Articles Posted in Landlord and Tenant

chelsea-300x200A recent article in the New York Times discusses the purchase of the building which currently houses Chelsea Market by Google.  Of course, this raises the issue of what becomes of the tenants in the building, including the all-important food vendors.  Commercial real estate in New York, whether in the New York City area or its surrounding suburbs, often changes hands.  The question then becomes what are the legal responsibilities of the new owner regarding the existing tenants.

In most cases, the property is sold subject to the current tenants’ leases.  This means that if the tenants have valid leases, and most commercial tenants would have such leases, then the new owner “steps into the shoes” of the existing landlord, and takes the property subject to the leases.  It is important for anyone purchasing such commercial real estate to have experienced counsel review the existing leases, and be aware of the rights and responsibilities of both landlord and tenants.  A commercial property such as Chelsea Market may have dozens of commercial tenants, who may have different leases, expiring at different points of time, with potential options to renew.  The new owner must analyze the situation prior to purchasing to ensure that the existing rent obligations create sufficient cash flow for their purposes.  Also, if the new owner wants the space vacated, an evaluation is needed to determine how long the existing tenants may remain.

Assuming the buyer is obtaining financing for its purchase, the institutional lender will require subordination non-disturbance and attornment agreements from the tenant.  This is an acknowledgement from the tenant of the status of the lease, such as term, security deposit held, rent due and whether either party is in default, and that it will pay the lender if the buyer does not make payments on their mortgage loan.  In exchange, the tenant should obtain an estoppel certificate, which is a document confirming their tenancy, and stating that they will not be evicted assuming they continue to meet their obligations under their existing leases.

tenant-300x161Our firm handles real estate transactions as well as landlord-tenant matters.  At certain times, these two areas of the law may intersect.  One situation which occurs frequently is when a multi-family house is sold by its owner, who may have one or more tenants living at the property.

In such a situation, what are the legal responsibilities regarding the tenants?  Most standard real estate sale contracts contain a clause requiring that the property be conveyed vacant and free of tenants.  Unless there is a rider to the contract modifying this clause, this means that it is the seller’s responsibility to remove all tenants prior to closing.   When our attorneys are confronted with such a situation, the first thing to do is to ask the proposed new owner’s attorney whether they wish to retain the tenants living at the premises.  It is possible that the new owner would also like to rent the property, or a portion of same, and does not want to go through the time and expense of locating new tenants after the purchase is complete.

If the new owner wishes to retain the tenants after she purchases the property, the next step is to determine whether the current tenants have a written lease for the premises.  If they do, the lease should be reviewed by the buyer’s attorney, and, at closing the lease should be legally assigned to the new owner.  What this means is that the new owner “steps into the shoes” of the former owner regarding the obligations under the lease.  Any security deposit being held by the seller of the property should be transferred to the buyer at the closing.  In addition, any rent already paid by the tenant prior to the closing should be pro-rated at the closing.  For example, a closing is scheduled for April 15.  The tenant pays his monthly rent of $1,000.00 on April 1 as per his lease.  At the closing, the buyer should receive a $500.00 credit as his share of the rent for the one-half month that he owns the property.  He will collect rent directly from the tenant starting in the first month after the closing.

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Our readers may have seen the recent report in The New York Times pertaining to the sale of Lord & Taylor’s flagship location in Manhattan to a co-working space company called WeWork. This seismic change in the use of “America’s Dress Address” is quite significant.  Lord & Taylor realized that its huge location in Manhattan was out of fashion and much more valuable when considered as a real estate asset only, rather than the proceeds generated by mostly clothing sales.  WeWork is a company most identifiable with the revolutionary means in which millennials are choosing to work.  Many millennials tend to be self-employed, but may prefer to work away from home.  They demand temporary and flexible work quarters.  WeWork allows such people to select a location for the short or long term at a price to be determined, without a long term commitment.  The worker or user has a professional location in which to engage in his occupation.

This post will address this transaction from a commercial leasing perspective.  The purchaser will use the Lord & Taylor property as its headquarters, through which it will presumably enter other commercial leasing transactions for other properties, and for shared work quarters in this property.  When entering commercial lease transactions for other properties, this author would suggest attempting to obtain the following provisions in such commercial leases.

Commercial leases typically identify the permitted use, such as real estate office, medical office and the like.  However, in this case, the tenant will want the use to be as broad as possible.  For instance, general office use, including co-working space and ancillary use may be suitable for this tenant.  That way, when multiple parties occupy and leave the premises and use the space for varied purposes, it will not be a lease violation.  Co-working spaces could be shared by diverse parties such as writers, day traders, salesmen as well as those who want to host conferences and meetings and the like.

tiny“Tiny homes” have become popular among those who want their possessions pared down to the necessities so that they can save what may be a large mortgage payment on a large home and enjoy experiences such as adventurous travel in its place.  We  have reported on what we call the clutter reduction program .  Limiting excessive possessions has assisted in the development of the tiny homes movement.  However, tiny homes are not without big problems.  The New York Times  recently reported about the difficulty that tiny home owners have in what should be an obvious issue: where are you permitted to place your tiny home?  Individuals spend hours upon hours designing such homes, with innovative space saving techniques and environmentally friendly building systems, only to neglect the need to determine the proper legal placement of such tiny home.

