Is New York Senate Bill S2892B Good Cause Eviction Bill a Good Idea?

The New York State Senate had introduced Bill S2892B, commonly referred to as the Good Cause Eviction Bill, which will fundamentally alter the ability of property owners to evict a tenant, subtenant or squatter unless the landlord can demonstrate a “good cause” for eviction.

The legislation would apply to all residential property including hotel rooms where the occupant stays more than 30 days, with the only exceptions being rent stabilized and rent controlled apartments and single family homes.

What counts as good cause?

Not having a lease or an expired lease is not good cause

Landlords are not allowed to evict or attempt to evict a tenant, even if that tenant’s lease has expired or if a squatter doesn’t have a lease to begin with, unless a court has decided that there is a good cause for eviction, as defined in the following sections. The text of the bill is as follows, in all capital letters:

§ 214. GROUNDS FOR REMOVAL OF TENANTS. 1. NO LANDLORD SHALL REMOVE A TENANT FROM ANY HOUSING ACCOMMODATION, OR ATTEMPT SUCH REMOVAL OR EXCLUSION FROM POSSESSION, NOTWITHSTANDING THAT THE TENANT HAS NO WRITTEN LEASE OR THAT THE LEASE OR OTHER RENTAL AGREEMENT HAS EXPIRED OR OTHERWISE TERMINATED, EXCEPT UPON ORDER OF A COURT OF COMPETENT JURISDICTION ENTERED IN AN APPROPRIATE JUDICIAL ACTION OR PROCEEDING IN WHICH THE PETITIONER OR PLAINTIFF HAS ESTABLISHED ONE OF THE FOLLOWING GROUNDS AS GOOD CAUSE FOR REMOVAL OR EVICTION:

Landlords can’t raise rent more than three percent

The tenant failing to pay rent is ostensibly a good cause for eviction, which must be determined by court, unless the reason the tenant didn’t pay rent was because the landlord increased the rent more than three percent or 1.5 times the rate of inflation, whichever is greater.

(A) THE TENANT HAS FAILED TO PAY RENT DUE AND OWING, PROVIDED HOWEVER THAT THE RENT DUE AND OWING, OR ANY PART THEREOF, DID NOT RESULT FROM A RENT INCREASE WHICH IS UNREASONABLE OR IMPOSED FOR THE PURPOSE OF CIRCUMVENTING THE INTENT OF THIS ARTICLE. IN DETERMINING WHETHER ALL OR PART OF THE RENT DUE AND OWING IS THE RESULT OF AN UNREASONABLE RENT INCREASE, IT SHALL BE A REBUTTABLE PRESUMPTION THAT THE RENT FOR A DWELLING NOT PROTECTED BY RENT REGULATION IS UNREASONABLE IF SAID RENT HAS BEEN INCREASED IN ANY CALENDAR YEAR BY A PERCENTAGE EXCEEDING EITHER THREE PERCENT OR ONE AND ONE-HALF TIMES THE ANNUAL PERCENTAGE CHANGE IN THE CONSUMER PRICE INDEX FOR THE REGION IN WHICH THE HOUSING ACCOMMODATION IS LOCATED, AS ESTABLISHED THE AUGUST PRECEDING THE CALENDAR YEAR IN QUESTION, WHICHEVER IS GREATER;

The tenant is violating a substantial obligation under the lease

A good cause for eviction is if the tenant is violating a substantial obligation under the lease, again as determined by a tenant friendly New York court. Of course, the obligation to vacate the property after lease expiration or default isn’t considered a good cause for eviction.

