A Comprehensive Guide to The Good Cause Eviction Laws
Introduction
There has been quite a bit of attention in the Real Estate Industry paid to the “Good Cause Eviction Law” (GCE) signed into law on April 22, 2024. While the law gives a good deal of new paperwork for lawyers to complete when dealing with tenants, our office has developed procedures to make the increase in fees required by such increased paperwork minimal. While the law, at first blush, seems strange and new, a closer examination of it will make it appear much more familiar to our clients who already have knowledge of Rent Stabilization.
GCE does not apply to rent stabilized apartments. The law is structured so that it applies to all New York City apartments except those that fall under an exception. This provision is more important than it appears. There is a similar provision in the Rent Stabilization Law that the courts have interpreted to mean that where there is a question about whether an applicable exception applies, the landlord claiming the exception has the burden of proof. Some of the categories of exception are so black and white that burden of proof issues will not likely arise, but others seem more inclined to need interpretation.
Exceptions
The exceptions are in the following categories:
1. Outside of the City of New York, GCE only applies where local authorities have enacted it by local legislation. Inside New York City, GCE will be phasing in, but most of it applies immediately.
2. “Small landlords” as defined by the statute. Basically, this means a landlord who “owns” a maximum of ten apartments inside New York State. However the meaning of “owns” in this context is very complicated and will clearly give rise to considerable litigation. Just for one example, anyone who has separate LLC’s for separate buildings where the total number of apartments in those buildings is more than eleven will, for purposes of this law, be considered not to be a “small” landlord. Landlords claiming to be small will have to disclose a considerable amount of information about their business associates. We have a number of clients who manage various collections of investors going in together for a particular property. While it is too soon to see how the courts will be interpreting the law, we predict that in any collection of investors, if there is one investor whose holdings add up to eleven or more apartments spread through various collections of investors, the presence of that one investor will make every building invested in subject to the GCE, even if all the other investors in that building have interests in buildings containing ten or fewer apartments.
3. Buildings of fewer than eleven units where the landlord lives in one of those units.
4. Apartments where a tenant subletting the apartment is trying to get the apartment back for personal occupancy. Note the GCE law gives this privilege to a tenant who is subletting, not to the owner of the property.
5. A superintendent’s apartment or that of any other employee who holds the apartment as part of a job and that employee has been fired.
6. A rent regulated apartment under any rent regulatory scheme.
7. Affordable housing units under an affordable housing law.
8. Coop and condo apartments.
9. Units that are newer than December 31, 2008. This exemption applies unit by unit, not to an entire building unless the entire building was built on or after January 1, 2009. The exemption lasts only for the first thirty years of the unit’s existence after the c of o has been issued.
10. Seasonal occupancies.
11. Occupancies in hospitals, retirement homes, assisted living and various other kinds of senior housing.
12. Mobile homes.
13. Hotel rooms.
14. College dormitories and boarding schools.
15. Religious cells.
16. Luxury apartments. The law defines how to determine whether an apartment is luxury, but it is not a fixed number. The figures change annually, but can generally be found at the Good Cause Eviction Charts. These charts enable calculation of 245% of the HUD geographic Fair Market Rent, that threshold being necessary to win exemption on this ground from GCE coverage.
17. While the law does not say so on its face, we predict that the courts will not apply the GCE to non-landlord/tenant relationships such as licensees, squatters, persons who have been foreclosed on, and various other reasons to evict a person who is not a tenant at all.
Causes for Eviction
Where the law does apply, the mere non-existence of a lease or the expiration of an existing one is no longer a ground for eviction on its own. The landlord must also have a cause for the eviction. However, the experience of this office has been that in the overwhelming majority of cases, landlords retain lawyers to evict tenants for some reason the tenant has become undesirable to the landlord. Most of these bases of undesirability appear as acceptable grounds for eviction under the GCE law.
These grounds for eviction are as follows:
1. Failure to pay rent. Notably the statute does not call for the tenant still owing the rent at the time of the eviction for this cause. Thus, this would appear to support eviction for owing rent at the time of the eviction proceeding for no lease or an expired lease. But, it would also apparently support an eviction for a tenant who has a history of being a frequent respondent in nonpayment proceedings (“chronic nonpayment”). Since there is no explicit chronic nonpayment proceeding in rent stabilization, but the courts allow it anyhow, we have reason to believe that chronic nonpayment would be a valid ground in GCE. Under the case law that grew under rent stabilization, the courts came to require previous cases to support a chronic nonpayment proceeding, mere rent demands not being enough. The way this law is written, it could mean that merely having been in arrears, even without a rent demand or a nonpayment proceeding, might be a ground for eviction. We will have to see how the courts interpret this.
