Some Fallout Among Landlords And Real Estate Practitioners Over The New Rent Law

Back in July I wrote an article that appeared on Hamptons.com regarding the Housing and Stability Tenant Protection Act that went into effect June14th, 2019.

The law has caused much consternation among landlords and real estate practitioners in counties affected by rent regulation laws as well as those where rents are not regulated, such as Suffolk County. A result has been confusion, misinformation, trepidation, and a reaching out for answers, many of which are not currently available, including from experts in the field.

The issue of greatest concern to landlords and real estate practitioners on the East End of Long Island has to do with the issue of Security Deposits for short-term or seasonal rentals, which are not addressed specifically in the legislation. The law limits the landlord to a security deposit equal to one month’s rent including utilities and a return of the deposit with an accounting for any deductions made from the deposit within fourteen days of the expiration of the lease.

The issue is best summarized by John Shea, Senior Partner with Twomey, Latham, Shea, Kelley, Dubin and Quartararo. “This shatters the leasing system that has been in place for decades for short term leases and seasonal rentals on the East End. Landlords had traditionally issued leases that required the payment of the rent for the full term of the seasonal rental no later than the time the tenant was to receive the keys and take occupancy. That is now specifically prohibited by the new legislation.”

A positive attempt to address the issue has been made by Assemblyman Fred W. Thiele that would amend the law by exempting seasonal rentals of 120 days or less and advising that “the State Attorney General provide guidance to the public that the security and advance limitation will not be enforced against seasonal rentals.”

In September I had several opportunities to provide instruction regarding the new law in my real estate classes at the Cook Maran Real Estate School in Southampton and East Hampton. The real estate agents in attendance expressed their frustration with the new law, especially over the issue of security deposits.

The DOS has issued a memorandum to all real estate licensees that states: “An agent who is working for a landlord and is holding a security deposit is required to comply with this section [of the law].”

I asked Anthony Gatto, Director of Legal Services for the New York State Association of Realtors, for his opinion regarding the obligations of real estate licenses. “The issue is if the licensee knows the landlord is doing something contrary to the law, the licensee will also be held liable and risks discipline from the Department of State. The licensee should not work with a landlord if they know the landlord is not complying with the law and explain why.”

In a memorandum published by NYSAR, it is stated that the common practice of a landlord requesting a security deposit equal to one month’s rent, as well as the payment of the first month’s and last month’s rent in advance are prohibited by the law now in effect.

In order that Assemblyman Thiele’s amendment to becomes law, the amendment will have to pass the Assembly and the Senate and signed by the governor.