NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A655
SPONSOR: Rodriguez TITLE OF BILL:
An act to amend the public service law, in relation to the collection of
charges for residential utility service deemed to be rent
PURPOSE OR GENERAL IDEA OF BILL:
Bill would ban the deeming of charges for electric service provided by
the landlord to residential tenants to be "rent".
SUMMARY OF SPECIFIC PROVISIONS:
Creates section 75 -a of the public service law to allow that in any
action or proceeding in any court for the collection of gas or electric
charges or for the possession of real property by reason of an unpaid
charge, if the charges for the utility are deemed to be rent under any
arrangement or agreement related to the rental property this shall be a
complete defense to the action;
JUSTIFICATION:
The Public Service Commission has plenary jurisdiction over the sale or
distribution of electric service under S 5.1.b of the public service
law. Under the public service law, the provision of electric service by
a landlord to a tenant is recognized as a permissible activity only by
"a railroad or street railroad the use of its tenants and not for sale
to others." Public Service Law S2 (13). The issue whether a residential
landlord - who is neither a railroad nor an electric corporation - can
lawfully sell electricity to its tenants has been questioned in the
lower courts but has not been decided by the court of appeals. (See,
e.g., Owners & Tenants Electric Ca., Inc. v. Tractenberg 158 Misc. 677,
at 679 - 680 (Mun. Ct. N.Y. City 936)).
In 1951 the Public Service Commission (PSC) prohibited all residential
electric submetering, calling the practice "parasitic." That decision
was upheld in the courts. (Campo Corp. v. Feinberg, 279 App. Div. 302,
(3d Dept. 1952) affirmed 303 N.Y. 995 (.1952). As a consequence, utili-
ties were directed by the PSC to adopt electric tariffs broadly prohib-
iting the resale of utility service. The previously permitted landlord
submetering was converted to direct utility metering.
Subsequently, the practice of submetering was again allowed by the PSC
on a case by case basis, mainly for residential cooperative and condo-
minium projects, where tenants have an ownership and governance inter-
est. Public service commission regulations and numerous orders have
allowed landlords' waivers from the general prohibition against resale
of utility service contained in: commission regulations and utility
tariffs, The PSC allows landlords to provide submetered electric service
on a deregulated or loosely regulated basis and allows landlords to
collect charges for unpaid service by actual or threatened eviction. As
a result, landlords are being allowed to be monopoly providers of elec-
tric service to their captive tenants. Also, in many instances the
state division of housing and community renewal has allowed landlords
who previously rented with utility service included in the rent to
change the terms of leases so as to shift responsibility for payment of
electric charges from landlords to tenants.
In its regulations and in its orders granting applications of owners of
residential real property to waive longstanding tariff and regulatory
prohibitions of submetering, the public service commission acknowledges
the applicability of Article 2 of the public service law, the Home Ener-
gy Fair Practices Act (HEFPA), to the landlords in their new capacity as
a provider of utility service. The commission also allows or approves
standard lease provisions which "deem" charges for utility service to be
"additional rent" due the landlord under the lease. These "additional
rent" provisions give landlords a claim to evict tenants for unpaid
"rent" which really includes charges for utility service.
The legislature has carefully designed programs designed to protect
utility customers from abuse, such as HEFPA, and has created safety nets
for the needy in the emergency utility assistance program under social
services law S131-s and the energy crisis provisions of the home energy
assistance program under social services law S 97 (HEAP). Assistance in
these programs is triggered by a notice of termination of utility
service, and is not available when a landlord attempts to evict tenants
for unpaid rent. As a result, tenants who have temporary difficulty in
meeting their obligations to pay for utility service are in a far worse
position than direct utility customers, who cannot be evicted from their
homes by the provider of utility service over unpaid or disputed charg-
es, who have the opportunity to pay arrears over time in affordable
installments through deferred payment plans which must be offered as an
alternative to termination of utility service, and who have the opportu-
nity to obtain emergency HEAP or 131-s assistance if alternative payment
arrangements with the utility cannot be afforded.
A "Residential Electrical Submetering Manual" published in 2001 by the
New York State Energy Research and Development Authority (NYSERDA)
suggests to landlords who provide submetered electric service to their
tenants that they may evict tenants in court proceedings as an alterna-
tive to complying with the Home Energy Fair Practices Act (HEFPA):
There are two potential remedies for an owner if a resident fails or
refuses to pay submetered electric charges. One is to discontinue
supplying the electric service. The other is to sue for either recovery
of the unpaid amounts or eviction.
As noted in the section discussing PSC requirements, New York State has
extensive regulations in place to protect residents against their elec-
tric service being shut off. An owner seeking to continue the tenancy
while discontinuing the service will most likely be required to comply
with all tenant-protection regulations applicable to utilities for
discontinuing the service. These include various notice and payout
requirements and protections for the elderly and disabled, which are
time-consuming, burdensome to the owner, and inconsistent with continua-
tion of the rental tenancy. Moreover, special arrangements with respect
to electric charges are likely to cause confusion in billing and
collection procedures. As a result, owners may want to consider legal
action for eviction of the resident or recovery of unpaid amounts as the
primary enforcement mechanism for nonpayment of submetered electric
charges.
Thus, rather than provide tenants in financial difficulty ample notice
and the opportunity to pay arrears over time through deferred payment
agreements required to be offered under HEFPA, rather than provide
detailed HEFPA notices to the elderly and disabled which require refer-
ral to public assistance if they cannot make arrangements, landlords are
being encouraged to evade HEFPA requirements and to bring tenants with
unpaid electric charges to court seeking court judgments and eviction
orders.
The deeming of utility service to be "additional rent" subjecting a
utility customer to eviction at the bands of an owner who provides
monopoly utility service under PSC orders is resulting in displacement,
hardship and injustice to submetered tenants, who are often unrepre-
sented in court proceedings, and is adding to the burden of the courts.
One example of a landlord's lease with such a rider that was approved
for submetering by the Commission, reads as follows:
"The electricity charges will be billed to the Tenant as additional rent
and will be payable on a monthly basis by the Tenant as additional rent.
Tenant specifically understands that if the electricity charges are not
paid in full on a monthly basis by the Tenant that the Landlord may
commence a summary proceeding to recover a money judgment and a judgment
for possession against the Tenant and that the Tenant can be evicted
from the apartment for, failure to pay electricity charges."
Some courts have prohibited submetering landlords from tea-inflating
tenancies for unpaid electric charges (see Related Tiffany, L.P. v.
McConeyhead, N.Y. City Civil Court L&T No. 55444/04, June 30, 2004) on
the ground that the "deeming" language of the landlord's lease does not
work to convert utility charges due into rent. In contrast, some court
decisions have allowed judgments and evictions for unpaid charges for
utility service provided by the landlord that were contractually defined
as "rent." This bill would clarify that unpaid charges for residential
utility service cannot be the basis for an eviction proceeding.
This bill will bring to a halt the growing use of the landlord tenant
courts by landlords to collect charges for unpaid electric service as
"additional rent." It will not affect any right the landlord may have to
collect its charges through conventional means, such as an action for
damages, and it will not affect any right the landlord may have, after
complying with HEFPA, to cease providing utility service if the tenant
does not pay. The bill will halt the evasion of HEFPA compliance; will
enable needy tenants to obtain energy assistance triggered by advance
termination notices, and will channel disputes over, utility charges
away from the courts and back to the public service commission's
complaint handling and decision process under HEFPA, i.e., section 43.2.
PRIOR LEGISLATIVE HISTORY:
A5279 2015/16
FISCAL IMPLICATIONS:
None
EFFECTIVE DATE:
Immediately