Tiny homes, as any other structure, require the legal right to use any particular parcel of land.  Perhaps a particular municipality requires that structures be of at least a certain square footage or that lots be of a certain minimum size, in order to discourage the placement of less aesthetically pleasing mobile homes.  Zoning laws could be violated.  For instance, the zoning for a property location may allow for vacant land or commercial use only and the tiny homeowner will be living there.  Likewise, the zoning regulation may allow single family home use only on a lot and a conventional homeowner allowing another residential structure is in effect using the lot for multifamily use.  Also, linkage to municipal sewer systems and electrical grids may be desired.

Now that the tiny home owner has decided that acquiring the legal right to land use is required, this author  will render advice on the means to such acquisition.  Parking your tiny home in a public parking lot is not an answer, as many commercial property owners have posted notices in their parking lots to the effect that no vehicles are permitted during certain hours.  Vacant land owners may post no trespassing signs for the same reason.

familyeviction-300x300Our firm receives many inquiries regarding property disputes among family members.  Often, several relatives may inherit property from a deceased relative, and cannot agree on how the property is to be maintained, whether the property should be sold, and who should live at the property.

Prior blog posts have discussed the possibility of a partition action when the owners cannot agree on the disposition of the property.  An additional question often raised, in several different contexts, is whether a family member, living at the premises, can be legally evicted.  The answer to this question involves delving into the situation in further detail, and is far from simple.

The first question to be asked is whether the person sought to be evicted is an owner of the property, whether through inheritance or other type of transfer.  If that family member is a legal owner of the property, the general answer is that person cannot be legally evicted.  In general, any owner of a property, even a partial owner, has a right to reside at the premises.  Let’s assume two brothers inherit a house from their parents.  Both brothers now own 50% of the house, and both have a legal right to reside at the house without paying rent to the other.  However, they are both legally obligated to equally share the costs of the upkeep of the house, such as routine maintenance and real estate taxes.  Neither would have the legal right to bring an eviction action against the other.  The situation could be resolved by one of the brothers buying the other’s interest, or selling the property to a third party, and splitting the net proceeds.

ralph-300x200News outlets have recently reported a conflict between local business Ralph’s Italian Ices in Mamaroneck and local officials, who are seeking to close the business due to noise and parking issues.  While we do not know how this specific situation will resolve itself, many of our firm’s clients are small businesses who may find themselves in similar situations.  This post will discuss the legal issues involved when a commercially leased property has issues relating to compliance with local regulations.

A business owner seeking to lease commercial property should first have counsel research the property in question.  Issues such as allocation of parking spaces, permitted hours of operation, and legal as-of-right zoning of the proposed location must be thoroughly vetted prior to signing any commercial lease.  Zoning is particularly important.  If the property being leased is not zoned for the proposed tenant’s use, a special use permit must be obtained from the locality in which the premises are located.  A special use permit allows the property to be used for a non-conforming use outside the legal as-of-right zoning.

When such a permit is necessary, the tenant’s attorney should make sure that a contingency clause is inserted in the commercial lease to allow for the obtaining of such a permit.  Obtaining such a permit requires a detailed application, formal notification of adjacent property owners of the pending application, and, usually, attendance at a zoning board hearing to explain the situation at a hearing before the town zoning board.  Therefore, the lease should contain a clause that the proposed tenant will make a good faith application to the zoning board for a special use permit, and, if such application is rejected, that the tenant would have the option to terminate the lease in question.  Otherwise, a tenant may lease a property, and discover that they cannot open their business due to not being in compliance with zoning regulations.  A contingency clause allows the tenant to apply for a special use permit without the risk that they may be committed to a long-term lease without the ability to legally operate their business.

Time-to-GoPrior blog posts have discussed eviction actions after foreclosures in New York State.  Recently, due to the increased number of cases going to a final judgment of foreclosure and sale, and then being sold, there is an increased amount of tenants in foreclosed properties.  This post will discuss the legal status of these tenants and the possibility of eviction.

A fast summary of the legal foreclosure proceedings is in order at this point.  Once a Court issues a final judgment of foreclosure and sale, the property in question is then sold at public auction.  The highest bidder then pays the amount bid to the court-appointed Referee, and receives a Referee’s Deed, which is evidence of their ownership of the property.  The former owner’s interest is extinguished, together with the interest of any of the former owner’s judgment creditors.