2. However, the GCE does not allow for eviction for failure to pay rent above the ceilings set forth in GCE. Those ceilings are constantly changing, but also appear in the Good Cause Eviction Charts. However, unlike rent stabilization, the GCE does not make it illegal for landlords to charge above the ceilings. They just can’t sue above the ceilings. As long as the tenant pays the agreed upon rent, the ceilings may never come into play. The GCE does not include an overcharge provision. We do not know if the courts will read one into the statute or, for that matter, whether the courts will examine only the rents being sued for or will also examine the rental history to see if any overage above the GCE rent ceilings would call for a credit or even a refund. In spite of all of that, the GCE has highly complicated provisions setting forth factors that would or would not factor into a rent increase being considered reasonable in light of “all relevant facts.” There is considerable leeway in these judgments and we can expect different judges to have very different views of what is and what is not reasonable. It will probably take decades to have any coherent guidance from court decisions in this.
3. More broadly than rent stabilization which allows eviction for a breach of the lease, the GCE sees the lease as only one potential set of rules, the violation of which could lead to the tenant’s eviction. It allows for any set of rules and regulations, but the GCE does not set forth just how they come to the tenant’s attention. We can assume that courts will require that they be in a writing that the tenant is in possession of. We can also assume that the courts are not going to accept just any rules, but are going to require that they are reasonable and fair. With that in place, the GCE requires the kind of ten day notice to cure we are accustomed to seeing in rent stabilization.
4. The GCE also gives “nuisance” as a ground for eviction. This is extremely familiar territory and we have a solid body of case law to be able to interpret this section.
5. Illegal occupancy of an apartment is also a ground for eviction. However, it is limited to something that the landlord could be prosecuted for criminally or civilly. However, the GCE goes on to specify that this ground only applies if there is a vacate order. The provision goes on in considerably greater detail however.
6. Eviction can take place for illegal activity in the apartment. The case law makes clear that this is not limited to illegal drugs and prostitution, but nearly any kind of illegal activity. This could include, for example, short term rentals without proper registration of the apartment for such purposes.
7. Failure to provide access is a specific ground for eviction, if it is for repairs or improvements. However, we note that if a lease requires access for showing an apartment to a prospective successor tenant, that would also be allowed under the provisions allowing for eviction for failure to follow the rules.
8. The GCE also allows eviction for a qualified landlord to recover the premises for the landlord’s or the landlord’s family’s personal use. However, it is so narrowly drawn that very few landlords will actually be able to qualify for this ground. It is not a sure loser of a case, but it is set up by the GCE at one of the highest standards in civil litigation. Seniors and disabled persons are completely exempted from this ground.
9. There is a strict standard for allowing a landlord who intends to recover the premises for demolition of the premises. However, it is not nearly as strict as in rent stabilization.
10. Unique to the GCE is a ground for eviction for failure to agree to reasonable lease changes, but rent stabilization has the exact opposite. Rent stabilization requires that leases be forever renewed on identical terms. But, if the landlord wants to use this ability, there is a 30 to 90 day window to request these lease changes. Our office would advise that any landlord looking to take advantage of this, do so in the 40 to 80 day range. The courts will be strict about construing this window period.
Setting Rents
The GCE is not rent stabilization or anything like it, even if it borrows many of its ideas for certain aspects of the law. While the GCE does not create overcharge liability in a landlord for setting rents higher than would be possible under GCE calculations, it does prohibit landlords from effectively suing for rents above those
calculations. So long as the tenant pays the higher rents voluntarily, there is nothing in the GCE that enables a tenant to sue for a refund of the higher rents.
Where there is an existing tenancy where the landlord is entitled to ask for newer higher rents (such as in lease expiration), the GCE calculations are straightforward enough. The allowable increase is the lower of 10% or the sum of 5% and the annual percentage change in the Consumer Price Index as published by HUD. (See the Good Cause Eviction Charts for those calculations.) Landlords who charge only such increases or less are immune from attack on their rental rates based on the GCE.
