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COVID-19 Emergency Protect Our Small Businesses Act of 2021

By Phillip Rosen

On March 9, 2021, Governor Cuomo signed into law the COVID-19 Emergency Protect Our Small Businesses Act of 2021 (the “Act”). The text of the Act is here: https://legiscan.com/NY/text/S00471/2021.

The Act, which took effect immediately provides, among other things, COVID-related protections for tenants in commercial eviction proceedings and defendants in commercial foreclosures. This article addresses the impact of the Act on commercial foreclosures.

Applicability of the Act to Commercial Foreclosures:

  • The Act shall apply to any action to foreclose a mortgage relating to commercial real property, provided the owner or mortgagor of such property owns ten or fewer commercial units whether directly or indirectly and is a business that is resident in New York State, independently owned and operated, not dominant in its field, and employs fifty or fewer persons. The ten or fewer commercial units may be in more than one property or building as long as the total aggregate number of ten units are currently occupied by a tenant or are available for rent.
  • Notwithstanding anything to the contrary, the Act shall not apply to, and does not affect any mortgage loans 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.

Requirements of the Act Concerning Pre-Foreclosures Notices and Commencing Commercial Foreclosures:

  • The foreclosing party shall include a "Hardship Declaration" with every notice required provided to a mortgagor prior to filing an action for foreclosure. Such notice shall also include a mailing address, telephone number and active email address the mortgagor can use to contact the foreclosing party and return the hardship declaration. The Hardship Declaration is in Subpart A on page 8 of the Act included above.
  • If a mortgagor provides a hardship declaration to the foreclosing party or an agent of the foreclosing party, there shall be no initiation of an action to foreclose a mortgage against the mortgagor until at least May 1, 2021, and in such event any specific time limit for the commencement of an action to foreclose a mortgage shall be tolled until May 1, 2021.
  • No court shall accept for filing any action to foreclose a mortgage unless the foreclosing party or an agent of the foreclosing party files an affidavit, under penalty of perjury:

    (i) of service demonstrating the manner in which the foreclosing party's agent served a copy of the hardship declaration with required notices, if any, provided to the mortgagor, and

    (ii) attesting that at the time of filing, neither the foreclosing party nor any agent of the foreclosing party has received a hardship declaration from the mortgagor.
  • At the earliest possible opportunity, the court shall seek confirmation on the record or in writing that the mortgagor has received a copy of the hardship declaration and that the mortgagor has not returned the hardship declaration to the foreclosing party or an agent of the foreclosing party. If the court determines a mortgagor has not received a hardship declaration, then the court shall stay the proceeding for a reasonable period of time, which shall be no less than ten business days or any longer period provided by law, to ensure the mortgagor received and fully considered whether to submit the hardship declaration.

Requirements of the Act Concerning Pending Commercial Foreclosures:

  • Any action to foreclose a mortgage pending on the effective date of this Act, including actions filed on or before March 7, 2020, or commenced within thirty days of the effective date of this Act shall be stayed for at least sixty days, or to such later date that the chief administrative judge shall determine is necessary to ensure that courts are prepared to conduct proceedings in compliance with this Act and to give mortgagors an opportunity to submit the hardship declaration pursuant to this Act. The court in each case shall promptly issue an order directing such stay and promptly mail the mortgagor a copy of the hardship declaration.
  • In any action to foreclose a mortgage in which a judgment of sale has not been issued, including actions filed on or before March 7, 2020, if the mortgagor provides a hardship declaration to the foreclosing party, the court, or an agent of the foreclosing party or the court, the proceeding shall be stayed until at least May 1, 2021. If such hardship declaration is provided to the foreclosing party or agent of the foreclosing party, such foreclosing party or agent shall promptly file it with the court, advising the court in writing the index number of all relevant cases.
  • In any action to foreclose a mortgage in which a judgment of sale has been issued prior to the effective date of this Act but has not yet been executed as of the effective date of this Act, including actions filed on or before March 7, 2020, the court shall stay the execution of the judgment at least until the court has held a status conference with the parties. In any action to foreclose a mortgage, if the mortgagor provides a hardship declaration to the foreclosing party, the court, or an agent of the foreclosing party or the court, prior to the execution of the judgment, the execution shall be stayed until at least May 1, 2021. If such hardship declaration is provided to the foreclosing party or agent of the foreclosing party, such foreclosing party or agent shall promptly file it with the court, advising the court in writing the index number of all relevant cases.
  • The office of court administration shall post and maintain a copy of the hardship declaration on the website of such office beginning within fifteen days of the effective date of this Act.
  • A hardship declaration shall create a rebuttable presumption that the mortgagor is suffering financial hardship, in any judicial or administrative proceeding that may be brought, for the purposes of establishing a defense under an executive order of the governor or any other local or state law, order or regulation restricting actions to foreclose a mortgage against a mortgagor suffering from a financial hardship during or due to the COVID-19 pandemic provided that the absence of a hardship declaration shall not create a presumption that a financial hardship is not present.

We are available to answer any questions you may have concerning this article or commercial foreclosures.

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Philip Rosen practices in New York and New Jersey, is a member of the firm’s management committee and the chair of the firm’s New Jersey creditors’ rights group. Phil’s diverse practice includes mortgage-related litigation, foreclosures, title and real estate disputes, bankruptcy matters and assisting investors in their acquisition of performing and defaulted loan portfolios. He is seasoned in foreclosure law having foreclosed millions of dollars in commercial and residential mortgages for banks, private equity firms and securitized servicers. For questions regarding this article, please contact Phil at prosen@zeklaw.com.