2017 was an astounding year in New York City real estate, especially on August 9, 2017. But to become effective at scattered times over the ensuing year, the City Council enacted numerous provisions falling into three distinct areas: general property owner/landlord and shareholder/unit owner/tenant relations, harassment-centered provisions, and provisions to slow down or discourage construction and sales of properties and laws affecting cooperatives and condominiums and foreclosure procedures. This article shall examine these laws and their applicability to property owners and occupants and the vendors that service them.
The August 9th Legislation
On one single day the New York City Council passed the following legislation, including laws concerning smoking, harassment of tenants, applications for construction and final inspections of permitted work, vacate orders, a task force on construction work in occupied multiple dwellings, distressed buildings subject to foreclosure by action in rem, building violations, oversight of construction contractors who have engaged in work without a required permit, increasing fines for working without a permit and stop work orders, a safe construction bill of rights, a denial of certain building permits where outstanding charges are owed to the city, and creation of an office of the tenant advocate within the department of buildings.
Expanded Definitions of Harrassment
Local Laws 162, 163, and 164 all expand the definition of harassment as found in New York City Administrative Code §27-2004 (48) and all took effect on December 28, 2017. Local Law 184 of 2017, effective February 5, 2018, Local Law 24 of 2018, effective April 30, 2018, and Local Law 48 of 2018, effective May 11, 2018 also expanded the definition. The expansions appear as follows:
Presumption of Intent
While under previous law, it had been the burden of the complainant to prove that the forbidden actions taken (being those of the pre-amendment law), were for the purpose of getting tenants to vacate their apartments or give up residential rights, under these amendments, the complainant need only prove the acts themselves, now being entitled to a presumption of the forbidden intent. Effectively, this means that the complainant has the initial burden of proving prima facie that the forbidden activities took place and once that prima facie burden is met, the owner now has the burden of disproving the forbidden intent.
In order to see this in action with a specific example, repeated lack of heat would be presumed to be with harassing intent, but such intent could be disproven by the landlord’s diligence in trying to get the boiler replaced.
Business Hours
One of the more peculiar provisions of the new suite of laws is that a landlord cannot contact a tenant more than once with a buyout offer if contact is made outside of the usual 9 to 5 business day. This is strange for a number of reasons, including the fact that many tenants in the City work at shifts other than 9 to 5 and mandating contacts during 9 to 5 for these tenants can make it required to contact them during their sleep time. Further, while case law for the service of process takes into account commuting time, this ordinance does not. For purposes of the ordinance, it is as if people beamed themselves to and from work. The entire ensemble of the ordinance makes buyout negotiations highly hazardous for landlords, greatly to their consternation, but to the consternation of tenants as well who, now having to take the initiative, weaken their hands in negotiation.
Gift to Tenant Organizers
Two provisions of these enactments immediately stand out as providing distinct advantages to organizations and law firms that, as a business model, organize the entire tenancy of a particular building—advantages over firms that only do occasional tenant representation.
The first of these is §27-2004 that enables a tenant to claim harassment for a one-shot loss of essential service if the interruption has taken place in a building where there are other interruptions of essential services, regardless of whether those other interruptions affect the complaining tenant. Obviously, if a tenant-oriented firm is working in the building, the firm is more aware of the building’s overall history than the individual tenants are.
Nothing in this provision requires that the interrupted service be building-wide in nature. Nothing in this provision allows for clearly excusable interruptions of essential services, such as the replacement of an elevator, an interruption that, by its nature, goes on for months at a time. However, as above stated, it appears that good faith and diligent repair or improvement to the building is a sufficient defense.
The second is §27-2004 that enables a tenant to claim harassment for one “baseless or frivolous” court proceeding, if there have been other “baseless or frivolous” proceedings in the building, specifically ones that have not affected the complaining tenant. Tenant-oriented firms are clearly better positioned to know of such lawsuits than individual tenants are. The other notable feature, however, is that the law has no requirement for a previous adjudication that the previous lawsuit was “baseless or frivolous.” While such a finding in the prior action would bind the owner by principles of collateral estoppel, since the complaining tenant is not a party to the prior action, there is no such collateral estoppel effect and the complaining tenant can therefore choose to relitigate the propriety of somebody else’s lawsuit afresh. However, under the law of unintended consequences, in buildings with significant distrust between the owner and the tenants, owners are, by this provision, strongly disincentivized to settle a run-of-the-mill nonpayment or holdover case on any terms that do not include a clear statement that the case had some merit to it. Tenants thus have an additional bargaining chip.