(B) THE TENANT IS VIOLATING A SUBSTANTIAL OBLIGATION OF HIS OR HER TENANCY, OTHER THAN THE OBLIGATION TO SURRENDER POSSESSION, AND HAS FAILED TO CURE SUCH VIOLATION AFTER WRITTEN NOTICE THAT THE VIOLATION CEASE WITHIN TEN DAYS OF RECEIPT OF SUCH WRITTEN NOTICE, PROVIDED HOWEVER, THAT THE OBLIGATION OF TENANCY FOR WHICH VIOLATION IS CLAIMED WAS NOT IMPOSED FOR THE PURPOSE OF CIRCUMVENTING THE INTENT OF THIS ARTICLE;

The tenant is damaging the property or being a nuisance

If the tenant is maliciously or due to negligence damaging the property, then a court may determine that this is an allowed good cause for eviction.

(C) THE TENANT IS COMMITTING OR PERMITTING A NUISANCE IN SUCH HOUSING ACCOMMODATION, OR IS MALICIOUSLY OR BY REASON OF NEGLIGENCE DAMAGING THE HOUSING ACCOMMODATION; OR THE TENANT’S CONDUCT IS SUCH AS TO INTERFERE WITH THE COMFORT OF THE LANDLORD OR OTHER TENANTS OR OCCUPANTS OF THE SAME OR ADJACENT BUILDINGS OR STRUCTURES;

The tenant must vacate due to dangerous, inhabitable conditions

The tenant may be required to vacate the property if the court determines that a housing code violation requires the vacancy of the apartment, and that the landlord did not cause the violation either through neglect or failure to act. The tenant is able to cure the violation on the landlord’s behalf, and credit any expenses against rent. The tenant is entitled to resume occupancy as soon as the violation has been cured.

(D) OCCUPANCY OF THE HOUSING ACCOMMODATION BY THE TENANT IS IN VIOLATION OF OR CAUSES A VIOLATION OF LAW AND THE LANDLORD IS SUBJECT TO CIVIL OR CRIMINAL PENALTIES THEREFORE; PROVIDED HOWEVER THAT AN AGENCY OF THE STATE OR MUNICIPALITY HAVING JURISDICTION HAS ISSUED AN ORDER REQUIRING THE TENANT TO VACATE THE HOUSING ACCOMMODATION. NO TENANT SHALL BE REMOVED FROM POSSESSION OF A HOUSING ACCOMMODATION ON SUCH GROUND UNLESS THE COURT FINDS THAT THE CURE OF THE VIOLATION OF LAW REQUIRES THE REMOVAL OF THE TENANT AND THAT THE LANDLORD DID NOT THROUGH NEGLECT OR DELIBERATE ACTION OR FAILURE TO ACT CREATE THE CONDITION NECESSITATING THE VACATE ORDER. IN INSTANCES WHERE THE LANDLORD DOES NOT UNDERTAKE TO CURE CONDITIONS OF THE HOUSING ACCOMMODATION CAUSING SUCH VIOLATION OF THE LAW, THE TENANT SHALL HAVE THE RIGHT TO PAY OR SECURE PAYMENT IN A MANNER SATISFACTORY TO THE COURT, TO CURE SUCH VIOLATION PROVIDED THAT ANY TENANT EXPENDITURES SHALL BE APPLIED AGAINST RENT TO WHICH THE LANDLORD IS ENTITLED. IN INSTANCES WHERE REMOVAL OF A TENANT IS ABSOLUTELY ESSENTIAL TO HIS OR HER HEALTH AND SAFETY, THE REMOVAL OF THE TENANT SHALL BE WITHOUT PREJUDICE TO ANY LEASEHOLD INTEREST OR OTHER RIGHT OF OCCUPANCY THE TENANT MAY HAVE AND THE TENANT SHALL BE ENTITLED TO RESUME POSSESSION AT SUCH TIME AS THE DANGEROUS CONDITIONS HAVE BEEN REMOVED. NOTHING HEREIN SHALL ABROGATE OR OTHERWISE LIMIT THE RIGHT OF A TENANT TO BRING AN ACTION FOR MONETARY DAMAGES AGAINST THE LANDLORD TO COMPEL COMPLIANCE BY THE LANDLORD WITH ALL APPLICABLE STATE OR MUNICIPAL LAWS OR HOUSING CODES;

The tenant is using the property for an illegal purpose

This is one of the few good causes for eviction that are relatively straightforward, and theoretically without bias. Again, a court will have to determine that the tenant is indeed using the property for an illegal purpose. For example, if you try to evict a tenant for operating an illegal drug trafficking operation from your property, which is a default under the terms of the lease, you have to wait for a court to determine that in fact it was illegal and thus a good cause for eviction.

