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Articles Posted in Landlord and Tenant

exitThe region served by this law firm certainly has its share of vacant commercial spaces.  An unproductive business environment at times leads to the consideration of closure by other businesses.  When a commercial lease ends prior to its termination date, it is know in the industry as “going dark”.  It is not unusual for commercial lease terms to extend for anywhere from five to twenty years.  Of course, during such a lengthy timeframe, business conditions can change drastically, making the continued conduct of business to be impractical and not profitable.  There may have even been a lease modification between the landlord and tenant which has still not assisted the tenant in the successful conduct of its business at the premises.  Perhaps the business involves a particular food or fitness craze that is no longer desired by potential customers.  When this occurs, experienced legal counsel  should be consulted to develop the optimal strategy for the tenant’s early exit.

The tenant’s attorney  should first review the fully signed commercial lease to determine the exact date of lease termination.  If the date is far into the future, different advice may be rendered.  The lease may contain a provision as to whether the tenant has the option to terminate the lease prior to its stated termination date.  Potentially a payment will be required by the tenant in order to leave the premises early.  Such a payment may amount to a set number of months and the waiver of the refund of the security deposit.  For instance, if the early termination payment is three months rent and the waiver of the refund of one month’s security deposit, the tenant may be best served to end the lease early rather than continue with the lease that has another four years to run.  In addition, the tenant’s attorney  should make sure that any notice to the landlord regarding early termination is consistent with the notice requirements in the lease, or such notice may not be deemed to be valid.  The notice requirement may be of a certain number of days before it is effective, need to be sent by a certain method such as certified mail and may also need to be delivered to the landlord’s attorney.

Lease guarantors may also need to be considered when early termination is considered by the tenant.  Most tenants sign leases under an entity name such as a limited liability company or corporation.  In such cases, a landlord will typically seek an individual person to guaranty performance by the tenant.  Such an individual may be the principal of the entity or a third party backing the tenant’s business.  In the case of a guarantor who is the principal of the entity, such a guaranty may take the form of a “good guy” guaranty.  This type of guaranty provides that if the tenant leaves the premises in the condition as required at the end of the lease and pays all sums due to the landlord through the vacate date, then the guarantor is released from further obligation to the landlord.  When there is a good guy guaranty, terminating the lease early is low risk to the parties involved.  However, if the guarantor is a third party backing the tenant’s business, such a third party may challenge the tenant’s early vacate because it may have to fulfill the tenant’s obligations after it leaves the premises.  It is prudent to have a separate agreement between the tenant and third party guarantor to define obligations if the lease ends early.

nycrent-300x157
Recent blog posts have discussed the changes to the New York Landlord-Tenant Law as they relate to holdover proceedings.  Holdover proceedings occur when a tenant’s lease has expired, or when a tenant is operating on a month-to-month basis and never had a written lease for the premises being rented.Under the revised law, also known as the Housing Stability & Tenant Protection Act of 2019, which became fully effective in October, 2019, landlords are required to give notice, under certain circumstances, of more than thirty days prior to commencing a holdover proceeding.  The termination notice, also known as a notice to quit, may require more than thirty day’s notice, which was the rule under the old law.  Experienced counsel should be familiar with the revised law and prepare the notices.

However, a recent article discusses another proposed revision to New York’s laws, which would greatly alter holdover proceedings, or, in some cases, eliminate them altogether. This proposed bill would prohibit landlords from evicting tenants without providing a “good legal reason” when a lease expires.  Under current New York law, when a tenant’s lease expires, the landlord is under no obligation to renew it, unless it is a unit subject to rent regulation.  For example, a tenant signs a one-year lease to rent a house, which is not a multiple dwelling subject to rent regulation.  When the lease expires, the landlord may decide, without providing any reason, not to offer a renewal lease.  If the tenant fails to vacate the premises after receiving the proper notices, they would be subject to a holdover proceeding, and eventual eviction.

