Clause by Clause

Since the law was passed in June, I've read dozens of articles summarizing certain parts of the law or providing various opinions on its efficacy, but none that broke it down in operational detail for Landlords in lay-terms, and even our attorneys weren't (and still aren't to a degree...) prepared to provide much guidance due to the sheer volume of clauses to interpret.  However, we were getting daily questions from panicked agents and clients about the law and needed to begin our company's compliance journey ourselves, so I decided to read the entire 74 page bill, break down the key components, and share my findings in this post.  

This article breaks down the nitty-gritty details of these new laws clause-by-clause, and provides a guide for Landlords, property managers, real estate agents, and investors in Upstate New York for navigating this sea of new rules and regulations.  For each clause, I've included the actual excerpts from the law in italics, followed by the page number and line number where the clause is referenced from the bill's 74 page PDF document for your reference.  These are in order as they appear in the bill and following each excerpt, I've provided my own interpretation and opinion of the change which is NOT legal advice, just my thoughts as an Albany Capital Region property manager and investor.  

Note: There were also a slew of regulations passed in this bill regarding mobile home parks, condo conversions, and NYC-specific items, but I'll not cover those in this article.  

DISCLAIMER: I'm not a lawyer, and this article is NOT legal advice in any way.  I'm just a licensed property manager and investor in New York State, and below are word-for-word excerpts from the law, and my interpretations and opinions of them.  Please consult with your attorney before taking any action as a result of reading this article!

Here goes:

1. Non-Retaliation

New law: In an action or proceeding instituted against a tenant of premises or a unit to which this section is applicable, a rebuttable presumption that the landlord is acting in retaliation shall be created if the tenant establishes that the landlord served a notice to quit, or instituted an action or proceeding to recover possession, or attempted to substantially alter the terms of the tenancy, within one year after [...] a good faith complaint was made, by or in behalf of the tenant, to the landlord, the landlord's agent or a governmental authority of the landlord's violation of any health or safety law, regulation, code, or ordinance, the warranty of habitability under section 235b of this article, the duty to repair [...] or section 174 of the multiple residence law.  (P43 L20)

What it means: In the past, if a tenant lodged a maintenance or habitability complaint with a governmental authority and the Landlord non-renewed or evicted the tenant within the following 6 months, it was to be presumed that the Landlord was retaliating and the tenant could recover possession of the premises.  Under the new law, this has been extended to complaints lodged with not only with governmental authorities but with Landlords and/or property managers themselves, and the timing to be considered retaliation extended to 12 months.  

Thoughts: This one mostly makes sense and protects a tenant from retaliation by slumlords that don't repair their properties, which I'm all for.  The only issue I see is that a Landlord that had already planned to lawfully alter lease terms or evict could run into issues if their property happened to develop a habitability violation during that time period and could be misconstrued as "retalitation".  

2. Notice of Non-Renewal or Rent Increase

New lawWhenever a landlord intends to offer to renew the tenancy of an occupant in a residential dwelling unit with a rent increase equal to or greater than 5% above the current rent, or the landlord does not intend to renew the tenancy, the landlord shall provide written notice as required in subdivision two of this section. If the landlord fails to provide timely notice, the occupant's lawful tenancy shall continue under the existing terms of the tenancy from the date on which the landlord gave actual written notice until the notice period has expired, notwithstanding any provision of a lease or other tenancy agreement to the contrary.  a) If the tenant has occupied the unit for less than one year and does not have a lease term of at least one year, the landlord shall provide at least thirty days' notice.  b) If the tenant has occupied the unit for more than one year but less than two years, or has a lease term of at least one year but less than two years, the landlord shall provide at least sixty days' notice.  c) If the tenant has occupied the unit for more than two years or has a lease term of at least two years, the landlord shall provide at least ninety days' notice.  (P44 L24)

What it means: In the past, tenants and Landlords were both required to provide 30 days notice of non-renewal of lease.  Effective October 12, 2019, tenants are still only required to provide 30 days notice of non-renewal regardless of length of occupancy, but tenants who are being non-renewed or receiving a rent increase of greater than 5% must be notified in advance as follows:

  • Occupied less than 1 year: 30 days notice
  • Occupied 1-2 years: 60 days notice
  • Occupied more than 2 years: 90 days notice

Thoughts: A couple operational challenges here...The first is that in the past, going month-to-month with a tenant was a fair way to give both the tenant and Landlord flexibility to non-renew a lease at any time, and doing so was mostly in the tenant's favor so they could move out any time without breaking the lease.  Under this new law, since 2 year occupants still require 90 days notice of non-renewal, there's little reason for a Landlord to offer a month-to-month lease when they're still obligated to provide a 90 day notice of non-renewal anyway, so this will force tenants to choose to either lock in to a 12 month lease renewal or non-renew altogether.