(E) THE TENANT IS USING OR PERMITTING THE HOUSING ACCOMMODATION TO BE USED FOR AN ILLEGAL PURPOSE;

The tenant cannot unreasonably refuse access for repairs required by law or for showings

A good cause for eviction is if the tenant “unreasonably” refuses access for legally required repairs, or for showings to prospective buyers, lenders, appraisers etc. Note that the bill makes no reference to access for optional repairs that a landlord may wish to do.

Again, New York’s courts will have great leeway in determining whether a tenant’s continued denials of access are reasonable or not.

What is New York Senate Bill S2892B? Does the Good Cause Eviction Bill mean universal rent control? What constitutes good cause? Citizen letters & more.

(F) THE TENANT HAS UNREASONABLY REFUSED THE LANDLORD ACCESS TO THE HOUSING ACCOMMODATION FOR THE PURPOSE OF MAKING NECESSARY REPAIRS OR IMPROVEMENTS REQUIRED BY LAW OR FOR THE PURPOSE OF SHOWING THE HOUSING ACCOMMODATION TO A PROSPECTIVE PURCHASER, MORTGAGEE OR OTHER PERSON HAVING A LEGITIMATE INTEREST THEREIN;

The landlord is allowed to re-occupy an apartment for personal use in smaller buildings

The below sections of the proposed bill allows owners to evict a tenant for good cause, presumably after the expiration of any lease, if the owner intends to occupy the property for personal use and no other unit is available in the building. This would be allowed in buildings with fewer than 12 units if there is an “immediate and compelling necessity,” again as to be determined via a court proceeding, to recover the property to use as a primary residence for either the owner or an immediate family member. Only one unit is allowed to be recovered, and no recovery is allowed if the tenant is over 62 years old or disabled. The bill is less strict for buildings with less than 5 units, and an owner is allowed to recover any or all units to use as a primary residence.

(G) THE LANDLORD SEEKS IN GOOD FAITH TO RECOVER POSSESSION OF A HOUSING ACCOMMODATION LOCATED IN A BUILDING CONTAINING FEWER THAN TWELVE UNITS BECAUSE OF IMMEDIATE AND COMPELLING NECESSITY FOR HIS OR HER OWN PERSONAL USE AND OCCUPANCY AS HIS OR HER PRINCIPAL RESIDENCE, OR THE PERSONAL USE AND OCCUPANCY AS PRINCIPAL RESIDENCE OF HIS OR HER SPOUSE, PARENT, CHILD, STEPCHILD, FATHER-IN-LAW OR MOTHER-IN-LAW, WHEN NO OTHER SUITABLE HOUSING ACCOMMODATION IN SUCH BUILDING IS AVAILABLE. THIS PARAGRAPH SHALL PERMIT RECOVERY OF ONLY ONE HOUSING ACCOMMODATION AND SHALL NOT APPLY TO A HOUSING ACCOMMODATION OCCUPIED BY A TENANT WHO IS SIXTY-TWO YEARS OF AGE OR OLDER OR WHO IS A DISABLED PERSON;

(H) THE LANDLORD SEEKS IN GOOD FAITH TO RECOVER POSSESSION OF ANY OR ALL HOUSING ACCOMMODATIONS LOCATED IN A BUILDING WITH LESS THAN FIVE UNITS TO PERSONALLY OCCUPY SUCH HOUSING ACCOMMODATIONS AS HIS OR HER PRINCIPAL RESIDENCE.