The new proposal has been called “good cause eviction,” but it has implications beyond what it states.  Requiring a property owner to provide “good cause” when they decide not to renew a lease would in effect subject every property in New York to some type of rent regulation.  It is unclear what “good cause” would mean under this proposal.  The owner of property may simply decide that she wants to use her property for her own use, or rent to a friend or relative.  She may want to raise the rent beyond what the current tenant is willing to pay.  A landlord may simply decide it is too much trouble to have a tenant, and may simply want to keep the rental property vacant.  Under this proposal, these reasons may not be considered “good cause”, forcing an owner to continue renting to a tenant, and then being forced to offer renewal leases to that tenant in perpetuity.  “Good cause” may not be explicitly defined by the revised law, causing courts to entertain lengthy litigation to determine whether a landlord has shown “good cause” when he decides not to renew a residential lease.  As with many well-meaning proposals, the full implication of the change in the law is not being considered.

building-300x198Although the public image is that legal cases are resolved through a trial of the issues involved, the fact is that most cases are settled well before any trial occurs.  This is especially true with regards to landlord-tenant cases.  The Court structure and sheer number of cases which must be heard by a busy landlord-tenant court makes it impractical to have a trial for every eviction matter, or even a small fraction of eviction cases.  What happens to the cases which do not go to trial?  They are usually resolved through an agreement reached between the parties, usually negotiating through their attorneys.  This blog post will explain how the process occurs.

Once an action has been commenced in landlord-tenant court, the Court assigns a return date, which, statutorily, must now be at least fourteen days after the Petition is served on the tenant.  During this period of time, an experienced attorney will contact the attorney for the other party to discuss the possibility of resolving the case without further Court proceedings.  The issues which need to be resolved may be the amount of time in which the tenant is required to vacate the premises, as well as whether the tenant will make payments (called “use and occupancy”) during this period of time.  If the tenant wishes to remain at the premises, outstanding issues such as payment of past due rent, and amelioration of any outstanding property condition issues, may also need to be resolved.  The effect of the newly enacted amendments to New York’s landlord-tenant laws should also be considered.

Assuming the attorneys can come to an understanding which satisfies both the landlord and the tenant, the next step is to prepare a Stipulation of Settlement.  This document will specifically delineate each parties’ rights and responsibilities.  For example, it may state that the tenant will vacate the property as of a specific date.  More importantly, it will state that if the tenant fails to vacate on the agreed-upon date, then the landlord is legally entitled to a Warrant of Eviction, which is a document allowing a Marshal or Sheriff to physically evict the tenant.  Usually, the landlord’s attorney will have to provide the Court with an Affirmation of Non-Compliance, which is a document stating that the tenant has not complied with the terms of the Stipulation of Settlement.  The Stipulation may also call for the tenant to receive notice of such an application, so he has an opportunity to cure his default.

fairway
We  endeavor to inform our readers as to relevant news pertaining to our region.  One of the Fairway grocery stores located in Rockland County  closed yesterday.  This store is part of a chain comprising approximately fifteen stores.  As reported , the tenant was in year six of its commercial lease.  Most commercial leases  are likely to be for a term of at least ten years, with options to renew.  As such, the tenant likely is vacating before the end of its lease term.  Although this author  has not personally reviewed the lease at issue, this post will discuss the provisions customarily contained in such commercial leases and the issues raised when the tenant leaves before the end of the lease.

Fairway represented that it decided to close this particular location not because of the overall financial health of its company.  Other anchor tenants  at the shopping center had already closed, which caused decreased customer volume for the grocery store that adversely affected its revenues.

