MEDIA
September 27, 2021

How Commercial Property Owners Can Evict Nonpaying or Holdover Tenants Despite the Continued Eviction Moratorium

Written by: Joshua Wurtzel

On September 2, 2021, New York extended its moratorium on residential and commercial evictions through January 15, 2022. While the extension was welcome news for many tenants, the new law also includes a carveout mechanism by which property owners may bring or continue eviction proceedings against nonpaying or holdover tenants before January 15, 2022 under certain circumstances.

Unlike the prior version of the law, the new law gives commercial property owners the ability to challenge a tenant’s claim of “hardship”—which, if successfully challenged, allows the eviction proceeding to move forward despite the extension of the moratorium. This ability to challenge a tenant’s claim of hardship was included in response to the U.S. Supreme Court’s order, dated August 12, 2021, enjoining part of New York’s eviction moratorium on the ground that it generally precluded property owners from contesting a tenant’s claim of hardship—and thus violated the “longstanding teaching that ordinarily ‘no man can be a judge in his own case’ consistent with the Due Process Clause.”

Here’s how commercial property owners can bring an eviction proceeding against a nonpaying or holdover tenant, despite the extension of the moratorium:

Serve the hardship declaration.

The owner must first serve whatever notice is required by the lease or law, or both, to terminate the tenant’s right of occupancy. With that notice, the owner must include a “hardship declaration,” as well as a “mailing address, telephone number and active email address the tenant can use to contact the landlord and return the hardship declaration.” The hardship declaration, if completed by the tenant, requires a representative of the tenant to swear, under oath, that:

The tenant’s business is a resident in New York State, “independently owned and operated,” “not dominant in its field,” and employs 100 or fewer persons; and the tenant’s business is “experiencing financial hardship” and is unable either to (i) “pay the rent in full or other financial obligations under the lease in full” or (ii) “obtain an alternative suitable commercial property” because of one or more of the following:

  • “Significant loss of revenue during the COVID-19 pandemic.”
  • “Significant increase in necessary expenses related to providing personal protective equipment to employees or purchasing and installing other protective equipment to prevent the transmission of COVID-19 within the business.”
  • “Moving expenses and difficulty in securing an alternative commercial property make it a hardship for the business to relocate to another location during the COVID-19 pandemic.”

Commence an eviction proceeding with the required affidavit.

When the owner starts its eviction proceeding, it must include an affidavit “demonstrating the manner in which” the hardship declaration was served and stating that:

  • the owner did not receive a completed hardship declaration from the tenant;
  • the owner received a completed hardship declaration from the tenant, but the tenant is “intentionally causing significant damage to the property” or is “unreasonably engaging in behavior that substantially infringes on the use and enjoyment of other tenants or occupants or causes a substantial safety hazard to others, with a specific description of the behavior alleged”; or
  • the owner received a completed hardship declaration from the tenant but the owner “believes in good faith that the hardship certified in the hardship declaration does not exist.”

 

If the tenant claims “hardship,” move to invalidate that claim.

Assuming the tenant returns the hardship declaration and asserts a hardship as defined above, the owner can make a motion, with notice to the tenant, “attesting a good faith belief” that the tenant “has not experienced a hardship.” The court must then hold a hearing to “determine whether to find the [tenant’s] hardship claim invalid.” If the court upholds the claim, the proceeding will be stayed until January 15, 2022. But if the court finds the tenant’s hardship claim invalid, the proceedings “shall continue to a determination on the merits.”

When challenging a tenant’s claim of hardship, focus on the definition of “hardship.”

While the definition of “hardship” is broad, not all businesses have lost “significant” revenue during the pandemic, nor have all businesses had a “significant” increase in costs related to providing or installing personal protective equipment. The broadest category of hardship is the last, which requires only that a business incur “moving expenses” and “difficulty” in finding an alternative space that make it a “hardship” to relocate. But the pandemic has created a significant amount of vacant commercial space, so an owner can point to other nearby spaces to which the tenant could move without much expense.

Keep an eye on further challenges to this law.

On September 9, 2021, the Rent Stabilization Association of NYC—which brought the suit that led to the U.S. Supreme Court’s injunction of the prior version of New York’s moratorium—filed a motion before the Second Circuit Court of Appeals seeking to stay enforcement of this new moratorium, arguing that, “while tweaked at the margins,” the new law “simply stepped onto the unconstitutional shoes” of the prior version that the Supreme Court enjoined. On September 17, 2021, the Second Circuit referred this motion to the merits panel, before which oral argument occurred on September 21, 2021. No decision has been issued to date.