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New York State Governor Andrew Cuomo has just issued a new executive order affecting the real estate industry in New York the executive order extends the existing eviction ban through August 20th 2024 hibbett slate these through that date and also allows tenants to use their security deposits to pay their back rent in this video I'm going to discuss each of those provisions in detail and also talk about the likelihood of this order being used as precedent by other states coming up [Music] hey guys my name is Vitaly Volkov I'm a practicing attorney an active real estate investor and the part on over real estate brokerage in upstate New York on this channel I discuss relevant legal concepts as well as best strategies and tips for real estate investing and personal finance if you're new to the channel consider subscribing and hitting notification bell so that YouTube notifies you of all my future content if you enjoy the content in this video hit the like button and comment down below as always whenever I'm discussing legal concepts in my videos just know that nothing that I say should be construed as legal advice you should always consult with your own attorney and your own advisor before making any legal or financial decisions last but not least the views and opinions that I express in this video are my own alone and don't necessarily reflect those of my law firm or any of my business partners so as my fellow real estate investors and landlords in New York know the current eviction ban in the state has been in existence since late March and it was set to expire on June 20th 2020 however yesterday May 7 2010 nekoma has issued a new executive order extending that ban interestingly though the ban is no longer a complete blanket ban instead there are some important caveats or carve-outs that I think can be read into the language of the executive order and I want to share that language with you and we can read it together and they'll provide some of my own interpretation as to what it means so the relevant language as it relates to the ban says there shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant for non-payment of rent or foreclosure of any residential or commercial mortgage for non-payment of such mortgage owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the pandemic for a period of 60 days beginning on June 20th 2020 now this provision is basically a one long run-on sentence but it has some very important caveats that I think are built into it the first part that I think is important here is that it says that proceedings shall not be initiated for non-payment of rent it does not say that you cannot initiate a proceeding for someone holding over beyond the end of their lease or initiating a proceeding for violation of another lease term so I understand the landlord right now are very upset that this ban has been but I do want to point out that this ban is not entirely a blanket ban so it presumably allows lay alerts to initiate some eviction proceedings just not the ones for non-payment of rent but not only that I think the non-payment of rent ban is also further modified by additional language in this provision so if we read further it appears that the eviction ban is only applicable to those individuals who are quote eligible for unemployment insurance or benefits under state or federal law or otherwise facing hardship due to the pandemic for a period of 60 days beginning on June 20 of 2020 this seems to suggest that individuals who are not facing a hardship and those individuals who are not eligible for unemployment insurance benefits are not going to be protected by this ban and in theory if those individuals are not paying their rent this executive order would allow landlords to evict those tenants now we haven't received any additional clarification from the governor's office but it appears that this is the correct interpretation I was on a zoom call yesterday with an association advocating for landlords rights in New York State and the information that we received on that zoom call from their counsel was that there have been negotiations and discussions with the governor's counsel's office about these provisions and according to the information that was provided in that meeting the governor's office is very cognizant of the burdens that are being placed on landlords so this was an attempt to soften those burdens and actually allow for some evictions to go forward as long as the tenants would be subject to those evictions are not ones that have been affected by the current pandemic so my interpretation of this provision is that this is not a blanket ban the same way that it has been a blanket ban from March until June 20th this executive order would seem to allow landlords to initiate at least some eviction proceedings beginning on June 20th the landlords would number one be able to evict anyone who's holding over number to anyone who has violated a lease term other than non-payment of rent and three anyone who has violated any terms including non-payment of rent if they're not impacted by the current pandemic and if they're not eligible for state or federal unemployment benefits now of course one concern here is the fact that impact or to quote the language in the actual provision otherwise facing financial hardship is not really we don't have much guidance on exactly what that means if a judge interprets that very broadly it can pretty much mean everybody everyone has been impacted by this pandemic financially in one way or another so we definitely help a lot if the governor's office would provide some clarifying criteria as to how that would be determined otherwise the way this would go right now is it would be completely up to a judge's