This one is also a bit of an administrative headache in that a Landlord now needs to keep track of not only who is due for a rent increase, but also when they need to be notified.  

3. Landlord Duty to Mitigate Damages

New lawIn any lease or rental agreement, [...] if a tenant vacates a premises in violation of the terms of the lease, the landlord shall, in good faith and according to the landlord's resources and abilities, take reasonable and customary actions to rent the premises at fair market value or at the rate agreed to during the term of the tenancy, whichever is lower.  (P44 L46)

What it means: If a tenant breaks a lease, a landlord is only allowed to recover lost rent during the vacant period if the unit was re-rented at fair market value or the past tenant's rent amount, whichever is lower.  If the Landlord chooses to increase rents at this time, the Landlord forfeits any right to recover lost rents during the vacancy period.  

Thoughts: This clause is reasonable and seems to be intended to discourage Landlords from testing the waters for unreasonably high rents following a lease-break since the past tenant is responsible to pay for the vacant period anyhow.  

4. No Screening for Evictions

New lawNo landlord of a residential premises shall refuse to rent or offer a lease to a potential tenant on the basis that the potential tenant was involved in a past or pending landlord-tenant action or summary proceeding under article seven of the real property actions and proceedings law. There shall be a rebuttable presumption that a person is in violation of this section if it is established that the person requested information from a tenant screening bureau relating to a potential tenant or otherwise inspected court records relating to a potential tenant and the person subsequently refuses to rent or offer a lease to the potential tenant.  (P45 L9)

What it means: It is now illegal for a Landlord to screen for prior evictions.  If a Landlord denies an applicant for any reason and it is found that they had screened for and found evidence of prior evictions, it will be presumed that the Landlord denied the applicant on that basis and will have violated NYS law.  Evictions will now be sealed and not made public.  This is effective as of July 14, 2019.

Thoughts: Totally outrageous.  Its well-known among property managers that prior evictions are highly predictive of future evictions, so that's one of the most common screening criteria used among property managers, and protects Landlords from renting to bad credit risks.  This is the rental equivalent of telling auto lenders that they can't screen for prior repossessions, or telling insurance carriers that they can't screen for prior accidents.  

5. No Recovery of Attorney's Fees In Default Judgment

New lawA landlord may not recover attorneys' fees upon a default judgment.  (P46 L15)

What it means: Pretty self-explanatory, if a tenant fails to appear in court for eviction and a default judgment is made in the Landlord's favor, the Landlord may not attempt to recover any attorney's fees.  

Thoughts: While not earth-shattering, its arbitrary and unfair for a Landlord to relinquish their right to recover damages incurred to them caused by a tenant failing to uphold their contractual obligations merely because that tenant fails to show up for their court date.  

6. Receipts Must Be Provided For Rent

New lawUpon the receipt of the payment of rent for residential premises in the form of cash, or any instrument other than the personal check of the lessee, it shall be the duty of the lessor, or any agent of the lessor authorized to receive rent, to provide the lessee with a written receipt containing the following: 1. The date; 2. The amount; 3. The identity of the premises and period for which paid; and 4. The signature and title of the person receiving the rent.  A lessee may request, in writing, that a lessor provide a receipt for rent paid by personal check.

What it means: Landlords must provide written receipts for all cash payments of rent, and provide receipts if requested in writing by a tenant for personal checks.  

Thoughts:  No issue here, this one is common sense and should already be a best practice by competent Landlords.  

7. Late Rent Notices to be Sent By Certified Mail

New lawIf a lessor, or an agent of a lessor authorized to receive rent, fails to receive payment for rent within five days of the date specified in a lease agreement, such lessor or agent shall send the lessee, by certified mail, a written notice stating the failure to receive such rent payment.  (P46 L45)

What it means: You must now mail a certified letter to a tenant notifying them that rent is late after 5 days, emails or texts are not sufficient even if acknowledged by the tenant.  

