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Articles Posted in Landlord and Tenant

homeless-300x156News outlets have recently reported that Lady Gaga’s father is refusing to pay the rent due on the commercial restaurant space occupied by him in Grand Central Terminal.  gct  Essentially, he has claimed that physical conditions interfere with the successful operation of his business.  These conditions allegedly include a growing homeless population that monopolizes seating intended for customers consuming food, rodents and aging facilities such as bathrooms and seating.  This post will discuss whether the tenant in this instance has a valid defense for refusing to pay his rent and other options that may be available to him.

In this case, the particular restaurant is in the center of the food court and does not require a patron to enter an area exclusively used by those being served.  It inherently allows for non-customers to occupy the restaurant space along with paying customers and may legitimately adversely affect business conditions.  The landlord in this case, the MTA, owns and manages the rest of Grand Central Terminal, making it potentially able to control adverse business conditions.

Generally, commercial leases negotiated by this author anticipate a tenant’s potential request for a rent reduction when property conditions deteriorate and forbids such action.  Most commercial leases provide that the landlord does not warrant property conditions and that a tenant therefore cannot withhold rent for diminished property conditions and the like.  Also, since this restaurant space was readily viewable and accessible prior to its being rented, the tenant could have anticipated the issues that he has recently raised and was aware of property conditions.

sickMost of us have been recently inundated by reports of the Coronavirus pandemic.      virus Although many of our readers do not travel to some of the afflicted locations, fear has a way of becoming contagious in its own right and can have negative business consequences.  Fundamentally, the fear is based upon not only becoming sick but also on the effect that widespread contagious illness can have upon the economy.  This post will address how our attorneys  respond to unfavorable financial times and the strategies to be rendered.

Real estate transactions  tend to be voluntary business activities.  For instance, a proposed buyer may be renting an apartment and be in the market to potentially purchase a house.  Typically, a buyer needs liquid cash assets to post a downpayment and have the cash needed to close.  If the stock market continues its losses of the past few days, a buyer may decide not to move forward because he needs to sell additional assets than previously intended in order to raise the cash needed.  An experienced attorney  would advise such a person that real estate is an investment that can be sold at a future date, hopefully at a profit.  However, continuing to rent an apartment does not provide an asset to be sold at a future date or potential tax benefits such as deducting mortgage interest and real estate taxes paid.  Now that we are about the enter the Spring market , new inventory and opportunities for buyers are available.  Perhaps if a seller is concerned that her house will not sell as readily in this economy, the price may be reduced to attract additional buyer interest.

Certainly, commercially leased properties  may see reduced customer traffic if consumers are afraid to be in public places and prefer to order products online or not visit restaurants where ill persons may be present.  If such conditions persist, a tenant may need a seasoned lawyer to negotiate a lease modification or lease surrender , thus assisting the tenant in not being required to continue in a lease that is not consistent with current economic conditions.  If such a modification cannot be negotiated, the tenant may be advised to “go dark” .  Should the landlord not be willing to accept these options, he may seek to bring a landlord-tenant proceeding against the tenant.

evict-300x200Most eviction matters handled by our firm involve conventional landlord-tenant relationships.  Either in a residential or commercial context, a property owner rents property to a tenant, who pays rent to the landlord on a monthly basis.  Usually, there is a written lease between the parties that delineates their rights and responsibilities to each other.  When one party violates the lease, an action can be brought in the appropriate Court.  For example, if the tenant fails to pay the rent due, a non-payment proceeding can be brought.  If the lease has expired by its terms, and the tenant refuses to vacate, a holdover proceeding should be brought to evict the tenant.

However, there are two common situations in which the ordinary landlord-tenant relationship does not apply, which will be discussed in this blog post.  The first is when a property is sold at foreclosure.  The purchaser of the property at the foreclosure sale generally buys the property “as is”, which may mean that the original owners of the property still occupy the premises.  The former owners are not “tenants” in the traditional sense, as they do not have a lease with the new owner and are not paying rent to the new owner.  How do the Courts handle this situation?

New York Real Property Actions and Proceedings Law, Section 713 provides the “ground rules” for eviction where no landlord-tenant relationship exists.  Subsection 5 of this law relates to situations where the property has been sold in foreclosure, and there are still occupants at the premises.  In this situation, the new owner of the property must first serve a ten-day notice to quit on the occupant or occupants.  This is a legal notice, usually prepared by the attorneys for the new owners.  It states that the occupant must vacate within ten days, or an eviction action will be brought.  If the former owner refuses to vacate the premises after receiving the notice to quit, then counsel will commence an eviction action in the appropriate landlord-tenant court.  The Notice to Quit must also include a certified copy of the Referee’s Deed in Foreclosure to prove the new owner’s ownership.

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.

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