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BLOG / 04.15.20 /Kenneth R. Jacobs

Coronavirus: NEW EXECUTIVE ORDER – ONGOING ISSUES

Cooperatives and condominiums appear to be adjusting to the “new normal” – limited access, leaner staff, frustration at so many halted projects, etc. Below is a status report on current and upcoming issues that we see.

Face Coverings for Building Employees. Executive Order No. 202.16, finalized yesterday, requires employers to provide “face coverings,” at employer expense, to essential employees in the workplace when in “direct contact with customers or members of the public.” The Order does not define “face coverings” or “members of the public”, but since building service workers are deemed “essential,” it would seem to apply to residential buildings. Members of the public would seem to include owners, tenants, other employees, visitors, vendors, or contractors, so you are required to provide your staff members with face coverings. The Order is effective on Wednesday April 15th at 8:00 PM.

How to Handle Arrears? Many Boards are asking whether to continue sending default notices and taking legal action against owners in arrears, given the moratorium on evictions and the limitation imposed on most court action. We are recommending the following:

1. Foreclosures and evictions have been suspended in NY by Executive Order through April 19th. Foreclosures and evictions are suspended for mortgages owned or backed by FNMA or FHA through May 17th. We expect that both moratoriums will be extended for some period.

While suspensions are pending, Boards should take all administrative and legal steps that you can at this time, including sending warning letters, formal notices of default and notices of termination, serving 14-day notices, preparing notices of petition and petitions, recording Notices of Lien and demanding assignments of rent. There will be a surge of court proceedings when the courts reopen, and you want to be in the best position to take appropriate collection action. Co-ops should notify shareholders’ lenders of shareholder arrears, since they frequently pay on the shareholder’s behalf. Condos should formalize their liens on the units and note that recording Notices of Lien does not require court action, and recording offices currently remain open.

2. We understand that Boards may want to make exceptions for certain situations and will always have the right to modify the approach for an individual case. For example, an owner who has been in arrears for several months before March, or who is a chronic with a long history of arrears, may not be entitled to the same consideration as one who fell behind in April. This does not mean that we recommend deferring collections; if maintenance/common charges are not paid, the association can’t keep the lights on.

Employer Benefits Available to Co-ops and Condos. The CARES Act also includes the “Employee Retention Credit,” under which employers will receive a credit against their employment taxes equal to their share of FICA contributions (6.2% of wages up to $137,700) between March 13th and December 31, 2020, up to a maximum of $10,000 of “qualified wages” per employee. This credit can be taken by cooperatives, condominiums, HOA’s and non-profits regardless of whether the employee remains on the job or was laid off. Every little bit helps.

PPP Impasse. As of this date, the House and Senate are pushing different plans for additional aid. The Senate wants to pass a $250 billion infusion to the Paycheck Protection Program since almost 80% of the initial appropriation was used up in a week. The House wants to increase that by another $250 billion to include aid to the states and hospitals. Since Congress is not physically present in Washington, only bills that can pass by “Unanimous Consent” can be enacted quickly, so additional funding remains problematic. Since the SBA hasn’t changed its official position barring cooperatives and condominiums from applying, though, associations still may not receive any benefit from additional funding.

We will continue to keep you updated on COVID-19 related issues affecting cooperatives and condominiums.