Of course, the former owner may never vacate the premises.  Once their ownership interest is extinguished, they are subject to eviction by the new owner (the successful bidder at the foreclosure auction).  This may be the original lending institution, or an individual or corporate third party who purchases the property as an investment.  If the former owner is still occupying the premises, they are considered a holdover tenant.  Under the law, they must receive proper notice prior to an eviction proceeding being brought.  If they do not vacate within a particular period of time, the new owner can then commence a holdover eviction proceeding in the appropriate local court having jurisdiction over landlord-tenant matters.  For example, if the property was located in White Plains, then a holdover proceeding would be brought in White Plains City Court.

guarantyMany landlords of commercial property  require that the obligations of the tenant be guaranteed by an individual or affiliated entity.  Most tenants of commercial leases are an entity, such as a corporation or limited liability company, whose only asset is the business engaged in the leased premises.  If the entity tenant cannot perform its lease obligations or leaves before the end of the lease, the landlord has no remedy besides renting the premises to a new tenant.  For this reason, most landlords require that an individual or entity closely affiliated with the tenant guaranty the tenant’s requirements.  That way, other assets of the guarantor may be available to the landlord if the tenant defaults under the lease.  This post will examine the various types of guaranties that may be requested by a landlord.

A full guaranty is the most broad, wherein the guarantor covers all of the tenant’s obligations under the lease.  Such obligations would include paying rent, real estate tax escalations, utility payments, common area maintenance payments, maintaining proper insurance, repair obligations and the like.  Landlords prefer this type of guaranty because there is no limit on the amount or extent of the obligation covered.  Also, the landlord does not need to meet any condition before enforcing the guaranty against the guarantor.

A partial guaranty is more limited.  Perhaps the obligations covered are only those that are monetary in nature or up to a certain amount.  Other limited guaranties may cover lease obligations such as keeping up with maintenance and repair obligations.  Partial guaranties could also “burn down” or “sunset” over time.  For instance, after a certain period of perfect performance by the tenant, the amount guaranteed reduces or the partial guaranty terminates entirely.  In partial guaranties, the landlord may need to meet certain conditions before it is enforced against the guarantor.

18If you are like this author , someone close to you may be about to turn eighteen years of age.  This post will discuss the legal ramifications of turning eighteen.  Additional rights and privileges as well as legal responsibilities occur once a “child” becomes eighteen.  Such a person can now vote, run for office, legally support oneself, and be employed full-time.  An eighteen year old male will be penalized if he does not register for the military draft.  All eighteen year olds are treated as adults if they commit a crime.  Since we  practice particular areas of law, this author will address the implications of turning eighteen as they apply to those areas of law.  Also, rights and obligations vary by state, so this post will only address these matters as they relate to New York.

Eighteen year olds have the right to enter a contract and to apply for credit.  Therefore, our soon-to-be eighteen year old can apply for a mortgage and sign a contract to buy a house.  Contracts involving real estate, whether for sale or for a lease of more than one year must be in writing.

Once a person is eighteen, he can make a Will and other estate documents.  While we do not want to consider that someone so young may pass away, without a Will, his assets will be distributed according to New York’s intestacy law.  Also, an eighteen year old can inherit from someone who named him in a Will or in an Administration proceeding if he is of the proper degree of relation according to the New York statute.  Since many eighteen year olds may not be sophisticated enough to inherit substantial assets, those drafting Wills may decide to leave such assets to the child in trust until such age as they anticipate that the child will be mature enough to manage the assets.

hand-300x169Prior blog posts have discussed foreclosure proceedings, from the commencement of a foreclosure case to the entry of a Judgment of Sale and the public auction of the property.  Many clients then ask, what happens next?  Is it possible for the owner who has been foreclosed already to recover the property after it has been sold at a foreclosure sale?  The answer to this question is a definite yes.

A public auction of foreclosed property will generally have two outcomes.  In the first, the bank or other lending institution which brought the foreclosure case will acquire title to the property.  This usually happens when either no one bids for the property, or when no bid exceeds the amount owned to the lender under the judgment of foreclosure.  The other outcome is when a third party bids over the amount of the judgment, then obtains title, while paying the lender the full amount of its judgment (or a smaller amount negotiated with the lender).

In such cases, the original owner of the property may retain legal possession of the property.  Although he may no longer be the legal owner, he maintains a right of possession, until an eviction action is brought against him.  Sometimes, the owner’s financial circumstances may have improved and he may be in a position to repurchase the property from the successful bidder.  The successful bidder may consider this a positive outcome as he would not have to bring an eviction case to obtain legal possession, and the occupant will pay him more than he paid to acquire the property, ensuring a profit.