Round 3 to Tenants! Landy on the Ropes!
DeBlasio Enters the Fray: Deals Major Blow to Landy!!
Congratulations to everyone who got behind 1932 as the Mayor signed it into law today! Perhaps that elusive tunnel light will soon come into view and we will be able to hoist ourselves further out of this crater and start believing in a plan that may actually get us to the other side. This is a huge victory for the industry because it gives us options and it demonstrates the power of our collective voices.
Along with the moratorium on evictions that runs to the end of August, the new law finally affords tenants some leverage. It’s a big deal so give it some serious thought and make sure you use it to your advantage. If you want to hand back the keys and take a breather, you can do so without losing it all. Yes, you lose your security deposit and any money that you owed pre-Covid but that’s it. If you want to use your right to turn in the keys to negotiate a better deal, by all means do so. Already, we are seeing Landy with a new disposition. The pit bull persona has softened and although still howling and growling, Landy is now much less likely to bite these days.
Here’s some other industry news that you may find interesting:
New Loan Available
New York State has a new loan, called the New York Forward Loan Fund. The pre-application process is open today and here’s the deal:
– It’s up to $100K Loan at 3% interest payable over 5 years.
– You must have 20 or fewer employees and gross less than 3 million dollars per year.
– It’s not first come, first served. Applications will be reviewed on a rolling basis but I would still get them in asap.
Here’s the kicker:
-You don’t qualify if you received PPP or EIDL money.
There are some other requirements as well so read carefully. You can find everything here: https://esd.ny.gov/nyforwardloans-info
Many of you know that Lauren and I moved to LA last year with plans of opening an office out there and living that LA Venice beach life. Well we lasted all of 2 months. The relentless sun, fierce fires, plastic personas and driving hell where intolerable and we hauled our asses back to Brooklyn right quick. And while I am so happy to be back in my hometown, the one thing I do miss is how wonderfully progressive they are out there. It seems that not only do they have the best ideas but they get stuff done and after they identify problems (other than the homeless crisis) they enact laws to help. Right now, they have a law pending that requires Landy to negotiate with tenants for 30 days and if an agreement can’t be reached, then the tenant can just hand back the keys with no further liability. It’s similar to 1932 but it has more bells and whistles and will last until the end of 2021 wherein 1932 ends at the end of September. Lawsuits are being threatened by the RE industry, so we will watch those decisions carefully.
Also, in the great food city of San Francisco, they are opening the streets. A program called “Shared Spaces” allows restaurants and bars to apply for a no-cost, expedited permit to share the sidewalk or parking lane for outdoor seating. This is precisely what we have been clamoring for. Will our Mayor follow suit? More on that later this week.
The House and the Senate continue their Dance of the Vampires as they try to figure out how they are going to amend the PPP while continuing to suck the blood out of our very existence with each passing day. House wants to extend to 24 weeks. Senate wants 16 weeks. House wants to reconfigure the 75/25 split. Senate has been silent on this. We expect some movement on this by the end of the week but it’s getting really late and the longer they wait, the less it matters. Here’s Joseph with more PPP madness.
Joey Regs Says by Joseph Levey
Another week, another Interim Final Rule from the SBA. It’s amazing to us that, despite the fact that many borrowers are already 6/8ths of the way through their covered period, the SBA continues to change the rules. As has been the case with all other guidance released by the SBA, this one is a mixed bag. There’s some good, and there’s some bad. And thanks, SBA, for doing it on a Friday night again – holiday weekend too. Nice touch. Here are the highlights:
Until this weekend, some recurring questions about the PPP program have been: Can I use PPP funds to prepay rent for periods beyond the 8 weeks? Can I use PPP funds to backpay rent that became due prior to the covered period?
Based on the literal language of the law, the answer was no; only costs that were paid and accrued within the 8-week covered period were eligible for forgiveness.
Well, we’re happy to report that the SBA has formally relaxed this restriction: rent and utility costs are eligible for forgiveness as long as they are paid within your 8-week covered period. This means that you can pay rent and utility costs for periods outside of the 8-week covered period as long as the payment is made within the 8-week period. The SBA’s reasoning? The “25 percent cap on non-payroll costs will avoid excessive inclusion of non-payroll costs.” Whatever. Who cares. We’ll take it!