discretion and interpretation when and if a landlord files an eviction proceeding and so you might have very different rulings in Albany as compared to for example Buffalo the governor's office should definitely clarify this and provide some very specific guidelines for exactly how this should be interpreted in my opinion the limitations should be along the lines of someone who was laid off furloughed or someone whose hours have been cut or someone who got sick with the virus and has been unable to work because of it I don't think it's smart or fair to leave the interpretation of this provision up to a judge's discretion it's just going to lead to very inconsistent and very unfair results if you look at the whole state so I would definitely encourage the governor's office to clarify this provision and provide some concrete guidance to both landlords and tenants on this point now the other part of this executive order is that now late these are completely prohibited specifically the language reads subdivision 2 of section 230 8a of the real property law to provide that no landlord less or sub less or grantor shall demand or be entitled to any payment fee or charge for late payment of rent occurring during the time period from March 20th 2020 through August 20th 2020 now the interesting thing is that this executive order is coming to us on May 7 2020 but it's talking about late fees that may have been charged as far back as March 20th Sarla are supposed to refund those late fees if they have already been collected let's say for March or April or does this provision only apply to those landlords who charge their tenants a late fee but have not been able to collect it since March 20th again there's no explanation as to how this would work and I think this is another area that requires additional clarification the last provision that I want to discuss in this executive order is the provision relating to using security deposits to pay back rent the provision is pretty lengthy so let's take it one part at a time and consider exactly what it's saying so the first part reads landlords and tenants or licensees of residential properties May upon the consent the tenant or a licensee enter into a written agreement by which the security deposit and any interest accrued thereof shall be used to pay rent that is in arrears or will become due if the amount of the deposit represents less than the full month rent payment this consent does not constitute a waiver of the remaining rent due and owing for that month execution counterpart by email will constitute sufficient execution for consent so there are a few takeaways from this provision first of all in order to do this you're going to need to have a written agreement second of all the tenant or lessee has to consent if the tenant does not consent to it you cannot use their security deposit at this point to pay their rent the third thing is if this security deposit is insufficient to pay all the back rent due it does not constitute a waiver of all the remaining back rent meaning that if the tenant owes $2000 in back rent and the security deposit is $1,000 pursuant to the agreement with the tenant you would be able to subtract thousand dollars from that $2,000 but the tenant will still owe the remaining thousand dollars finally the last part of this paragraph says that you can enter into this agreement by email so the landlord intended do not actually have to meet in person and potentially contract the virus from each other and they can simply sign electronically and email copies of the agreement to each other the next paragraph reads landlords shall provide such relief to tenants or licensees who so requested that are eligible for unemployment insurance or benefits under state or federal law or are otherwise facing financial hardship due to the pandemic this is the same language that is used in the eviction ban extension basically what this says is that the only tenants who are eligible for use of their security deposit stored rent are those who have been impacted by the current pandemic the next paragraph says it shall be at the tenant or licensees option to enter into such an agreement and landlords shall not harass threaten or engage in any harmful act to compel such agreement the purpose of this provision is pretty obvious the governor does not want Labor's to force tenants to agree to use their security deposit for back rent now some of you may be saying wait a minute I thought I could use a security deposit to cover my damages when the tenant doesn't pay his rent that is true but only after the tenancy has ended through an eviction proceeding or through the natural expiration of the term of the lease the final paragraph of this vision reads any security deposit used as a payment of rent shall be replenished by the tenant or licensee to be paid at the rate of 1/12 the amount used as rent per month the payments to replenish the security deposit shall become due and owing no less than 90 days from the date of the usage of the security deposit as rent the tenant or licensee may at their sole option retain insurance that provides relief for the landlord in lieu of the monthly security deposit replenishment which the landlord must accept such insurance as replenishment so what this paragraph is saying is that the tenant has to repay the security deposit once the security deposit is used for rent however the tenant does not need to start making repayment until 90 days have passed since the usage of that security deposit additionally starting at 90 days the tenant would only have to make a payment equivalent to 1/12 of the security deposit per month an immediate question that I had about this was what happens when a tenant whose lease has expired decides that they're not going