Thoughts: A needless administrative headache and expense for Landlords.  For example, 100% of the tenants we manage owe rent on the 1st and pay online or with cash at any CVS location, and receive instant receipts.  Is it really necessary to remind them rent is past due by certified mail?  

8. Limitation on Application Fees

New lawA landlord, lessor, sub-lessor or grantor may charge a fee or fees to reimburse costs associated with conducting a background check and credit check, provided the cumulative fee or fees for such checks is no more than the actual cost of the background check and credit check or twenty dollars, whichever is less. (P47 L16)

What it means: Simply put, you can't charge a tenant more than $20 or 5% per application, whichever is less.

Thoughts: Arbitrary and totally disconnected with the economic reality of processing applications.  This is an expensive problem for Landlords since the vast majority of major screening companies charge between $25 and $40 per screening, not to mention the additional soft costs incurred with processing each application, such as the time it takes to read and interpret each app, filing and storing the applications for multiple years, ensuring fair housing compliance, calling landlord references, verifying employment, and sending out Adverse Action notices to each declined applicant.  With application fees capped at $20, even the most efficient Landlords and property managers will take a loss on each application submitted, which will put a particular strain on Landlords of lower-income properties that have far lower application acceptance rates.  

9. Limitation on Late Fees

New lawNo landlord, lessor, sub-lessor or grantor may demand any payment, fee, or charge for the late payment of rent unless the payment of rent has not been made within five days of the date it was due, and such payment, fee, or charge shall not exceed fifty dollars or five percent of the monthly rent, whichever is less. (P47 L28)

What it means: Self-explanatory.  

Thoughts: I can understand imposing a late fee limit to prevent unethical Landlords from charging usurious late fees, but to impose an absolute maximum limit of $50 without regard to how long rent has been late or the past due amount is arbitrary and disproportionately benefits those renting the most expensive properties, without providing much benefit to those in lower income properties.  Not to mention, once a tenant has maxed out their late fee, there is little reason for urgency on the tenant's part to pay up.  

10. Only Base Rent May be Sought in Eviction Proceedings

New lawIn a proceeding relating to a residential dwelling or housing accommodation, the term "rent" shall mean the monthly or weekly amount charged in consideration for the use and occupation of a dwelling pursuant to a written or oral rental agreement. No fees, charges or penalties other than rent may be sought in a summary proceeding pursuant to this article, notwithstanding any language to the contrary in any lease or rental agreement.  (P47 L37)

What it means: A Landlord can no longer seek to recoup any fees or charges that a tenant is due in an eviction proceeding; the landlord may only seek to recover the base rent amount.  

Thoughts: Charges like late fees exist as an incentive for tenants to pay on time, and if a Landlord does not have any firepower to collect on those fees, their only option for penalizing a tenant for refusing to pay those fees will be to non-renew their lease and take the fees from their deposit or take them to small claims court, driving up vacancy, costs, and further exacerbating the affordable housing problem.   

11.  Pay-Or-Quit Notice Time Extended

New lawA special proceeding may be maintained under this article upon the following grounds: The tenant has defaulted in the payment of rent, pursuant to the agreement under which the premises are held, and a written demand of the rent has been made with at least fourteen days' notice requiring, in the alternative, the payment of the rent, or the possession of the premises, has been served upon him.  (P47 L56)

What it means: In the past, the first step of the eviction process was to formally deliver a notice to a tenant that rent was late in the form of a 3-Day Notice, notifying the tenant in writing that they had 3 days to either pay in full or vacate the premises, or the Landlord would proceed with the eviction process.  This notice has now been increased to 14 days.

Thoughts: One of the best, most well-known practices a Landlord can implement to minimize risk of evictions is to have policies in place that ensure tenants are heavily incentivized to never fall more than 1 week behind in rent.  That may sound callous and counter intuitive, but when a tenant is allowed several weeks of non-payment before encountering any consequence (as is now required by law), there is slim to no chance that the tenant will ever be able to catch up in rent again, and eviction will be highly likely in their future.  Conversely, when tenants are swiftly reminded of their rental obligations and consequences are imposed within one week, tenants are far more likely to have the means to catch up and never fall under threat of eviction.  

