Attorneys for the state say tenant security deposits are available to cover unpaid rent, but a group of landlords asked the Second Circuit how that helps if they get stuck with a damaged apartment.
MANHATTAN (CN) — New York is getting on its feet again after a long year battling Covid-19, but federal appeals court judges dug in Wednesday to landlords’ claims of continuing hardships stemming first from an eviction moratorium and now a state law that lets tenants pay rent with their security deposits.
The landlords are fighting the law now as they appeal for an injunction against the moratorium that the District Court denied them. For the state, however, the law is wholly separate from the temporary eviction ban that triggered the fight in the first place.
At Second Circuit oral arguments on Wednesday morning, Linda Fang with the state Attorney General’s Office referred to the initial order from Governor Andrew Cuomo as “a temporary executive stop-gap until the legislatures could act.” The eviction pause is more comprehensive, she said, “and that has never been a scheme that plaintiffs have sought to challenge.”
U.S. Circuit Judge Dennis Jacobs questioned Fang about whether the executive order could make a comeback, given the nature of the pandemic, and the risk of new strains of the coronavirus, which he called “unknown and unknowable.”
Fang acknowledged the uncertainty but argued that, at this point, “we’re at a very different place pandemic-wise.”
The hearing comes months after state lawmakers voted to limit Governor Andrew Cuomo’s emergency powers during the Covid-19 pandemic, but the same Legislature later recently extended the moratorium on evictions through August of this year. Another provision of the statute lets tenants use their security deposits to pay rent if they are experiencing financial hardships because of the pandemic.
When the Second Circuit panel asked about that change regarding security deposits. Fang made the argument “that, in fact, benefits landlords,” allowing property owners to tap into “what in essence was a pot of money” that they otherwise would have had to leave untouched.
Noting that the statute requires tenants to replenish security deposits within three months, Fang asserted that it “merely shifts the temporal liability.”
The argument was not a hit, however, with U.S. Circuit Judge William J. Nardini.
“You’re telling me landlords should be happy about this, but they seem to be suing,” the Trump appointee remarked. As Nardini saw it, once a security deposit was used up, the landlords could be stuck with tenants “bending the Venetian blinds, poking holes in the wall — and then when they move out, I don’t have any money to repair the damage.”
The final judge on the panel, U.S. Circuit Judge Denny Chin, brought up an argument from briefing on behalf of the landlords that the security-deposit statute violates the Contract Clause of the Fifth Amendment. His question, though, was why such an impairment isn’t “something that we should live with, given the exigencies of the pandemic.”
The landlords’ attorney Mark A. Guterman had an easy answer for the Clinton appointee. “Because this all comes down to money,” replied Guterman, of the firm Lehrman Lehrman & Guterman.
State government recently put grants in place to help landlords, the attorney noted, but he said they don’t replenish security deposits.
As for mootness, Guterman said that neither litigants nor the court can predict what future order Cuomo may impose. He said his clients’ suit falls under an exception to mootness like the one extended to houses of worship in a Supreme Court ruling in favor of Roman Catholic and Orthodox Jewish groups, who sued Cuomo over capacity limits.
In a phone interview following the argument, Guterman said the Second Circuit should take an opportunity to revisit pandemic-related policies to avoid a legal scramble in the event of another health emergency in the future.
“The medical community looks back at how things were done over the course of a pandemic, and they try to make new ways of dealing with things, so that if it ever happens again, they won’t be caught short — as we clearly were when this pandemic started,” he said. “The hope is that the law can do the same thing.”
Guidance from the courts, especially regarding constitutionality of statutes put in place by governors, is valuable for future — for “next time,” as Guterman put it.
“And if you listen to the experts, ‘next time’ is only ‘when,’” he said, not ‘whether.’”
Cuomo’s office did not immediately return a request for comment.
Nardini, Chin and Jacobs, an appointee of George H. W. Bush, reserved judgment.