to renew the lease at that point presumably the tenant would be moving on and not paying anything to the landlord going forward so I could see a scenario where a security deposit was used mid lease let's say at a six month point then the landlord had to wait an additional three months 90 days for the repayment to start at which point the lease would be at the ninth month and then the tenant only remained for three additional months and only made 3/12 of the repayment back to the landlord at that point the tenant decides to move out the apartment is completely trashed and the Lalor has only been replenished with three twelfths of the security deposit to use toward the repairs and cleanup there are obviously a million different permutations of this but the point is that if you're a landlord chances are that most likely your tenant will not be repaying back the entire security deposit and you'll still be left holding the bag additionally one security deposit is obviously not going to be enough if the tenants behind on rent by two or three or four or more months so while somewhat helpful this provision doesn't really solve the underlying problem last but not least this whole reference to insurance is completely baffling to me I've never heard of any such insurance and I'm not even sure what they're talking about here I've heard of renter's insurance but I'm not sure that any insurer is going to come in and insure the income of a tenant to pay the landlord their security deposit back so if anything this is another area where this of order requires some clarification so with all that said the provisions in this executive order appear to attempt to strike some balance between landlords and tenants while still allowing for an eviction ban to continue so it's not a complete blanket ban but it's also not a lifting of the ban and I know that in the state of New York the governor has been under some pressure from both sides of this issue tenant advocacy groups have been clamoring for a complete moratorium on payment of rents in fact several New York state legislators have actually proposed a bill that would do just that and the governor has refused to go along with it most likely because he's also feeling the pressure from the real estate industry side so this executive order reads to me like it was a compromise between two positions if I'm not mistaken tenant advocacy groups are very unhappy about this bill but I also know that a lot of landlords are very unhappy about it as well as I said in my previous videos this is obviously a very difficult issue to resolve for anybody in my opinion a better solution would be something like a voucher system which would be available to those who have been impacted by the current pandemic so those tenants who have been impacted who have lost their jobs have been laid off would go and they would apply and receive financial assistance from the government and they would then in turn be able to pay their rent for the housing that they're receiving as of a few weeks ago there were dozens of states that had eviction bans in one shape or another across the country many of those eviction bans are coming to an end in the next month or so and as those dates draw near those states are going to face the same pressures there are going to be tenant advocacy groups will want an extension of the bans and perhaps also moratoriums on rents and they're also going to be realistic groups who will want the bands to be lifted and I think that legislators and governors are going to try to reach the same compromise that New York State had just tried to reach so if you are in a state that currently has an eviction ban just be prepared for an extension of that ban with some potential caveats one thing I can say with near certainty is that this issue is not going to be resolved anytime soon even if the eviction ban had been lifted in New York State on June 20th 2020 it would take months for an average Lalor to complete an eviction process because of how much backlog were expected to have so whereas a normal eviction in New York State can now take anywhere from 60 to 90 days I think it's going to take much longer when the eviction ban is ultimately lifted I think we're talking about on the order of maybe four five six months even and this obviously is really bad news for all landlords across the state who are dealing with tenants who are not paying their rent so either those tenants are going to get some financial assistance the landlords are going to get some financial assistance from the government or those lay lurtz are likely going to o into foreclosure whether it's tax foreclosure or mortgage foreclosure and then end up going out of business I foresee quite a bit of turmoil in the real estate market in the near future one positive thing for real estate investors is that if they are in the good position financially they may be able to find some really good deals in the coming months however those that have overextended and overspent on their properties are likely going to be in serious trouble I'm going to keep my eye on eviction bans as well as other laws that are impacting real estate investors both in New York and across the country and I'll let you guys know whenever I see something significant and I'll make a video about it you have any questions about this eviction ban or anything else that I said in this video please feel free to drop me a comment down below and I always try to answer every comment I get if you guys enjoyed this video if you got value from it please do me a favor and hit the like button and if you haven't subscribed to my channel yet definitely subscribe so you don't miss out on any of my future content thanks again for watching and I'll see you guys in the next one take care [Music]