Senate Bill S377

                                 
BILL NUMBER: S377

SPONSOR: PARKER
 
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; * Act taking effect immediately.

              

 
JUSTIFICATION:

The Public Service Commission has plenary jurisdiction over the sale or
distribution of electric service under § 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. .. for the use of its tenants and not
for sale to others." Public Service Law § 2(13).  The issue of whether a
residential landlord - who is neither a railroad nor an electric corpo-
ration - can lawfully sell electricity to its tenants has been ques-
tioned in the lower courts but has not been decided by the court of
appeals. (See, e.g., Owners & Tenants Electric Co., Inc. v. Tractenberg.
158 Misc. 677, at 679 680 (Mun.  Ct. N.Y. City 1936).

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. niv. 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 condominium projects,
where tenants have an ownership and governance interest. Public service
commission regulations and numerous orders have allowed landlords waiv-
ers 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 electric 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 long standing 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 § 131-s and the energy crisis provisions of the home energy
assistance program under social services law § 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 protection 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 hands 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 terminating 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:

2019/20 S.3598 - REFERRED TO ENERGY AND TELECOMMUNICATIONS 2017/18 S5041
- Referred to Energy and Telecommunications

2015-16:Referred to Energy and Telecommunications(S.7991)

2013-14:Referred to Energy and Telecommunications(S.1231)

2011-12:Referred to Energy and Telecommunications(S.1396)

2009-10:Referred to Energy and Telecommunications(S.4748A)

 
FISCAL IMPLICATIONS:
None are anticipated.

 
EFFECTIVE DATE:
This act shall take effect immediately.