Landlords  typically negotiate the following provisions in leases.  The rent due escalates through the end of the lease and the tenant forfeits its security deposit if the tenant vacates early.  In order to avoid such costly penalties, the tenant may try to find a replacement tenant to whom the lease can be assigned.  When the lease is originally negotiated, an experienced attorney  will negotiate a liberal assignment clause so that the tenant can more readily exit the lease if the business is not successful at the location.  That way, the landlord will be required to accept another tenant located by the tenant that is leaving the shopping center.

changes-300x199Recent blog posts have discussed sweeping changes to New York State’s regulations for rental units.  These changes were recently passed by the state legislature, and signed into law by Governor Cuomo.  A prior post discussed the changes regarding rent regulated units. However, many rental units, especially in Westchester County, are not subject to rent regulation.  They include premises with fewer than six rental units, as well as properties in towns or cities which have not adopted the “emergency” rent regulations, which the new law has made permanent.

However, changes to the way in which landlords may rent their units are not the only significant part of the new law.  There are also provisions relating to eviction procedures in New York, which will have a major effect on both landlords and tenants.  As our firm represents both landlords and tenants, we are carefully studying the new law so that we can advise our clients accordingly.

While a full discussion of the every aspect of the new landlord-tenant rules is beyond the scope of this post, here are some of the “highlights” or “lowlights”, depending on your perspective and role as a landlord or tenant.  The first one relates to the notice period, which is the period after the tenant has been served with an eviction petition, but before he has to appear in Court.  Under the old law, the “window period” was 5-12 days, meaning at least five days, but not more than twelve days.  The new law has increased the period to 10-17 days, meaning that the hearing date must be at least ten days after the eviction petition is served, but no more than seventeen days.

courthouse-300x159A recent blog post discussed sweeping changes to New York State’s regulations for rental units.  These changes were recently passed by the state legislature, and signed into law by Governor Cuomo.  While a full discussion of the new law is beyond the scope of this post, suffice it to say that the law makes it more difficult for landlords to remove apartments from rent stabilization, as well as removing the right of a landlord to increase the regulated rent after a tenant vacates and a new tenant moves into the unit.

One effect of this change is to remove the incentive for a landlord to “buy out” a rent regulated tenant.  Prior blog posts have discussed transactions where a landlord would pay a tenant a significant sum of money to vacate a rent regulated apartment.  The reason for these transactions is that the landlord would then be permitted to significantly increase the rent for a new tenant, once the last tenant vacated.  Under the new regulations, the landlord would not be permitted the large “vacancy increase” that was allowed previously.  Therefore, landlords no longer would have an incentive to pay an existing tenant to move out, because the regulated rent would remain the same for a new tenant.

Landlords were not expecting the new regulations, as they were introduced very late in the legislative session.  The new regulations also make it more difficult to evict tenants who do not pay their rent.  As tenant-favorable laws will always be easier to pass in large cities, due to the simple fact that many tenants vote, and they are always more numerous than landlords, the question becomes whether these rent regulations can pass muster under the United States Constitution.

trap-300x225Prior blog posts have discussed the operational aspects of a holdover landlord-tenant eviction proceeding.  Holdover proceedings, unlike non-payment proceedings, occur when a tenant’s lease term has expired, or when a tenant does not have a lease, and either party decides to terminate the tenancy on thirty day’s notice, which is their legal right.  This is in contrast to a non-payment proceeding, which is when a tenant with a valid lease fails to make his rent payments.

For example, a tenant has a lease with a term that ends on December 31.  On January 1, the tenant remains in the premises.  If they make a rent payment for January, they are now considered a month-to-month tenant for as long as the landlord continues to accept the monthly rent under the same terms as the expired lease.  The lease is now considered to be extended on a month-to-month basis as long as the parties agree.

But what happens if the landlord does not want the tenant to remain after the expiration of the lease, even if the tenant continues to pay rent?  The landlord must terminate the month-to-month tenancy by serving a “Notice to Quit” on the tenant.  The Notice to Quit must state that the tenancy will be terminated on no less than thirty days notice.  New York law has held that the termination date should follow the end of the lease term date contained in the original lease.  If the original lease term occurred on the last day of the month, the termination date in the Notice to Quit should also be on the last day of the month.  This may result in the tenant receiving slightly more than thirty days notice, for example, if the Notice to Quit is served on February 15, and the lease term ended on December 31 of the prior year, the Notice will have a termination date of March 31, which is at least thirty days notice, but at the end of the month as legally required, mirroring the original lease term.

rent-300x200Recently in the news is that state representatives in Albany are considering sweeping changes to New York State’s regulations for rental units. Prior blog posts have discussed past revisions to the rent regulations.  While some of the changes only affect apartments in New York City, others may apply to apartments statewide.  As of this writing, Governor Cuomo has stated that he will sign any bill that the lawmakers pass.

