New York Extends COVID-19 Eviction & Foreclosure Hardship Stay Until January 15, 2022
September 3, 2021
On September 2, 2021, New York Governor Kathy Hochul signed legislation extending the protections of the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (the “CEEFPA”). As set forth in previous client alerts on December 29, 2020, and May 5, 2021, the CEEFPA, which became effective December 28, 2020, allows tenants facing eviction, and mortgagors facing foreclosure, to stop those proceedings by claiming a hardship related to the COVID-19 pandemic. The stay of proceedings pursuant to the CEEFPA, as originally enacted, was set to expire May 1, 2021. In May 2021, as that period was expiring, the Legislature extended the hardship stay period until August 31, 2021. The new law extends the stay period through January 15, 2022.
After the Legislature extended the CEEFPA in May, a group of New York landlords brought an action in the federal District Court for the Eastern District of New York, challenging the law as unconstitutional. See Chrysafis, et al. v. Marks, et al., Case No. 21-cv-02516 (GRB)(AYS). The landlords sought a preliminary injunction to block the application of the stay period through August 31, 2021. The preliminary injunction was denied in the District Court, and the Second Circuit Court of Appeals affirmed. However, on August 12, 2021, the United States Supreme Court reversed, in part, the denial of the injunction, effectively blocking application of the stay period with respect to evictions. The Supreme Court ruled that, under CEEFPA ”[i]f a tenant self-certifies financial hardship, Part A of CEEFPA generally precludes a landlord from contesting that certification and denies the landlord a hearing. This scheme violates the Court’s longstanding teaching that ordinarily ‘no man can be a judge in his own case’ consistent with the Due Process Clause.” Chrysafis v. Marks, 2021 WL 3560766 at *1.
The current CEEFPA extension signed into law on September 2, includes an addition to the previous law, in direct response to the Supreme Court’s ruling in Chrysafis. The newly added sections allow the petitioner in an eviction, or foreclosing party in a foreclosure, to make a motion to challenge an adverse party’s hardship claim. Where such a challenge is made, the law requires the court to “grant a hearing to determine whether to find the respondent’s [or defendant’s] hardship claim invalid.” The challenge must be based on a good faith belief that the tenant/mortgagor has not experienced a hardship, and the challenger must overcome the rebuttable presumption of financial hardship that is created by the tenant/mortgagor’s submission of the hardship declaration. Such a challenge may be especially difficult because the tenant/mortgagor need not identify a specific hardship in the declaration, but only that they are experiencing one or more of the following as a result of the COVID-19 pandemic: loss of household income, increase in expenses, childcare responsibilities, care for elderly, disabled or sick family, moving expenses, difficulty securing alternative housing, other circumstances negatively affecting the ability to obtain meaningful employment, the tenant’s increase risk for severe illness from COVID-19 (for Part A, eviction protections), or loss of rental payments (for Part B, foreclosure protections). Demonstrating a good faith belief that none of those circumstances exist in a given case will be difficult. Having the issue fully adjudicated before January 15, 2022, may be even more difficult.
The laws passed on September 2 also included amendments to the state’s emergency rental assistance program. Those amendments seek to help the state and local governments distribute what remains of approximately $2.4 billion dollars in funds earmarked to provide up to 12 months of past-due rent directly to landlords on behalf of eligible renters. Recent reports indicated the state had only distributed approximately $200 million through the program since it began on June 1, 2021.
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This Legal Update is intended to keep readers current on developments in the law, and is not intended to be legal advice. If you have any questions, please contact any member of the Financial Service Litigation Group.