On December 28, 2020, in response to the COVID-19 pandemic, the New York legislature met in a Special Session and passed the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (the “Act”) (S.9114/A.11181), which became effective immediately. The Act is aimed at providing relief to tenants facing residential eviction (Part A) and mortgagors/borrowers facing pending or future residential foreclosure proceedings (Part B, Subpart A). In addition, the Act (i) prohibits local governments from proceeding with tax lien sales or commencing tax foreclosures until May 1, 2021, on residential properties (Part B, Subpart B); (ii) prohibits credit discrimination and negative credit reporting (Part B, Subpart C); and (iii) requires local governments to carry-over the Senior Citizens’ Homeowners Exemption and the Disabled Homeowner Exemption to 2021 (Part B, Subpart D). Highlights of the Act are summarized below, but please refer to the full text of the Act for additional information.[i]
Limits of the Act
- The Act does not apply to residential eviction and foreclosure actions involving vacant and abandoned properties, as defined in RPAPL 1309(2), listed on the statewide vacant and abandoned property electronic registry, as defined in RPAPL § 1310, prior to March 7, 2020, and that remain on such registry.[ii]
- The Act also does not apply to, and does not affect, any mortgage loan made, insured, purchased, or securitized by a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation or the rights and obligations of any lender, issuer servicer, or trustee of such obligations.[iii]
Eviction Highlights – Part A of the Act
- Stays pending residential eviction proceedings for 60 days and bars new filings for 60 days through the end of February 2021, or to such later date that the chief administrative judge shall determine is necessary to ensure that the courts are prepared to conduct proceedings in compliance with the Act[iv];
- Allows residential tenants to submit to their landlord and/or file with the court, a Hardship Declaration,[v] under penalty of perjury regarding their inability to pay their rent or secure alternative housing and suffering a financial hardship or suffering a health-related hardship that will extend the stay on eviction proceedings until May 1, 2021;
- Certain proceedings can continue if the court receives an authorized new petition stating that the tenant is persistently and 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;
- Requires the landlord and the court to serve on tenants, the Hardship Declaration Form, along with all required notices of petition;
- Requires the state Office of Court Administration to post such information and forms on its website in multiple languages;[vi]
- Allows tenants to vacate default judgments upon oral or written request; and
- Creates a presumption of financial hardship upon filing a Hardship Declaration that would support a defense based on financial hardship under the Tenant Safe Harbor Act.[vii]
Foreclosure Highlights – Part B of the Act
Stay of Residential Foreclosures
- All pending residential foreclosure actions are stayed for at least 60 days through the end of February 2021, or to such later date that the chief administrative judge shall determine is necessary to ensure that the courts are prepared to conduct proceedings in compliance with the Act.[viii]
- The 60-day stay applies where the owner or mortgagor of the property is a natural person, regardless of how title is held, and owns 10 or fewer dwelling units whether directly or indirectly.
- Any owner, borrower, mortgagor, or natural person who owns 10 or fewer residential dwellings (as long as this includes the borrower’s primary residence) and experiences a financial hardship, can file a Hardship Declaration[ix] with the lender, its agent, or the court to stay a pending foreclosure proceeding until May 1, 2021, and prevent the commencement of a foreclosure action until May 1, 2021.
- Where a judgment of foreclosure sale was issued before December 28, 2020, but has not yet been executed, execution of the judgment shall be stayed until the court holds a status conference with the parties. If borrower/mortgagor submits a Hardship Declaration prior to the execution of the judgment, the action shall be stayed until May 1, 2021.
Statute of Limitations
- The statute of limitations to foreclose will be tolled during the initial 60-day stay. The Act also provides that “any specific time limit for the commencement of an action to foreclose a mortgage shall be tolled until May 1, 2021.”[x]
Requirements for New Residential Mortgage Foreclosure Actions
- New York Courts will not accept new foreclosure complaints for filing, unless the foreclosing party files an Affidavit of Service stating that:
(a) the required notices under RPAPL § 1303 (Help for Homeowners in Foreclosure/Notice to Tenants or “1303 Notice”) and RPAPL § 1304 (the “90-Day Notice”) and the Hardship Declaration (in English and mortgagor’s primary language, if other than English[xi]) were served on borrower/mortgagor; and
(b) attesting that at the time of filing, neither the foreclosing party nor its agent has received a Hardship Declaration from the mortgagor.