As most New Yorkers are aware, rental prices in New York City are among the highest in the nation.  Whether having the government attempt to control the prices of rental units will result in lower rents overall remains to be seen.  Rent regulation by the government has existed in some form since the World War II years, and keeping rental prices low has not been achieved.  While some regulated tenants benefit, others, whose units are unregulated, may see larger increases. In addition, forcing landlords to charge regulated rents may discourage both the building of new units and investment by landlords in improving existing apartments.  Why spend money on repairs or renovations if rent rates remain fixed by regulation?  Obviously, our representatives do not think that this is a factor.

Of course, not all apartments are subject to rent stabilization.  In Westchester County, where our offices are located, each municipality has the option of adopting the Emergency Tenant Protection Act (ETPA).  A list of these villages, cities, and towns can be found here.  If the units are in a village, city or town which has not adopted the ETPA, then the units are not rent regulated.  In addition, the law only applies to buildings of six or more units.  Therefore, if one owns a three unit apartment building in Westchester, it would not be subject to rent regulations.

apartment-300x150Prior blog posts have discussed the difference between the two types of landlord-tenant eviction proceedings.  To summarize, non-payment proceedings occur when a tenant fails to pay rent or other charges due to the landlord.  Holdover proceedings, which will be discussed in this post, happen when a tenant’s lease term has expired, or, in certain situations, when a tenant does not have a written lease.

First, let’s discuss situations when a tenant’s lease term has expired.  Most, if not all, written leases, contain a specific lease term.  It may be expressed in terms of a set period, such as one year, and can also give the specific date that the lease will expire.  What happens when the lease term expires, but the tenant remains in possession?  Under New York law, the tenant now becomes a month-to-month tenant.  This means that the lease terms remain in effect, but the lease has been extended for an additional monthly period, assuming that the tenant continues to pay the rent due, and continues to comply with the other lease terms.

By accepting the rent for an additional month, the landlord is agreeing to an extension of the lease for that additional month.  Let’s say the lease expires on March 31.  On April 1, the tenant pays an additional month’s rent check to his landlord, and the landlord accepts the rent, by depositing the check.  Under the law, the parties now have a month-to-month tenancy, which either party can terminate on thirty day’s notice.

rentown-300x171There are many opinions regarding whether being a renter or owner of one’s residence is the correct decision in New York.  Many factors, including one’s economic situation, must be considered in whether to rent or buy real property.  One additional possibility is renting the property with an option to buy.  This post will discuss the legal issues related in entering into such an agreement.

Initially, there must be an agreement with the owner of the property regarding the terms of the rental.  This is commonly documented in the form of a lease.  The lease will delineate the monthly rental amount as well as the lease term and other provisions.  If the parties agree, an option to buy the property can be included in the lease, or as a separate agreement.

The most common arrangement is to provide the renter with the option to purchase the premises at a set price during the rental term, or at the expiration of the rental term.  If the renter exercises her option to buy, then the attorney for the property owner should prepare a contract of sale to be executed by all parties.  The signed contract of sale is necessary should the potential purchaser need to apply for a mortgage loan to purchase the premises.  Any institutional lender will need a copy of the fully executed sale contract in order to process a standard loan application.  In addition, a down payment, typically in the amount of ten percent (10%) of the purchase price is usually also necessary to obtain a traditional bank loan.  The lending institution requires proof of the down payment deposit into the escrow account of the seller’s attorney.

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