Think about how this might change things, from a strategic standpoint, with dear old Landy. Maybe additional $ up front helps to negotiate some other sticking points away. Just a thought.
Please note, however, that this does not extend to your existing mortgage obligations – so you cannot use your PPP funds to prepay interest on your covered mortgage obligations.
Bonuses ARE Forgivable.
Until this recent Interim Final Rule, it was unclear whether bonuses paid to employees were considered part of the ‘payroll costs’ for which a borrower may apply for forgiveness.
Fortunately, the SBA has now answered that question with a resounding, “YES.” Bonus payments, as well as hazard pay, are eligible for loan forgiveness, provided that the aggregate of all cash payments to an employee during the covered period does not exceed the $100k annualized cap.
Ratting Out Your Employees.
This one is bad, on a humanistic level. The SBA giveth, and then it taketh away.
The SBA had recently announced that borrowers wouldn’t be penalized for not hitting their FTE targets and/or salary thresholds if those reductions were a result of employees’ refusal(s) to come back to work. This made sense, since it seemed that the federal government had been primarily concerned with making sure our pre-COVID workforce had the option to actually return to work.
However, the SBA just added a big, fat, ugly requirement into the mix. In order to actually take advantage of this exemption, “the borrower [must inform] the applicable state unemployment insurance office of such employee’s rejected offer of re-employment within 30 days of the employee’s rejection of the offer.”
In other words, if you had planned on having your FTE target reduced on the basis that an employee declined to be put back on your payroll, you’re now required to rat that employee out to the NYS DOL.
What does this report involve? How do I submit it? What if 30 days have already passed? The SBA promises to give us more information on the logistics, here, but that guidance doesn’t appear to be available yet. We’ll be monitoring this closely.
Needless to say, this requirement is messed up. Not only because New York is one of the states that hasn’t EVER required employers to affirmatively report any such offers of re-hire to the DOL, but because many employers have already told their employees that they wouldn’t be reporting anything to the DOL unless asked specifically. Please know that we are working feverishly to determine the practical implications of this new requirement and trying to determine the best way forward for our clients. And with rules being as fluid as they have been here, that’s unfortunately easier said than done.
It should be noted that this requirement seems to only apply if you want to have that employee counted towards your FTE target. It doesn’t appear that you would need to report anything if you ultimately end up replacing that FTE with a new employee.
The Banks Will Decide Our Fate.
Previously, we reported that forgiveness applications would be reviewed directly by the SBA and not the bank. Now, it appears that the SBA is pushing that burden onto the banks – which means that, yes, your bank will be the one responsible for reviewing and approving your forgiveness application. With how uninformed the banks were during the PPP application process, we are understandably concerned that they will be playing such a large role in this super important part of the process.
Things are slated to proceed as follows: The banks will review loan forgiveness applications, having 60 days from receipt of the application to make a decision regarding loan forgiveness. That decision will be issued by the bank to the SBA, who will have 90 days to then remit the appropriate forgiveness amount to the bank.
The SBA may, however, conduct its own review of the forgiveness application to ensure that the borrower is, in fact, eligible to receive forgiveness. So, the SBA may ultimately contact borrowers directly if they have any questions or need additional documentation, but it appears that the banks will be primarily responsible for making forgiveness determinations.
We know that the above overview may raise more questions than it provides answers for, and trust us, we know how frustrating that is. But before you scrap your old plans and analyses, we implore you to just sit tight for another few days. Consider how much has changed in just the last 10 days. Now consider that this was all WITHOUT an act of Congress happening. Congress is meeting tomorrow, and more major wholesale changes are expected to come. So, our advice at the moment, to EVERYONE who has PPP money in their account, is, “Sit tight for a few more days before re-strategizing.” It really makes no sense to start spinning our wheels here, based on the interim, interim, interim guidance that was just released quite yet. Because, as we all know now, as pros at this, it could all be totally wiped out or drastically changed on a fuckin whim. 8 Weeks could become 16 or 24; 75-25 could disappear and either of those amendments would change EVERYTHING.
Hang in there.
Joey Regs out.
He’s Gone: RIP Jimmy Cobb, a legendary jazz drummer who played on the best selling jazz album of all-time, Miles Davis’ Kind of Blue.
Also, because music and passion were always in fashion, RIP Copacabana.