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Can a landlord re-take premises without first getting a warrant?

(The following article is the last in a 14-part series examining the standard Real Estate Board of New York form commercial lease. This series highlights particular clauses in the REBNY lease and how the courts have interpreted them.)

If you have made it so far through our series on these nitty-gritty provisions of the REBNY form commercial leases - and we appreciate all the comments we have received - then you must certainly have asked yourself more than once: wouldn't it be nice if the commercial landlord could just cut-out the Court system, and, if a tenant defaults, just change the locks and remove tenant's property?

If you look at Form Lease [paragraph] 17(2), you might think that you can do this. It says: "If [a notice of termination under the "conditional limitation" clause] shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required, then and in any of such events Owner may without notice, reenter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representatives of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end." [Emphasis added.]

But you can't, although there are circumstances where there may be a right of self-help. Moreover, this provision tends to cause landlords additional trouble: tenants, seeing this draconian provision, will often seek a modification to require some notice before re-entry; but because this provision refers to summary proceedings, such a modification can give rise to a tenant argument that any summary proceeding also requires this additional predicate notice.

This note, accordingly, will first review the common law and statutory rules relating to self-help, and explain why Lease [paragraph] 17(2) needs to be re-drafted. It will then note the problem created by notice modifications. Third, we will note that [paragraph] 17(2) is important in helping landlords defeat the argument frequently made by tenants that when the landlord re-lets after a tenant prematurely abandons, the landlord is waiving its right to collect the balance of the rent due. Finally, we will suggest principles for re-drafting Lease [paragraph] 17(2).

Rights of Self-Help and Punishments If You Act Wrongly

As a preliminary matter, residential landlords are subject to criminal sanctions in New York City if they use self-help (NYC Admin. Code [section] 26-521). There is no such statute, however, for commercial landlords.

In considering self-help, one must consider both the landlord's theoretical right, and the potential consequences of an adverse judicial determination.

Looking at the "right" side, a landlord never has the right to use force, regardless of what the lease may say. A New York statute, RPAPL [section] 853, prohibits a landlord from re-entering "in a forcible or unlawful manner," and gives the tenant a right to treble damages.

A landlord does, however, have a right of peaceable re-entry. In 110-45 Queens Blvd. Garage, Inc. v. Park Briar Owners, Inc., a cooperative leased-out its garage space. After the last day of the lease, the cooperative sent several representatives to speak to the night-shift garage employees and told them they were supposed to leave - and they did. Is that peaceable? The Civil Court, without an evidentiary hearing, held that the cooperative had acted peaceably. [4/21/97 NYLJ 31 (col. 1) Civ. Ct. Queens Co.] The Appellate Term did not disagree that the landlord had a right to peaceably re-enter - either because the lease term had ended or because under Lease [paragraph] 17(2), there had been a rent default. That Court reversed, however, saying that affidavits by the employees, saying that they had been afraid, raised issues of fact; and

remanded for trial (177 Misc.2d 555, 677 N.Y.S.2d 424). The matter has now been argued before the Second Department.

In short, as a practical matter, a landlord should anticipate that its conduct will undoubtedly be subject to differing factual characterizations.

A key practical question, then, is what is the landlord's penalty if it turns out that the landlord is held to have crossed the line. Certainly it is liable for treble damages. But what if, in the interim, the landlord has relet to a new tenant? Is the old tenant automatically entitled to be restored to possession, even if the old lease by its terms had already expired?

Above and beyond the treble damages penalty, that seems a double punishment of the landlord, and a punishment of the new tenant, disrupting its business by putting it out of possession. Most of the courts that have considered this issue in recent years - including, in an analogous context, the Appellate Division, Second Department - have held that the Court is not required to order re-possession, but may consider, e.g., that a repossession order would be futile (given than the old tenant's lease had already ended), would be disruptive, and would otherwise be inequitable.

Thus, in Friends of Yelverton, Inc. v. 163rd Street Improvement Council, 135 Misc.2d 275, 514 N.Y.S.2d 841 (Civ. Ct. Bronx Co. 1986), the Court held that it "need not" order repossession; and on the facts, declined to do so. There, the City had leased - or at a minimum, licensed - certain space to a day-care center. The original agreement was for one semester; the school in fact operated for a couple of years. Over a summer, the City changed the locks and made the space available to another tenant. The Court severely criticized the City's behavior, but nevertheless denied a remedy of repossession, since the center's right of occupancy had already expired, and repossession would be "futile":

"Holding the City acted illegally does not mean it must restore the premises to Yelverton. (See Yates v. Kaplan, [75 Misc.2d259, 347 N.Y.S.2d 543 (Civ. Ct. N.Y. Co. 1973)] and Bressler v. Amsterdam Operating Corp., 194 Misc. 76, 86 N.Y.S.2d 250 (Mun. Ct., New York 1948) which hold that a court need not order a wrongfully evicted party back to possession where the return would be futile.

