The Second Circuit appeared divided Monday over the fate of a lawsuit that says New York City trampled the rights of landlords in a global emergency.
MANHATTAN (CN) — Over a year into a deadly pandemic that made New York City an early hotspot, a group of landlords made to hold off rent collection indefinitely urged the Second Circuit on Monday to revive their case.
“You don’t get to throw out constitutional protections just because there’s an emergency,” said Claude Szyfer, representing Brooklyn landlord Marcia Melendez and others.
Commercial tenant protections came into effect last May, part of Mayor Bill de Blasio’s effort to help businesses leasing storefronts they may not have been able to use as the novel coronavirus blazed across the city and every other corner of the earth in 2020.
“One of the other crucial elements of today is the focus on tenants who are dealing with some unprecedented problems because of the coronavirus, dealing with some landlords — and they are not the majority — but some landlords who unfortunately are taking advantage of this crisis and using it as a time to harass or mistreat tenants,” de Blasio said at the time.
The new laws expanded the definition of landlord harassment, meaning that the landlord could not pester tenants about rent or eviction based on their status due to Covid-19. One major sticking point for landlords is a provision that says they cannot enforce personal guaranty on property. The law covers rent payments from March 2020 through March 2021, but landlords are permanently barred from seeking money owed during those dates.
Melendez and the other landlords alleged violations of their due process under the First Amendment, noting that tenants were not the only ones struggling during the pandemic, but a federal judge dismissed their case in November.
“First, because the court finds — as the city insists — that the Harassment Laws do not prevent landlords from making routine rent demands, these laws do not implicate plaintiffs’ free speech rights,” U.S. District Judge Ronnie Abrams wrote. “Moreover, because the Harassment Laws are sufficiently clear on what constitutes harassment, the court further concludes that these laws do not violate due process.”
As the landlords took their fight to the federal appeals court on Monday, U.S. Circuit Judge Susan Carney, an Obama appointee, underscored the city’s point that it passed the laws as a way to benefit all New Yorkers.
Szyfer, with Stroock Stroock and Lavan, pushed back. “By simply saying you’re benefiting the society at large doesn’t mean you are,” he argued.
The argument struck a chord with U.S. Circuit Judge Reena Raggi, a George W. Bush appointee. “Landlords also have obligations they aren’t meeting without getting this rent,” Raggi said.
Jamison Davies, representing the city, agreed, but noted that the law gives tenants time to potentially save money and make up the difference of any missed payments.
“Though it does stop landlords from getting rent during that time period, it permits those tenants to generate income and maybe the ability to pay back rent,” said Davies.
Kimberly Joyce, a spokeswoman for the New York City Law Department, expressed certainty after the hearing that Melendez’s suit is a losing one.
“In response to the pandemic, the city passed a series of laws protecting individual small business owners from personal financial ruin and guarding against tenant harassment,” Joyce said in an email. “These laws are critical parts of the city’s pandemic response, and we are confident the court will hold that they are entirely constitutional.”
Szyfer, for the landlords, did not immediately respond to an email seeking comment. Monday’s panel was rounded out by U.S. Circuit Judge Jose Cabranes, a Clinton appointee.
Among those sticking up for small businesses in the spat is the Association for Neighborhood and Housing Development.
“Commercial tenants in New York city have experienced a massive loss in revenue, and there is no dedicated rent relief program for small businesses,” Karen Narefsky, a senior organizer at the nonprofit, said in an email. “Unless they have worked out a deal with their landlord, commercial tenants are on the hook for full rent going back to the beginning of the pandemic, even during the months when the city was almost completely shut down — this can be tens or even hundreds of thousands of dollars.”
Narefsky went on: “The personal-guaranty protections passed by the city are critical to ensure that small business owners don’t face personal financial ruin because of debt accumulated during the pandemic. The city should continue to build on these protections by addressing the rising cost of commercial rent and preventing warehousing of commercial spaces.”
By September 2020, six months into the pandemic, nearly 6,000 businesses in New York City had closed, and there was a 40% jump in bankruptcy filings across the five boroughs.