12.  Rent Paid in Full During Eviction Nullifies Eviction

New lawIn an action premised on a tenant defaulting in the payment of rent, payment to the landlord of the full amount of rent due, when such payment is made at any time prior to the hearing on the petition, shall be accepted by the landlord and renders moot the grounds on which the special proceeding was commenced. (P48, L26)

What it means: In the past, if a tenant still failed to pay rent after their grace period and 3-day notice had been delivered and expired, the eviction process was under way and the Landlord was not obligated to accept rent and could continue with eviction even if the tenant offered to pay rent in full during the eviction process.  Under the new law, regardless of the time and expense incurred by the landlord throughout the eviction process and the length of time the eviction has been drawn out, if a tenant provides payment in full of rent proceeds at any time during the eviction process, the eviction is thrown out and the landlord's expenses throughout the eviction are irrecoverable.  

Thoughts: Evictions are a Landlord's method of last resort when a tenant has refused all other reasonable means to pay rent or vacate the premises voluntarily, and given the length of time an eviction can now be drawn out by the courts, can easily cost Landlords thousands in legal fees and lost rent.  By the time months have passed and thousands spent due to a tenants failure to pay, it is unreasonable to think that a Landlord should be forced to accept this tenants payment, only to risk having to repeat the process over again, and again, and again with the same tenant at zero expense incurred by the tenant. 

13.  Tenant Response Time to Petition Extended

New lawThe notice of petition shall be returnable before the clerk, and shall be made returnable within ten days after its service.  (P48 L34)

What it means: The time a tenant has to respond to notice of petition during an eviction proceeding has been increased from 5 to 10 days.  

Thoughts: Further delaying eviction proceedings.  See thoughts, #11.  

14.  Delivery of Warrant Response Time Extended

New lawThe officer to whom the warrant is directed and delivered shall give at least fourteen days' notice, in writing and in the manner prescribed in this article for the service of a notice of petition, to the person or persons to be evicted or dispossessed and shall execute the warrant on a business day between the hours of sunrise and sunset.  (P52 L12)

What it means: The officer delivering a warrant during an eviction proceeding must now provide a 14-day notice to the tenant, which has been increased from 72 hours.  The warrant must also now be served on a business day.  

Thoughts: Delaying evictions even further, see thoughts #11 and #13.  Between the certified letter for late rent after 5 days, followed by 14 day pay-or-quit notice, followed by 10 days to respond, followed by another 14 days of sheriff notice, not to mention weekends and holidays, I don't see how it would be possible to evict in New York in less than 60 days, and 90 would not be unlikely.  For many accidental Landlords holding mortgages on a single rental home as is common with some of our military clients, it would be possible for foreclosure proceedings to be held due to the Landlord's inability to pay the mortgage on their rental before the tenant could legally be evicted to recover the premises.  

15.  Evictions Can Be Delayed Up to 12 Months

New lawIn a proceeding to recover the possession of premises [...],the court, on application of the occupant, may stay the issuance of a warrant and also stay any execution to collect the costs of the proceeding for a period of not more than one year, if it appears that the premises are used for dwelling purposes; that the application is made in good faith; that the applicant cannot within the neighborhood secure suitable premises similar to those occupied by the applicant and that the applicant made due and reasonable efforts to secure such other premises, or that by reason of other facts it would occasion extreme hardship to the applicant or the applicant's family if the stay were not granted.  In determining whether refusal to grant a stay would occasion extreme hardship, the court shall consider serious ill health, significant exacerbation of an ongoing condition, a child's enrollment in a local school, and any other extenuating life circumstances affecting the ability of the applicant or the applicant's family to relocate and maintain quality of life. The court shall consider any substantial hardship the stay may impose on the landlord in determining whether to grant the stay or in setting the length or other terms of the stay. (P53 L7)

What it means: In short, a court may stay (delay) an eviction for up to 12 months if a tenant can prove "extreme hardship", which may be considered as having a child enrolled in school, or if the relocation could affect the tenant's "quality of life."  The Landlord is allowed to make their own case for hardship that the stay could cause the Landlord.  

Thoughts: This is the big one that is justifiably causing Landlords and investors to rethink their investment in New York real estate altogether.  The thought of a tenant being legally allowed to remain in a property for a full year without paying rent to maintain "quality of life" isn't just unreasonable, it's legalized theft of a Landlord's property.  I will be very interested to see how this particular clause is challenged in the courts.