- Importantly, the foreclosing party should not rely on 1303 Notices served, or 90-Day Notices that were mailed, before the Act was effective. Rather, the foreclosing party should serve new 1303 Notices and mail new 90-Day Notices with the required Hardship Declaration.[xii]
- After a foreclosure action is commenced, the court shall seek confirmation on the record or in writing that borrower/mortgagor has received a Hardship Declaration and has not returned the Hardship Declaration to the foreclosing party or its agent.
- If the court determines that the borrower/mortgagor has not yet received a Hardship Declaration form, the court must stay further proceedings for no less than 10 business days to ensure borrower/mortgagor receives and fully considers whether to submit a Hardship Declaration.
Tax Lien Foreclosures
- Local governments cannot proceed with any tax lien sale or tax foreclosure until May 1, 2021, on residential properties, where the owner owns 10 or fewer units, including their primary residence, who is experiencing a financial hardship and files a Hardship Declaration.
- The enforcing entity conducting the tax lien sale or tax foreclosure must notify the owner of the property of their rights and that a copy of the Hardship Declaration can be accessed on the New York State Department of Tax and Finance’s website and must provide a link to the form. If the owner of the property submits a Hardship Declaration, any pending or potential tax lien sale or tax foreclosure action is stayed until May 1, 2021.
Extension of Credit/Credit Reporting Protections
- Prohibits lenders from discriminating in the determination of whether to extend credit to any owner of residential real property (owning 10 or fewer units) because the owner has been granted a stay of mortgage foreclosure proceedings or tax foreclosure proceedings or tax lien sales, or the owner is currently in arrears and has filed a Hardship Declaration with the lender; and
- Prohibits lenders from negative credit reporting to any credit reporting agency based on (i) a stay of any mortgage foreclosure proceedings, tax foreclosure proceedings, or tax lien sales; or (ii) mortgage arrears during the COVID-19 period with respect to an owner who has filed a Hardship Declaration with the lender.
Protections for Senior Citizens & Disabled Homeowners
- Requires local governments to carry over Senior Citizens’ Homeowner Exemption and Disabled Homeowner Exemptions from the 2020 assessment roll to the 2021 assessment roll at the same levels;
- Requires local governments to provide renewal applications, via e-mail or regular mail for individuals who may be eligible for a larger exemption in 2021;
- Allows local governments to specify procedures by which local assessors may require renewal applications by recipients believed to no longer qualify for the exemption in 2021; and
Bars any requirement for a recipient to personally appear to file a renewal, if a renewal is required
[i] The Act can be located at: legislation.nysenate.gov/pdf/bills/2019/S9114.
[ii] See the Act, Part B(B)(1)(b).
[iii] See the Act, Part B(A)(1)(b).
[iv] See the Act, Part A.
[v] The Hardship Declaration Form is available on the State of New York Unified Court System and can be located at: nycourts.gov/Courts/nyc/SSI/images/corona/HardshipDeclaration.pdf.
[vi] The Office of Court Administration posted such information on its website and provided the Hardship Declaration in multiple languages at: nycourts.gov/covid-eefpa.shtml.
[vii] The Tenant Safe Harbor Act was enacted on June 30, 2020, in response to the COVID-19 pandemic to help tenants avoid eviction for unpaid rent if they can demonstrate a financial hardship during the covered period. For additional information, go to legislation.nysenate.gov/pdf/bills/2019/S8192B.
[viii] The Act also covers foreclosure actions involving shares in a residential cooperative. See Part B(B)(1)(a).
[ix] In executing the Hardship Declaration, the borrower/mortgagor must swear to one of the enumerated circumstances and certain additional statements set forth in the declaration. Please see the Hardship Declaration for the specific circumstances and statements.
[x] See the Act, Part B(A)(5).
[xi] If borrower/mortgagor’s primary language is different from one of the eight languages the Hardship Declaration has been translated into by the New York State Unified Court System, the foreclosing party must provide a copy of the Hardship Declaration translated into that language.
[xii] While the Act does not expressly state that a foreclosing party must mail new 1303 Notices and new 90-Day Notices, this best practice is based on information provided at a New York State Bar Association Webinar on January 15, 2021, entitled “Eviction Moratorium: What Lawyers Need to Know About the COVID-19 Emergency Eviction and Foreclosure Prevent Act of 2020” with bill sponsors, Assemblyman Jeffrey Dinowitz and Senator Brian Kavanaugh.