Ignoring the charges of illegality, at best Yelverton is a licensee whose alleged written right to use the premises has expired and whatever holdover rights it might have enjoyed have been terminated. It makes no sense to restore Yelverton to possession only to order its eviction a month or so hence.

The Yelverton analysis was adopted by the Second Department in Wagman v. Smith, 161 A.D.2d 704, 555 N. Y.S.2d 839 (2d Dep't 1990). There, the new owner of a foreclosed property resorted to the common law remedy of self-help to remove the former owner. This Court, citing approvingly to Yelverton, affirmed the dismissal of the former owner's petition seeking re-possession, explaining:

"The Supreme Court properly dismissed the petition. The respondent could have been better advised to have employed the statutory remedy of a writ of assistance pursuant to RPAPL 221 rather than resorting to the common law remedy of self-help. Nevertheless, there is no need to restore the petitioner to possession, as the respondent would then be entitled to a writ of assistance and possession under RPAPL 221 (see Friends of Yelverton v. 163rd St. Improvement Council, 135 Misc.2d 275, 514 N.Y.S.2d 841; Yates v. Kaplan, 75 Misc.2d 259, 347 N.Y.S.2d 543). See also, e.g., Colon v. N.Y.C. Department of Housing Preservation and Development, 11/23/94 NYLJ 28 (col. 6) (Civ. Ct. Kings Co.); Frances v. Reid, 7/17/96 N.Y.L.J. 26 (col. 5) (County Ct. Westchester Co.); and Padilla v. Padilla, 164 Misc.2d 740, 626 N.Y.S.2d 656 (Civ. Ct. Bronx Co. 1995).

An Appellate Term panel in the Second Department, however, in Park Briar, held that these recent cases should all be ignored, in favor of certain turn-of-the-century precedents not involving leases, which that Court read as requiring re-possession as an automatic remedy.

The four older cases relied upon by the Appellate Term for a contrary role appear patently distinguishable: in particular, none of them involved a lease. In none of those cases were the parties in a landlord-tenant relationship with each other. (See Iron Mountain and Helena Railroad v. Johnson, 119 U.S. 608 (1887); Cain v. Flood, 14 N.Y.S. 776 (N.Y. City Common Pleas 1891), aff'd 138 N. Y. 639 (1893); Town of Oyster Bay v. Jacob, 109 App. Div. 613 (2d Dep't 1905); and Rzepecka v. Urbanowski, 114 Misc. 30 (Sup. Ct. Erie Equity Term 1920).

Our firm is representing the new tenant in its pending appeal from the Appellate Term to the Appellate Division in Park Briar. A key point we have tried to make is that in Park Briar, the futility of a re-possession order is clear and indisputable, because the lease there had expired by its terms: the 10-year term was over. Lease [paragraph] 17(2), by contrast, focuses on conditional limitation terminations and rent defaults.

Often, these present contested issues: the tenant may, for instance, be correct that the landlord made a mistake in calculating some additional rent charge. In such cases, it may be difficult for a landlord to establish futility or other equities, and courts may be inclined, as an interim matter, to order the old tenant immediately reinstated pending a resolution of the merits of the alleged default. (The landlord will then in effect, be in a situation where it is subject to the detriments of a "Yellowstone"-type injunction, without any of the benefits of the conditions that courts frequently impose upon tenants in a "Yellowstone" action.)

In short, Lease [paragraph] 17(2) as written is contrary to statute, and focuses on contexts where the landlord is least likely to successfully employ or risk self-help. The foregoing suggests that Lease [paragraph] 17(2) might, however, be usefully modified.

Modifying Lease [paragraph] 17(2) by Adding a Notice Requirement is Counterproductive

One common modification of Lease [paragraph] 17(2) is, instead of saying that the landlord may re-enter without notice, to say that it may re-enter in the event of, e.g., a rent default, on 5 or 10 days' notice.

The problem that then arises is that when the landlord commences a routine nonpayment proceeding, the tenant will argue that, since Lease [paragraph] 17(2) also contains a reference to re-entry by summary proceeding, the additional notice added by such modification must also be given prior to and in addition to the standard RPAPL [section] 711 3-day notice!

This tenant's argument should not, in a commercial case, in our view, be accepted, because the [paragraph] 17(2) right of re-entry is, fairly read, separate from and in addition to the statutory right to a warrant; and there is authority in favor of the commercial landlord. See, e.g., New Green 1140 Realty, LLC v. Doros & Brescia, P.C., L&T No. 92230/98 (Civ. Ct. N.Y. Co. - decision dated 2/4/99), explaining:

"The statutory rent demand is a condition precedent to the maintenance of a nonpayment proceeding which cannot be waived by the parties unless the parties' intention is expressly stated in the lease. See 96-18 43rd Avenue Corp. v. IBT Industries Ltd., NYLJ, 5/28/91, p. 32, c. 4 (App. Term, 2d & 11th Judicial Districts). Commercial entities represented by counsel are free to adopt notice requirements in variance with RPAPL 711, but their intent to do so should be expressly stated in the lease (Four Star Holding Co. v. Alex Furs Inc., 153 Misc.2d 447 - App. Term, 1st Dep't 1992).

