Attorneys Predict Rent Cancellation Defense, Challenges

By Emma Whitford
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our daily newsletters. Signing up for any of our section newsletters will opt you in to the daily Coronavirus briefing.

Sign up for our New York newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!



Law360 (March 31, 2020, 4:00 PM EDT) -- Since New York state Sen. Michael Gianaris introduced legislation to cancel three months of rent for New Yorkers directly affected by the COVID-19 crisis on March 23, the Queens legislator has collected 22 co-sponsors in the Senate and 12 in the Assembly, and the #CancelRent hashtag has proliferated on social media.

“More than 60,000 people logged on to [the Senate website to] support the bill,” Gianaris told Law360, “by far the highest interaction we’ve had on a bill in the Senate.”

Amid this outpouring, attorneys have started to grapple with the legal defense for rent cancellation. Some argue that the state has ample powers to do this, even though Gov. Andrew M. Cuomo seems unwilling to exercise them. Others have identified ambiguities in Gianaris’ draft bill and predicted the arguments landlords might make if it prevails.

Gianaris told Law360 Friday that his office identified precedent for rent cancellation in the 1922 U.S. Supreme Court opinion in Edgar A. Leavy Leasing v. Siegel.

The case is one of several that dealt with the constitutionality of sections of New York’s Emergency Housing Laws, which were signed in 1920 to address an acute housing shortage after World War I. “There existed in the larger cities of the state a social emergency,” according to the opinion, “caused by an insufficient supply of dwelling houses and apartments, so grave that it constituted a serious menace to the health, morality, comfort, and even to the peace of a large part of the people of the state.”

Leavy v. Siegel considered a section of the emergency laws that says tenants can challenge their rent as “unjust and unreasonable,” and whether this is a valid application of states’ police power. Leases are typically protected from government oversight by the contracts clause of the Constitution.

“This case reiterated that states have the power to regulate rents and evictions under circumstances where the markets are not working well and people are facing either the prospect of profiteering or homelessness as a result of abnormal conditions,” Tim Collins, a partner with Collins Dobkin & Miller LLP, told Law360 Monday.

“States abrogate [or impair] contracts all the time, but it has to be an abrogation that fits the purpose of the legislation and is a genuine effort to help health, safety or welfare,” he added.

In the case of the Gianaris bill, Collins, who represents tenants, argues that “the public emergency could not be more clear.”

“The bottom line is, I think it is clearly constitutional, but I would expect a fight over it,” he added.

Andrew Raines, a partner at Raines Feldman, which represents commercial and residential landlords in New York and Los Angeles, invoked the Takings Clause of the Fifth Amendment, which says private property cannot be taken for public use “without just compensation.”

“It’s questionable whether the government would be able to compensate the landlord for the fair value unless the government steps in and pays that actual rent because that was the benefit of the bargain the landlord was anticipating under the contract,” Raines said.

The Community Housing Improvement Program, a trade association for the owners of 400,000 rent-stabilized properties in New York City, agreed that the takings clause could hold.

The Gianaris bill includes a calculation for mortgage relief “up to the total dollar amount of lost rent,” according to the bill text. But Joseph M. Condon, CHIP’s chief counsel, said the standard for such relief, “hardship,” was vague and suggests that “lost rent payments alone may not be enough for a property owner to qualify.”

“The takings clause and the contracts clause still loom large over the constitutionality of the rent waiver and mortgage waiver provisions,” Condon added. “In my opinion, the takings clause is likely to have a better chance, especially if some property owners are singled out for relief from the government.”

Allison Schoenthal, a partner with Hogan Lovells in New York and head of the firm’s consumer finance litigation practice, agreed that the language of the Gianaris bill is too ambiguous to function smoothly.

According to the draft bill, residential tenants would have to show they have lost income because of COVID-19, and commercial tenants that they have had to close shop because of it.

“If it’s not clarified who this applies to and how it’s implemented, then it’s going to cause confusion to a slew of renters in New York,” she added. “And whenever you have confusion you have a mess. You have litigation.”

John Teufel, an attorney and writer from Brooklyn, recently wrote an op-ed for the New York Daily News, urging Cuomo to use his executive power to suspend rent. He agrees that litigation is inevitable. “Universal rent suspension would be a much easier way to deal with this,” he predicted.

Asked about the lack of detail in his bill, Gianaris said government agencies would have to work out the details. “We put a definition in there that would cover most circumstances,” he said. “The details of which would ultimately have to be subject to agency regulation.”

Judith Goldiner, attorney-in-charge of the civil law reform unit at the Legal Aid Society in New York, says she believes a “huge surge” of litigation is inevitable whether or not the Gianaris bill passes. The bill remains important because it has helped push the public conversation about the inadequacy of eviction moratoriums.

Cuomo has said repeatedly ahead of the April 1 budget deadline that his executive order barring residential and commercial evictions for 90 days will protect tenants.

“We’re concerned that a lot of people will not be able to pay their rent later when the economy gets started again,” Goldiner told Law360 on Friday. “Gianaris is putting a good spotlight on this issue. The governor is saying we have an eviction moratorium so all tenants are fine. No, they are not.”

Goldiner is also hopeful that the bill and public support will pressure landlords to consider whether widespread evictions are worthwhile, in the precariousness of a post-COVID-19 economy.

“How are you going to get blood from a stone?” she said. “What’s your plan here? Evict everyone? Who’s going to rent those apartments?”

--Editing by Peter Rozovsky.

Update: This story has been updated to clarify the definition of abrogation. 

For a reprint of this article, please contact reprints@law360.com.

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Beta
Ask a question!