02. Commercial Landlord/Tenant Law
Commercial Tenant Rights -
COMMERCIAL TENANTS DO NOT HAVE THE SAME RIGHTS AS RESIDENTIAL TENANTS
Residential tenants have many additional rights that are guaranteed to them by federal or local laws. Commercial tenants do not enjoy additional protections outside of the lease agreement. In New York, a commercial tenant’s rights only include the rights that the lease agreement affords them. If an obligation or a right is not made explicit in the commercial lease agreement, it is probably not legally enforceable.
COMMERCIAL TENANTS DO NOT HAVE A WARRANTY OF HABITABILITY
Residential tenants in New York have a right to a safe, decent, and sanitary apartment. Conversely, commercial tenants do not have a warranty of habitability. In other words, commercial landlords are under no obligation to make their property safe. They are not required to repair broken fixtures or maintain common areas. Instead, commercial tenants agree to rent the property “as is.” However, when a lease agreement requires landlords to maintain the condition of the property, the landlords are legally required to do so.
Commercial landlords are legally required to repair some damaged structural conditions. When conditions substantially impact the use of the premise, landlords must fix the condition. For example, if the hot water in the building does not work, or the electricity does not work, the landlord cannot collect payment for rent until he or she fixes the condition.
THE DUTY TO MITIGATE AND RENT REGULATION
When residential tenants leave a property, the landlord has a legal duty to try to mitigate the damages. In other words, the landlord must at least try to find a tenant for the leased property when the original tenant breaks his or her lease and leaves before it expires. Commercial landlords in New York do not have a duty to mitigate. When a commercial tenant vacates the property before the lease is over, the landlord has the legal right to demand payment from the commercial tenant until the lease is over.
New York can control the rent of residential buildings. When a building is rent-controlled, the landlord must keep the rent the same or under a certain amount after a lease expires. New York does not control the rent prices of commercial properties. Once a commercial lease expires, the landlord can raise the rent as he or she sees fit. Commercial landlords are under no obligation to offer the tenant a lease renewal at the same rental price.
NEGOTIATING AN ADVANTAGEOUS COMMERCIAL LEASE AGREEMENT IS ESSENTIAL
The lack of additional rights afforded to commercial tenants makes it vital that commercial tenants take time to review and negotiate their contracts before signing them. For example, many commercial leases allow a commercial landlord to terminate the lease if he or she decides to demolish, sell, or rehabilitate the building. Our skilled commercial litigation attorneys frequently review commercial lease agreements. When agreements contain provisions that are not advantageous for our clients, we negotiate with the commercial landlord on behalf of our clients.
TIPS FOR DRAFTING AN EFFECTIVE COMMERCIAL LEASE AGREEMENT
Because commercial tenants do not have as many legal rights as residential tenants, drafting an effective lease agreement is incredibly important. Commercial lease agreements are often complicated and difficult to understand. Busy business people often read the agreement too quickly or unintentionally gloss over the important details. Doing so can result in many negative consequences, however. When commercial lease agreements fail to mention important issues, commercial litigation might be required to resolve the issue.
In order to avoid costly commercial litigation, it is essential to draft and negotiate well-written commercial lease agreements. Lease agreements should include the following provisions:
A detailed and accurate description of the property the tenant will rent
A diagram of the exact space the tenant will rent
A list of any additional spaces that could be included, such as bathrooms and storage
The specific rent amount per month and the term of the lease
The date on which the rent is due
Whether or not the landlord requires a security deposit
The amount of the security deposit and requirements to get the deposit back
NEGOTIATING A RIGHT TO RENEW A COMMERCIAL LEASE
Tenants may want to request a right to renew the lease after it expires. Commercial tenants do not have any legal right to renew the lease. Instead, a right to renew the lease must be written in the agreement to be enforceable. Anticipating all of the possible complications that could arise in a landlord and tenant relationship is challenging. It is essential to speak with a skilled commercial lease litigation attorney before agreeing to sign a commercial lease agreement.
Notice to Cure -
When a commercial tenant receives a notice to cure, the tenant must take action before the notice expires. If the tenant does not and permits the notice to cure to expire, then the landlord may serve a termination notice and commence a holdover (eviction) proceeding in Civil Court. In such a case if the landlord establishes a breach of the lease, then the tenant will not be provided an opportunity to cure, and will be evicted. This is because the law that allows for a post-judgment cure only applies to residential leases. In such a commercial eviction proceeding predicated upon a breach of lease, the tenant’s defenses are limited to proving that there was no breach of the lease.
Why do landlords typically seek to terminate commercial leases?
Reasons that commercial tenants may receive a notice to cure can include:
Making illegal alterations
Not getting permits for work performed
Violating the certificate of occupancy
Using the space for things not permitted by the lease
A lawyer’s counsel is critical
Commercial tenants who receive a notice to cure need to retain a lawyer right away. Tenants get only 10 days or less to resolve the issue before the landlord can serve them with a notice to terminate the lease. They can, however, ask the New York Supreme Court for a Yellowstone injunction if they have a defense to the breach or need more time to cure the breach. These injunctions are often granted. While the court may provide the injunction, it sometimes requires that the tenant posts a bond, especially where the alleged breach relates to purported damage to the leased premises.