16.  No Collection of Double Deposit or Last Month's Rent

New lawNo deposit or advance shall exceed the amount of one month's rent under such contract.  (P55 L55)

What it means: Security deposits are now limited to a max of 1 month's rent, and Landlords are no longer allowed to require last month's rent upfront.  

Thoughts: Although this is intended as a tenant-protection measure, this clause effectively limits the rights of applicants with limited credit or income levels to provide additional security to the Landlord to secure an approval when minimum screening criteria are not met.  Since applicants can no longer provide additional security to Landlords, this will likely lead to significantly lower applicant approval levels and increased vacancy, particularly on lower-income housing.

17.  Tenant May Require Landlord to Conduct Multiple Move-In/Out Inspections

New lawAfter initial lease signing but before the tenant begins occupancy, the landlord shall offer the tenant the opportunity to inspect the premises with the landlord or the landlord's agent to determine the condition of the property. If the tenant requests such inspection, the parties shall execute a written agreement before the tenant begins occupancy of the unit attesting to the condition of the property and specifically noting any existing defects or damages.  (P56 L13)

Within a reasonable time after notification of either party's intention to terminate the tenancy, unless the tenant terminates the tenancy with less than two weeks' notice, the landlord shall notify the tenant in writing of the tenant's right to request an inspection before vacating the premises and of the tenant's right to be present at the inspection. If the tenant requests such an inspection, the inspection shall be made no earlier than two weeks and no later than one week before the end of the tenancy. The landlord shall provide at least forty-eight hours written notice of the date and time of the inspection.  After the inspection, the landlord shall provide the tenant with an itemized statement specifying repairs or cleaning that are proposed to be the basis of any deductions from the tenant's deposit. The tenant shall have the opportunity to cure any such condition before the end of the tenancy.  (P56 L22)

What it means: Landlord's must now offer tenants the opportunity for an in-person inspection with the Landlord after signing the lease but prior to move-in, and after notification of non-renewal but before vacating.  Tenant must have an opportunity to fix any issues before moving out.  

Thoughts: Most quality property managers today utilize digital photo inspection platforms that are timestamped, GPS-stamped, and can be digitally acknowledged by a tenant on a mobile device at move-in and move-out, specifically for the purposes of accurately documenting property condition for the protection of all parties, and for streamlining the process and reducing the number of trips required for a unit turn.  Despite the use of all those technologies, this clause may now require 2 additional trips to a property during a turn which will further drive up Landlord costs, which will almost surely be passed on to tenants in the form of steeper rent.  

18.  Deposits Must Be Returned Within 14 Days

New lawWithin fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit.  (P56 L38)

What it means: In the past, a security deposit had to be returned within a "reasonable amount of time" following a tenant vacating.  Now, the security deposit and disposition form must be returned to the tenant within 14 days.

Thoughts: More administrative headache that is disconnected with the reality and challenges of handling deposit dispositions.  Following a vacancy with damages, Landlords must contact repair vendors, prepare scope of work documents, procure repair estimates at the property, prepare the deposit disposition form, and physically refund the deposit, which is nearly impossible in 2 weeks time.  If this time frame can't be met, this requirement encourages a Landlord to guess at a safe repair charge to withhold from a deposit prior to getting a quote, likely resulting in higher than normal deposit deductions to be taken from tenants.  

In addition, the "burden of proof" for withholding security deposits for damages is now on the Landlord, so it is critically important to conduct detailed photo inspections during move-in and move-out, documenting and acknowledging condition throughout the property.  

Conclusion

In typical New York State fashion, the legislature has passed this set of new laws with little regard to the unintended effects it will have on exactly the demographic they purport to protect, which is the lower-income tenant.  By making it more difficult to evict and to collect reasonable fees, Landlord's will be forced to heighten their application approval criteria to avoid taking on the risk of renting to lower-income tenants.  Developers will continue building more luxury, class-A apartments, and not take on the risk of building much-needed workforce and lower-income housing throughout the state.  The additional administrative costs resulting from additional regulation, as with any business, will be surely be passed on to the tenant in the form of increased rents to cover the Landlord's shortfall. 

The Tenant Protection Act of 2019 doesn't protect tenants, it merely attempts to pass the burden, expense, and responsibility of providing subsidized housing from the State to Landlords.