Possible Solution To State Restrictions On Seasonal Rentals

Twomey, Latham, Shea, Kelley, Dubin & Quartararo, LLP Real Estate Broker E-Alert

Landlords Suffer Major Blow From New State Law Affecting Seasonal Rentals, But There Is A Possible Solution

by John Shea, Senior Partner
August, 2019

While City landlords were infuriated by certain provisions of the recently enacted Housing Stability and Tenant Protection Act of 2019 applicable to long term urban rentals, local landlords should be aware that important aspects of the legislation apply statewide.

Buried away in the final bill signed by Governor Cuomo are two provisions that will significantly affect rentals on the East End of Long Island. Both pertain to rentals generally, but one provision is extremely problematic for seasonal rentals.

Section 7-108(1) of the General Obligations Law (GOL) has been amended to add a new subdivision for leases of standard residential properties stating that “No deposit or advance shall exceed the amount of one month’s rent under such contract.”

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 this new legislation.

The law also provides that:
"(g) Any person . . . found to have willfully violated this subdivision shall be liable for punitive damages of up to twice the amount of the deposit or advance.”

One solution might be to require a Letter of Credit to ensure faithful performance of a tenant’s obligations under a seasonal lease.

For example, for a 3 month summer rental, the tenant could be required to give the landlord one month’s rent together with a Letter of Credit stating that the bank would cover any rent that the tenant failed to pay.

If the bank required the tenant to make a deposit with the bank to secure the Letter of Credit, that tenant account with the bank would not constitute a “deposit or advance” with the landlord.

The other problematic provisions of the new legislation are the following, GOL Section 7-108(1-a):
“(e)Within fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit.

(f) In any action or proceeding disputing the amount of any amount of the deposit retained, the landlord shall bear the burden of proof as to the reasonableness of the amount retained."

Many leases had given the landlord a full 30 days to re-enter the leased property after the tenant’s departure and assess the damage. In some instances, 14 days may not be enough time to fully itemize and estimate damages with contractors or others, and produce an itemized statement. Landlords would be wise to make every effort to adhere to the fourteen day deadline to avoid forfeiture of security deposits.

About John Shea

Senior Partner John Shea is actively engaged in commercial litigation, corporate counseling, real estate development and transactions, environmental law, and estate planning for high net worth individuals. Click here for John’s full bio.

Twomey Latham has provided dedicated counsel to our clients for over forty years. As a full-service practice, we provide caring, comprehensive and cost-effective legal services to a broad range of corporate and individual clients.

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