ALTERNATIVES TO HOUSING COURT WHEN DEALING WITH A DEFAULTING TENANT

On March 16, 2020, pursuant to the Administrative Order 68/20 of the Chief Administrative Judge of the Courts, the Housing Courts in the City of New York ceased operations because of the COVID-19 Pandemic. Since that date, the Housing Courts throughout New York City have had only limited functionality. On May 24, 2021, after nearly fifteen (15) months, all courthouses will be returning to full staffing. However, while staff may be returning, the cases pending in Housing Court are proceeding slowly, if it all, due to ongoing stays of eviction proceedings triggered by the COVID-19 Emergency Eviction and Foreclosure Act of 2020 (which allowed tenants impacted by COVID-19 to stay proceedings through August 31, 2021 by completing and filing a Hardship Declaration). Even when those stays lift on September 1, 2021 (or later if further extended by the State Legislature), the Housing Courts throughout New York City will have a backlog of thousands of cases that have laid dormant over the past fifteen (15) months.

As a result of these limitations, it is crucial for Landlords to consider alternative venues for seeking relief against defaulted tenants, which alternatives may be pursued in lieu of and (in some instances) in addition to commencement of a summary eviction proceeding in Housing Court.

NONPAYMENT OF RENT/USE AND OCCUPANCY

If a tenant is in default of his/her/its obligations to pay rent, a Landlord may commence a so-called “plenary” action in either Civil Court or Supreme Court seeking a Money Judgment against the tenant for unpaid rent, additional rent charges and attorneys’ fees (if provided for in the lease), but not a judgment of possession. In most circumstances, these types of cases can be prosecuted to completion relatively quickly and if/when the Landlord prevails, steps can be taken to collect upon the Money Judgment by (i) garnishing wages, if the tenant is employed; (ii) turning over funds from a tenant’s bank account(s); and (iii) attaching the judgment to any real and/or personal property that the tenant may own and, potentially, forcing the sale of the property to satisfy the judgment. In New York, a Money Judgment is valid for ten (10) years and can be extended for an additional ten (10) years as a matter of right.

If a tenant has held over past the expiration of their lease and has not been paying rent/use and occupancy, a Landlord may similarly commence a plenary action seeking a Money Judgment for unpaid use and occupancy pursuant to Real Property Law §220 and/or pursuant to the Lease (if there is a provision which governs a tenant’s failure to surrender upon the expiration of the lease). Notably, many residential and most commercial leases have provisions which entitle Landlords to recover “holdover rent” at the rate of some designated multiple of the rent set forth in the lease (i.e. double or even triple the last agreed upon rent). This so-called “holdover rent” may also be sought in the plenary action.

BREACH OF LEASE

If a tenant is in violation of his/her/its non-monetary obligations under a lease, a Landlord may also seek injunctive relief in Supreme Court seeking an Order forcing the tenant to comply with the lease. For example, if the tenant fails to comply with any such Order, the Landlord may have the right to hold the tenant in civil and/or criminal contempt and be awarded monetary damages and even, in extreme circumstances, require that the tenant be sent to jail.

CONCLUSION

While these are not perfect options, they have proven to be effective in putting pressure on a defaulting tenant to force them to come to the table to reach a settlement whether that is (1) surrendering the space; (2) entering into a lease modification to provide for payout of arrears and increased rent; (3) payment of all or a portion of the rent owed; and/or (4) any combination of these possible solutions.