Penalties for Harassment
Effective December 1, 2017, Local Law 165 amends Administrative Code §27-2115 to increase the penalties for a judicial finding of harassment based on repeated commencement of baseless or frivolous lawsuits against one particular tenant from $1,000 to $2,000 dollars minimum for initial violations and $4,000 dollars for repeatedly doing so. For both the initial and repeated finding, the ceiling on the penalty is $10,000.
Note that the specific conduct penalized here is “commencing repeated baseless or frivolous court proceedings against any person lawfully entitled to occupancy of such dwelling unit.” Note that the basis for sanctions includes when the lawsuit “is completely without merit in law.” Imposition of a penalty under this amended ordinance would not seem to preclude an award of sanctions under the existing New York Court Rule §130-1, and even disciplinary action under Rule 3.1 of the Rules of Professional Conduct.
Certificates of No Harassment
Effective on September 27, 2018, Local Law 1 of 2018, the City’s new legislation with regard to Certificates of No Harassment (CONH) falls under the categories of anti-harassment legislation and of anti-construction legislation. In order to effect such a division, we focus on the prohibited conduct to establish the anti-harassment laws of the ordinance and on the consequences of such behavior in order to establish the anti-construction aspects of the legislation.
Substantively, “harassment” for purposes of this ordinance is made by reference to Administrative Code §27-2004 which, as we saw, was amended in this same package of legislation from August 9, 2017 and subsequent enactments, some of which are currently phasing in. However, that presents a problem in that while some of the conduct from §27-2004, such as plugging locks, would have been illegal without that ordinance, other conduct prohibited by §27-2004 is not illegal except for §27-2004.
That kind of “harassment” includes, for example, making a buyout offer to a tenant after having been asked not to. While only adjudications of harassment after the effective date of this ordinance can be counted to be “harassment” for purposes of this ordinance, the conduct to which it relates is, of course, prior to the adjudication and therefore could have been prior to the effective date of this ordinance. In fact, under the ordinance, it can be as much as five years prior to the passage of this ordinance.
Some of the new definitions of harassment being phased in are going to require considerable case law to flesh them out. For example, Subsection f-5 of the definition of harassment includes “threatening” people “based on age, race, creed, etc.” But it does not say threatening with what. For example, if a landlord honestly believes that younger persons require greater vigilance on the landlord’s part in collecting rent due to youth-induced forgetfulness, are such collection efforts “harassment”? Since subdivision (a) of the same section already says that implied threats “of force” are harassment, this means that the protected class threats are threats of some other nature than force, but what that other nature is, the legislation leaves to the imagination. Clearly, denying an owner a building permit because the owner engaged in conduct only vaguely defined in the statute is going to create significant constitutional issues. Under all understandings of due process, you cannot punish people for something you have not specifically told them they are not allowed to do. “A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.”[15]
Against adjudication of harassment, there are no current steps that an owner can take to purge the record. Therefore, for any building effected by this kind of history of harassment, the building’s sale value just took a precipitous fall, and there is nothing anybody can do to fix that.
New State Cooperative/Condominium Laws
Added by L. 2017, c. 305, effective January 1, 2018, under new Not-For-Profit Corporation Law §519-a and Business Corporations Law §727, Cooperative Board of Directors members and Condominium Board of Managers members are required to disclose those contracts that they were involved in between the Board and outside vendors or other contractors with whom the directors and managers have a relationship. That relationship is defined by reference to Business Corporations Law §713 that uses as a standard “a substantial financial interest.” While the statute does not define any of those terms, there is an adequate body of case law that does so.
Under the amended Not For Profit Corporation Law both the Boards and, under the Business Corporations Law, their individual members have requirements. The Boards themselves are required to report each meeting, including director attendance, voting records for contracts, and how each director voted on such contracts. They are also required to furnish annually to the directors copies of Business Corporations Law §713 and Not For Profit Corporation Law 715, the law that defines Board members acting in their personal interest and to require of the directors that they report their self-interested transactions. The Board members are also required to sign reports including information on the contract recipient, contract amount, and the purpose of entering into the contract, along with the date of each vote for a contract and the starting and ending dates of the contracts’ validity.
There are no penalties stated in the statute for violation of either of these laws.
Adam Leitman Bailey and Dov Treiman
Adam Leitman Bailey, P.C.
1 Battery Park Plaza, 18th Fl
New York, NY 10004
212-825-0365
alb@alblawfirm.com
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