A Viable Eviction Option For NYC Commercial Landlords

March 9, 2021Articles Law360

As the weather warms and more vaccines are distributed, there appears to be a light at the end of this long COVID-19 tunnel. But commercial tenants who have failed to pay their rent under their commercial lease should pay close attention to the light to make sure it is not an oncoming train known as a self-help eviction by the landlord.

A commercial landlord typically commences an action or proceeding to evict a tenant when they fail to pay the rent under their lease. The reason is clear — there is security and finality in a judicial order that directs an eviction to be carried out by a marshal or sheriff.

This article reminds commercial landlords and tenants that while the court may be the most secure method, self-help is the oldest and may be coming back in vogue as the courts grapple with the backlog of cases and influx of additional filings.

As explained by the New York Court of Appeals in Bliss v. Johnson in 1883:
[The] true owner of land wrongfully held out of possession may watch his opportunity, and if he can regain possession peaceably may maintain it — and lawfully resist any attempt by the former occupant to retake possession, nor will he be liable to be proceeded against under the statute of forcible entry and detainer. There can be no wrongful detainer by the true owner when the entry was both lawful and peaceable.[1]

To be sure, the use of self-help is not for the faint of heart as it is a thorny issue that if not done correctly can subject the landlord to three times the damages incurred by the tenant pursuant to Real Property Actions and Proceedings Law Section 853. But if the remedy is available to a commercial landlord, and if done correctly, it may serve as the quickest path to recovery of possession — especially during these uncertain times.

It is well established[2] that a commercial landlord may utilize self-help[3] where (1) the lease specifically reserves the landlord the right to reenter and regain possession of the premises upon the tenant's breach of its obligation to pay rent;[4] (2) prior to reentry, the landlord serves upon the tenant a valid rent demand; and (3) reentry is effected peaceably.[5]

The first part of the equation, the reservation of right, is where the entire analysis should start and, if the right does not exist, stop. The lease provision — paragraphs 17(1) and 17(2) — relied upon in Sol De Ibiza LLC v. Panjo Realty Inc. was held to allow for self-help and is instructive as it is a typical commercial lease default provision:
(1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent … upon [Landlord] serving a written fifteen (15) days' notice upon Tenant specifying the nature of said default, and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default … then [Landlord] may serve a written five (5) days' notice of cancellation of this Lease upon Tenant ...

(2) [Or] if Tenant shall make default in the payment of the rent reserved herein … then, and in any of [the] events [specified in paragraph 17(2)], [Landlord] may without notice, reenter the demised premises either by force or otherwise, and dispossess Tenant by summary proceeding or otherwise, … and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end.[6]

The court held that the above quoted lease provision "reserved landlord's right to reenter and regain the demised premises upon tenant's breach of its obligation to pay rent."[7]

The next step is to determine whether the tenant is in default of the lease by failing to pay rent (a nonmonetary default may also be available depending on your lease) and serving a proper 14-day rent demand pursuant to RPAPL Section 711(2).

This step may seem simple enough but it is here that many cases go to die because landlords and some attorneys fail to follow the proper procedures. According to the Appellate Division of the New York Supreme Court, First Division, in Holding v. Prince in 2007, the rent demand must:
fairly afford the tenant, at least, actual notice of the alleged amount due and of the period for which such claim is made. At a minimum, the landlord or his agent should clearly inform the tenant of the particular period for which a rent payment is allegedly in default and of the approximate good faith sum of rent assertedly due for each such period.[8]

Moreover, although it seems obvious, the 14-day rent demand must, in fact, give the tenant no less than 14 days from service to pay the rent due. Once the rent demand is prepared it must be served in accordance with law, i.e., personal service pursuant to RPAPL 735.

This means that the rent demand should be served personally upon the tenant or by substitute service with a mailing. If either of those methods do not work then, as a last resort, a landlord may use nail and mail.[9]

If the tenant fails to cure the rental default after the service and expiration of the aforementioned rent demand, then the landlord may seek to regain possession of the commercial space. The key here is that reentry should be done peaceably, i.e., there should be no violence.

Notably, breaking a lock to enter the premises is not considered violence.[10]

As explained by the Kings County Supreme Court in Liberty Industrial Park v. Protective Pack in 1972:
Hiring "trucks and men and even a garbage company to dispossess defendant" does not constitute forcible entry. In the absence of force that tends to breach the peace, personal violence or circumstances that cause fear of personal injury to a tenant, re-entry is not deemed forcible.[11]

Even if the ouster of the commercial tenant was forcible, the commercial tenant may not be restored if "it is clear from [the] record that restoring the [tenant] to possession would be futile, because the [landlord] would prevail in a summary proceeding to evict the [tenant]," according to the Appellate Division of the New York Supreme Court, Second Division, in 110-45 Queens Blvd. v. Park Briar Owners Inc. in 1999.[12]

The tenant's remedy in such an event is to seek damages for the forcible ouster in a plenary action.[13]

Practitioners are reminded that executive orders (e.g., Executive Orders No. 202.8 and 202.28 as amended and extended), as well as existing and proposed legislation pending in Albany may impact individual cases and should be considered before any self-help is utilized.[14]

It must be repeated, this is an aggressive approach and it is not foolproof.[15] Nevertheless, there can be no doubt that a commercial landlord has a viable alternative to the courts so long as the right of self-help has been properly reserved in the lease.

[1] 73 NY 529, 534 (1878).

[2] Rasch's New York Landlord and Tenant § 29:1. Landlord's right to regain possession without process of law.

[3] Sol De Ibiza LLC v. Panjo Realty, Inc.  29 Misc3d 72 (App Term 1st Dept 2010).

[4] Martinez v. Ulloa . 50 Misc3d 45(App Term 2nd, 11th and 13th Jud Dist 2015).

[5] Pine Hill Associates v. Malveaux . 93 Misc2d 63 (App Term 9th and 10th Jud Dist 1978).

[6] At 73-74.

[7] Id. at 76.

[8] Holding v. Prince . 46 AD3d 309, 311 (1st Dept 2007).

[9] RPAPL Section 735.

[10] See Stock v. Fredamil Realty Corp.  177 Misc 897, 898 (NY Mun Ct 1941).

[11] 71 Misc2d 116, 119 (NY Sup Ct 1972).

[12] 265 AD2d 415, 416 (2d Dept 1999).

[13] Id.

[14] See, e.g., Smart Coffee Inc. v. Sprauer , (court interpreted Executive Order 202.8 and held that self-help eviction of a nonpaying commercial tenant was not permitted) 2021 NY Slip Op 21004 (Civ Ct Queens Co). But see, Shack Collective Inc. v. Dekalb Mkt. Hall, LLC , (court permitted the self-help eviction of a commercial licensee after licensee failed to cure a nonmonetary default after service of a proper notice to cure and notice of termination pursuant to the license). 2020 NY Slip Op 51156 (Civ Ct Kings Co).

[15] See, Martinez, supra. The tenant reentered possession as a squatter and the landlord was required to start process all over again.

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