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Is the Good Cause Eviction Bill de facto rent control?

Yes, the Good Cause Eviction Bill would enact universal rent control for most residential real estate in New York. Landlords, including owners of individual condo and co-op apartments, would be required to perpetually renew a lease to a tenant with rent increases of no more than 3% per year.

Furthermore, there are no provisions to protect property owners from operating at a loss if property taxes, common charges or maintenance fees or other operating expenses increase more than 3% per year.

We think this bill is inherently unfair by capping property owners’ ability to raise rents without also capping increases in property taxes.

Furthermore, the proposed bill will limit property owners’ ability to access the unit to make repairs, unless the court determines that a repair is legally necessary. In theory, once an apartment is rented out, the owner may never be able to access his or her apartment again due to mandated lease renewals and restrictions on recovering their property.

Moreover, the proposed bill enables an occupant to obtain an injunction to stop a holdover tenant, nonpayment or objectionable tenancy court proceeding for years while a judge determines whether there’s a good cause for eviction. This is no embellishment given that the borrower friendly courts allow the foreclosure process in New York to drag out for 3 to 5 years on average.

How will condos and co-ops be affected?

If enacted, Senate Bill S2892B would prevent co-op boards from conducting a coop foreclosure if shareholders refuse to pay maintenance charges or co-op special assessments that increase by more than 3% vs the prior year, and condo boards would be prohibited from foreclosing on common charge liens if a condo unit owner similarly refuses to pay common charges or special assessments that are more than 3% above the prior years charges.

This presents a major issue for condo and co-op buildings, especially since common charges and maintenance have increased by upwards of 8% on average in recent years due to ever increasing regulations imposed by City Hall and Albany.

For example, Local Law 11 regulations require buildings to undergo costly inspections every 5 years and catastrophically expensive facade repairs if they fail the inspection.

Facade repairs can easily cost millions of dollars in NYC, especially for larger buildings or landmarked buildings with ornate exteriors.

Furthermore, New York has enacted an ever expanded set of green initiatives for buildings to reduce their carbon footprint, and along with the likely increase in income and property taxes due as a result of lost revenues from the COVID-19 shutdown, it’s extremely unlikely that property owners will be able to keep expenses from increasing less than 3%.

In the following section, a former assisted FSBO customer who successfully sold his Downtown Brooklyn co-op apartment in 2018 shared with us a letter he wrote to State Senator Julia Salazar, the primary sponsor of Senate Bill S2892B, as well as twelve co-sponsors.

Act Now: Email, call or visit your state representative to share your views on this bill. You can find out who your NY State Senator is here. You can find out who your New York State Assembly Member is here. You can find a compelling memorandum in opposition of this bill written by the Rent Stabilization Association here.

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A letter to State Senator Julia Salazar from a former co-op board member

I’m posting today to express my serious concern over the multiple detrimental effects, perhaps unintentional, that Senate Bill S2892B will have on shareholders in coops which permit subletting, especially coops which have a liberal sublet policy, such as University Towers in Downtown Brooklyn.

Coops have long been exempt from Rent Control and Rent Stabilization guidelines.

The most troubling aspect of Senate Bill S2892B is the requirement to offer a lease to any occupant of a rental coop, regardless of legal status, even if there is no existing or previous lease.

This single requirement will have a drastic effect on the lives and financial futures of any coop shareholders who sublet their apartments, regardless of whether they are ordinary home owners or small private investors. It will also negatively impact all shareholders of coops which permit subletting by reducing property values.

How?

1) Resale Market

Investors in large apartment buildings or multi unit rental houses know when they initially invest in the building that it will always be occupied. Moreover, they know they will eventually sell the occupied building to the limited market of other investors. Their business plan is based on this assumption.

Coop home owners and small, private investors in rental coops face an altogether different situation.