A lease is subject to the rules of construction which are applicable to any other agreement (Parker 24 Commercial Associates v. Siera Restaurant III Corporation, NYLJ, 12/8/98, p. 25, c. 1 - App. Term 1st Dep't). A court should apply the familiar principles of construction, which prefer an instrument that avoids inconsistencies and gives meanings to all of its provisions.

The court, after a review of Paragraph 17 and the [modification], concluded that the 10-day notice of default [added in the modification thereof] only applies when the landlord elects to terminate the lease pursuant to a conditional limitation (See Cloister Owner Corp. v. Campbell, NYLJ 1/7/94, p. 21, c. 1 - App. Term, 1st Dep't). Since this proceeding for non-payment was brought pursuant to RPAPL Section 711(2), after service of the requisite three (3) days' notice, D&B was not entitled to receive additional notice (See Colum 75, Inc. v. Braiu, 7/9/97, p. 25, C. 1 - App. Term, 1st Dep't),

Nevertheless, what landlord needs another issue to be raised in a routine commercial non-payment case?

Defeating a Tenant's Claim of "Surrender By Operation Of Law"

Suppose a tenant abandons a premises prior to the lease expiration? The landlord proceeds to try to re-let. The landlord also wishes, however, to hold tenant liable, under Lease [paragraph] 18, for the resulting loss of rent through the stated expiration date. The landlord has obviously not expressly agreed to waive its claim against the abandoning tenant, but that tenant will often argue that there should be a deemed waiver, under a doctrine of "surrender by operation of law" (See generally Riverside Research Institute v. KMGA, Inc., 68 N.Y.2d 689 -1986.

However, it has been held that where the lease provides that landlord has a right to reenter and then re-let as a way of possibly mitigating the tenant's exposure - which is what Lease [paragraph] 17(2), combined with Lease [paragraph] 18, provides - then the landlord's conduct should not be deemed as a waiver (See, e.g., Building Supervision Corp. v. Skolinsky, 50 Misc.2d 375, 275 N.Y.S.2d 454 Civ. Ct., N.Y. Co. 1966), stressing that a landlord's "unequivocal conduct must also be "inconsistent with... the survival clauses in the lease continuing the liability of the tenant despite re-entry by the landlord and renting to others [citing cases]." In re Barnes' Estate, 37 Misc.2d 833, 237 N.Y.S.2d 183 (Surr. Ct. N.Y. Co. 1962)(same); see generally Continental Bank and Trust Co. of N.Y. v. Goodyear, 49 N.Y.S.2d 747 (AT 1st Dep't 1944).

A lesson here is that the form provisions often accomplish a multiplicity of purposes - one should be careful no fit to simply delete them, even if the clause appears not to accomplish its principal purpose.

A Suggested Approach

We suggest, accordingly, that [paragraph] 17(2) should be re-drafted to accomplish the following purposes:

* To separate the re-entry provision from the conditional limitation provision in [paragraph] 17(1)

* To state clearly that landlord's right of re-entry upon any of (i) a rent default; (ii) a conditional-limitation termination, or (iii) lease expiration, is an additional remedy, and does not limit or modify any of landlord's other rights under the lease or the law in these events;

* To acknowledge that the landlord's right of re-entry is subject to any applicable statutes, but extends as far as is permitted;

* To make clear that this right of re-entry is separate from landlord's right, if a premises is, e.g., abandoned, to re-enter and change the locks for the limited purposes of, e.g., fire safety, turning off plumbing lines, removing rubbish that might attract vermin, etc. The landlord has a right to do this, but should give tenant prompt notice that it has done so (See, e.g., C.E. Towers Co. v. Trinidad and Tabago (BWIA Int'l) Airways Corp., 903 F. Supp. 515 - S.D.N.Y. 1995; and

* Finally, to provide that, if the lease has already expired by its terms or by conditional limitation, then tenant waives any right to re-possession and agrees that its sole and complete remedy shall be such damages as are allowed by RPAPL [section] 853.

General Conclusions

Commercial leases often last for many years, and in those years, the law may change in unforeseeable ways. For example, we once saw a period of commercial rent control; more recently, we saw a major rewriting of the bankruptcy laws. One philosophy of landlord leases is to leave in "stuff" - such as permitting re-entry by force - even if the provision is clearly unenforceable today, because it may be enforceable in five or 10 years.

Our philosophy in this series has been "that's fine," but (i) there are points within the existing legal framework where a landlord can strengthen itself, and those should be noted; and (ii) apparent overreaching, particularly when it is unclear, is often counterproductive in the real world of nuts-and-bolts processes of negotiation and litigation.
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Title Annotation:review of the standard Real Estate Board of New York form commercial lease
Author:Claman, Richard
Publication:Real Estate Weekly
Date:Jul 14, 1999
Previous Article:Nine city properties available for development.
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