However, if the landlord can prove expenses that justify a higher rent rate, the courts are sustain them. One complaint we have frequently heard from our landlord clients is that they have to keep paying higher and higher real estate taxes without their rents keeping pace. The GCE specifically calls upon the courts to consider such taxes as a basis for a higher rent, but does not create any kind of formula as to how those taxes are to be taken into account. To re-emphasize, landlords are permitted under the GCE rents higher than the GCE calculation, but higher rents will require hard cash based justification stemming from higher expense. Keeping up with what similar apartments charge in the nearby neighborhood is not an allowable factor and the effect of the GCE will likely be partial prevention of neighborhoods from becoming more fashionable than they previously were—unless nonrental housing becomes the norm in such neighborhoods.
None of these considerations affect brand new housing units, including, of course, housing in newly constructed buildings.
While there are few surviving paths whereby a rental unit can become deregulated, there still are some. However, the GCE does not take into account a unit passing from regulated status to deregulated status in setting the rents according the the GCE formulas. The previous practice of setting rents at what the market will bear in newly deregulated units will not survive under the GCE. Rather, the GCE will look to the previous rent the same as any rent in a GCE calculation and only count as reasonable the rents that are the less of 10% or 5% plus CPI change. However, the landlord can justify a somewhat higher rent based on what the landlord spent on upgrading the apartment to achieve the higher marketability of the apartment. However, the GCE provides no guidance in how to apply those outlays in justifying the newer higher rents. One principle of law called “pari materia” might lead a court to use the same amortization rates as rent stabilization uses in IAI increases. If that were to become the law (whether by legislature or judicial precedent) it would almost certainly discourage landlords from modernizing apartments any more than is necessary to charge the rent that is already being charged in the apartment in its outmoded condition (plus the usual GCE approved increases).
New Notices
New York State already has some of the longest leases in the USA by page count alone. The required provisions swell a perfectly ordinary lease issued in New York City in many cases to in excess of sixty pages. Regardless of whether a particular tenancy is in fact currently exempt from the GCE law or will be, all leases in New York State will, starting on August 18, 2024 be required to have a new form properly filled out and attached to them.
To fully understand the breadth of this requirement, we spell it out exactly: It applies to anyone who is a “fee owner, lessor, sublessor, assignor, court appointed receiver, or any other person or entity receiving or entitled to receive rent for the occupancy of any housing accommodation or an agent of any of the foregoing.”
Otherwise put, this requirement applies to anyone who rents out any space residentially, anywhere in the State of New York, no matter how small the space is, regardless of rent stabilization or other regulatory status, and regardless of how much or how little the rent is, and regardless of the formality or the informality of the relationship. The only limitation on this law as written is that it does not apply to oral rentals. To anything in writing regarding a residential rental occupancy, it applies. Even in tenancies to which the GCE does not apply, this notice is required.
This requirement takes the form of a notice (“The GCE Notice”) we will describe below.
In an ordinary tenancy, the tenant will repeatedly receive the same notice, over and over again, but even more often if the tenant is being sued.
Effective August 18, 2024. the landlord must give this notice:
1. In every lease;
2. In every lease renewal;
3. In every notice sent to a tenant informing the tenant that the landlord does not intend to renew the lease;
4. In every notice sent to a tenant informing the tenant that the rent will be increasing by more than 5%;
5. In every rent demand; and
6. In every petition in Housing Court or any other court that can hear eviction proceedings like the ones heard in Housing Court.
The notice must be given in full every single time with nothing left out, even though the notice correctly states that the GCE does not apply because (for example) the location of the rental premises is not in a place with the GCE applies.
The notice lists the various reasons a unit may be exempt from the GCE, all of which are discussed in this article.
The notice appears at the end of this article.
Penalties
In addition to losing proceedings for eviction, the GCE sets forth other remedies for tenants who believe their landlord has abused this law or failed to live under its obligations. It allows for lawsuits for damages, declaratory judgments, and injunctions. Not only is the landlord a proposed defendant, but so too is a proposed purchaser (a provision that seems to have constitutional problems).
Waiver
Nothing in a lease or any other document can waive the protections for tenants under this law.
Conclusion
Even a quick glance at this law shows that it is intended to completely shift the balance in New York to being considerably more pro-tenant than it currently is. However, that is only really true for inside New York City. In other communities, it will be up to local politicians to decide if they want to swing the pendulum in quite that manner. We note in that regard, however, that the law calls for an all-or-nothing acceptance of this law. An upstate community does not have the option of picking and choosing those provisions it wants to have. Such a pick and choose approach would require a local law that independently passes its own more limited version of the law. Whether the courts would accept such a pared down version of the GCE, we cannot state.