Since rental units comprise only a small percentage of the units in any coop, owners of these units expect from the outset to eventually sell to buyers who will occupy the unit, not investors. Shareholders’ financial futures are based on this assumption.

I know from my seven years of Board service at University Towers that nearly all purchasers of individual coops will occupy the unit.

By effectively mandating permanent residency, Senate Bill S2892B will force ordinary shareholders to sell their unit occupied, thus eliminating most of their potential market.

Owners of these units will be forced to sell to the vastly smaller market of investors. Since the law will already be in effect, all prospective purchasing investors will expect to eventually resell to other investors. In addition, unlike buyers who will occupy the unit, investors’ expectation of monthly income will factor into the purchase. This will drastically reduce the market value.

Ordinary home owners who sublet, as well as small private investors will be forced to subsidize renters, in some cases, at the expense of their financial futures.

2) Reduced Property Values

This “permanent residency” requirement will also impact all shareholders by reducing property values.

When shareholders who occupy their unit decide to sell, they will have to compete with rental units, which will be priced much lower. Prospective buyers and real estate buyers’ agents will use the lower sale price of similar rental units as a bargaining chip, thus lowering the market value of all coops in the complex.

3) Shareholders Compelled To Subsidize Renters

In cases where rental coops cannot be sold because the investor market is unfavorable, unsuspecting shareholders will be forced into the role of a permanent landlord. With exorbitant increases in NYC property taxes and a government mandated limit of 3% yearly rent increases, it’s entirely possible that ordinary shareholders who were merely trying to supplement their retirement will be forced to actually take a monthly loss in order to subsidize a one time government mandated conversion of their units into permanent rental units.

4) Board Approval and Limited Leases Rendered Meaningless

Many coops employ an exhaustive Board approval process in an attempt to maintain a safe and community oriented atmosphere. Some coops also limit sublet leases to a one year term. In the event a renter disturbs or threatens neighbors, the Board can simply decline to approve a new lease without a lengthy and expensive eviction proceeding.

The requirement of offering a lease to all occupants, even illegal occupants, will render meaningless both the board approval process and the one year lease requirement.

5) Increased Maintenance

Coop Boards and shareholders may be quite resistant to the prospect of losing control over their own property, their community and their collective financial future. As a response to this law, coops may end all subletting, which would further restrict the rights of shareholders who wish to temporarily sublet because of a job relocation or unfavorable market conditions, or simply to build a financial future. An end to subletting and thus sublet fees would significantly reduce income to coops and would result in higher maintenance fees.

Ordinary shareholders, not just those who sublet, would effectively be forced to subsidize renters.

6) Reduced Housing Availability

Finally, by resulting in an end to coop subletting, Senate Bill S2892B would reduce the availability of housing to the very renters it was designed to protect.

The government has made it clear for generations that it does not wish to be in the business of providing housing. That’s why generous tax exemptions for mortgage interest, property taxes, maintenance or common charges (in full), depreciation, repairs and improvements are offered to investors, to create incentive for investors to provide housing. By fixing prices for all rent and effectively preventing the sale of investment real estate, the government is not only removing the traditional incentive, but is forcing investors to subsidize renters, potentially without compensation, and possibly at an economic loss.

How can the right of an owner to build a financial future and sell his/her own property be restricted in favor of the rights of an occupant who has no legal right to occupy that property?

If renters are not subject to existing laws, how can owners be expected to honor Senate Bill S2892B?

Simply stated, Senate Bill S2892B will protect the rights of renters by infringing upon the rights of owners.

It’s difficult to imagine the courts upholding a law which potentially compels one group of citizens into involuntary servitude for the benefit of another group of citizens.

If lawmakers believe that existing tenant protections are insufficient, then it is the responsibility of those lawmakers to find a way to create additional protections without infringing on the rights of property owners.

Russell F. Morrow

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Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 148 Lafayette Street, New York, NY 10013.

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