Marcia Melendez, Ling Yang and their associated companies asked United States District Judge Ronnie Abrams to enjoin the three laws passed in May. Among other things, the property owners argue the city is infringing on their free speech ability to seek rent payments and wrongly changes the terms of their contracts with their tenants, both in violation of the U.S. Constitution.
"Together, these widely sweeping laws — the commercial harassment law, the residential harassment law, and the guaranty law — squelch plaintiffs' ability to engage in lawful speech and extinguish plaintiffs' contractual rights to enforce critical lease guaranties," according to the motion.
The lawsuit was filed July 10 and names as defendants the City of New York, Mayor Bill de Blasio and other city officials.
On May 26, de Blasio signed the three laws to help tenants during the novel coronavirus pandemic, namely by protecting them from potential rent harassment by landlords and by allowing commercial renters to walk away from leases during the outbreak by suspending the personal guarantees that back such agreements for the duration of the crisis, the suit said.
But Melendez, Yang and their attorneys argue the laws as crafted violate the First Amendment by limiting their ability to even ask their tenants for rent payments without potentially being seen as threatening, and by changing the terms of their contracts with tenants after they've been signed in violation of the Contracts Clause.
The two harassment laws for residential and commercial renters essentially penalize landlords who give rent forbearances, as property owners who then later try to recover payments could be seen as harassing tenants, Stephen Younger of Patterson Belknap Webb & Tyler LLP, counsel for the landlords, told Law360.
The laws are also phrased so broadly as to cover most of the city, including large national retail chains that are more likely to be able to pay rent, Younger said.
"These sorts of companies that don't need a government bailout, particularly shouldn't get a bailout from small property owners, are potentially covered by the scope of these bills and are now asserting harassment when landlords are trying to collect rent during this period," he said.
The landlords claim that the temporary suspension, from March 7 to Sept. 30, of enforcing the personal guarantees for commercial leases that otherwise allows property owners to recover rent from business owners violates the Contracts Clause as the law changes the terms of their agreement after they've been signed.
"By passing the guaranty law, defendants have improperly transferred the economic burdens experienced by tenants onto their landlords — regardless of their respective financial situations. Such burden shifting is not a legitimate public purpose," the suit said. "This creates a perverse incentive for tenants to abandon their leases without repercussions, which will likely have a detrimental effect on this city by accelerating the blight of vacant storefronts."
A spokesperson for the city told Law360 New York will "vigorously defend these laws, which provide needed relief and protections for tenants who have been hit hard by the current pandemic."
The property owners also said the municipal laws conflict with the authority of the New York state legislature and that of Gov. Andrew Cuomo to manage the crisis, and that New York City can't take on powers that don't belong to it.
"The harassment laws and the guaranty law directly conflict with the legislature's grant of emergency power to Gov. Cuomo because they seek to regulate conduct in conflict with the manner in which the governor has explicitly suspended and modified state and local laws," according to court documents.
The landlords are seeking a court order preventing the city from enforcing the laws, a declaration that the laws as they apply to property owners violate the Constitution and are preempted by New York state law, as well as attorney fees and costs.
The landlords and their companies are represented by Stephen Younger, Alejandro Cruz, Esther Kim, Hyatt Howard and Timothy Smith of Patterson Belknap Webb & Tyler LLP.
The city of New York is represented by Pamela Koplik and Carlos Alvarez of the New York City Law Department.
The case is Melendez et al. v. The City Of New York, et al., case number 1:20-cv-05301 in the U.S. District Court for the Southern District of New York.
--Editing by Amy Rowe.
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