Learning to deal with undesirable tenants.
The tenants are not necessarily undesirable, but may not fit into the profile of a particular building or neighborhood. Some tenants do not fit in well in residential surroundings, others may need a building all to themselves so as not to disturb other tenants.
Owners may unwittingly rent to X-rated video stores, bordellos and massage parlors and also could have problems with otherwise respectable tenants.
Attorneys advise conducting enough due diligence to ensure the tenant is "who he says he is," and decide if the use is compatible with the property.
Rubin Pikus, president of Milbrook Properties, that manages and oversees the operation of real estate in the metropolitan area, said as a fiduciary of owning real estate he has to make sure something is good for the property. "You have to be politically correct on one side and logically correct on the other," he said.
While he would not want to interfere with a woman's right to choose, he explained, he would try to locate a tenant like an abortion clinic in a building where it could be self - sufficient and other tenants could not complain.
"Given the politics of today, I couldn't endanger co-occupants of the property in any way, shape or form or diminish their ability to do business or diminish the ability to keep renting the property," he said. "I have to question that first." Then he would try to place the prospective tenant in the appropriate place.
Medical practitioners are often given leases or may have even have purchased their suites in cooperatives, noted Edward T. Braverman, senior partner of Braverman & Associates, who represents 85 co-ops and condominiums.
In the case of a lease, building owners may restrict the usage, limiting subleases and the kinds of medical practice. Braverman says he advises allowing specialties such as psychiatrists "who don't practice scream therapy," and plastic surgeons. But he would not advise renting to orthopedists 'because they mean ramps, wheelchairs and ambulettes."
In one co-op where a doctor's office is accessed through the lobby, the shareholders complained about patients waiting in the lobby, ambulettes parked out front and the sheer number of people the doctor and his doctor sub-tenants were seeing. "We are refusing permission to sublease," Brave-man said, as one way to curb the excesses.
It is harder to regulate medical practices if the doctor is a shareholder, Braverman admitted, but noted that even in those cases, subletting privileges can be limited. And if the tenant is creating a nuisance, the building can enjoin them from certain activities.
Says Lindsay J. Rosenberg, a partner with Rudd Rosenberg & Hollender, "You really want to put restrictive provisions in your commercial leases which would prohibit certain kinds of conduct at the premises. Once you make it a violation of the lease, you have a shot [at eviction]; if it's not in the lease, it's more difficult."
Owners are known to have taken large amounts of security from tenants that might become undesirable. If the tenants are closed down because they are caught by the authorities, the owner will start an eviction proceeding and the security will cover costs until the tenant is formally removed or the padlocks are taken off the doors.
Some owners are duped, however, and don't enter into such leases willingly. Edward R. Siegel, a partner with the law firm of Finkelstein, Borah, Schwartz, Altschuler & Goldstein, recalled an owner who rented to what was represented as a video production facility.
"Six weeks later, the city locked them out," he said, as the tenant was really an illegal massage parlor. "The tenants make enough money in a month to make up any costs they incur," sighs Siegel. Meanwhile, the premises are padlocked and the owner has to start a holdover action to gain legal possession before going back to the city to get permission to unpadlock and release.
In Midtown, Siegel observed, the Mayor's Office of Enforcement is constantly bringing actions against illegal prostitution rings masquerading as massage parlors.
And not renting to a certain ethnic group in a desire to prevent certain illegal usage "might bring you in front of the Human Rights Commission," Siegel warned.
In the face of a warranted eviction, crying "discrimination" is one tactic that some tenants use to remain in place. The discrimination doesn't have to be against, for instance, a minority who is renting the premises, but it can be alleged to be against the clientele. These would be the people who would use the services provided by the tenant, be they AIDS sufferers, the elderly, the physically-challenged or drug abusers trying to obtain treatment.
Siegel recalled one case in which he represented an owner who was entering into a lease with the city for an entire building. The catch? The city wanted the building owner "to do their dirty work" and evict a methadone clinic that was the remaining tenant.
"The tenant made a complaint to Human Rights, the city backed down, and my client was stuck with them," said Siegel. "About a year later they moved, but it was definitely an undesirable tenant."
At the end of the lease, an owner doesn't need a reason not to renew unless there is a human rights issue because of some infirmity. "Drug addiction and alcoholism are considered a disability, so it creates a real problem in these areas," Siegel noted. "There have been a number of cases where buildings tried to get rid of doctors that treated AIDS cases. Every one of those cases has been lost."
Rosenberg suggests owners should try to document any activity or nuisance that could later be used in court. "The easiest [cases] are where there is a public record of arrests or conduct," he said. "You really want to put restrictive provisions in your commercial leases which would prohibit certain kinds of conduct at the premises. Once you make it a violation of the lease you have a shot. If it's not, it's more difficult."
Manhattan attorney Andrew Squire notes that in commercial cases, the courts are less biased toward the tenant than in the residential arena, especially if there is a reason to evict the tenant and they continue to operate their business but are in violation of their lease. "In a landlord/tenant relationship, the controlling document is the lease," said Squire, "and that controls when and how you can end the relationship."
That's why its important to draft the lease documents in such a manner to protect the property against undesirable usage. "It would be hard to evict an abortion clinic just because there are pickets out front," explained Squire. "The owner has to do their due diligence before renting. Whenever he looks for a potential tenant, he should be careful about the tenant - take into account the money he is getting but also the dangers involved."
If there are protests by anti-abortion groups outside co-op and condominium buildings, attorney Stuart Saft said "I don't think the board would have the right to terminate the leases, but they would think twice about extending it."
Salt, the head of the real estate department at Wolf Haldenstein Adler Freeman & Herz, noted the building owner in Garden City hasn't yet succeeded in evicting the clinic. "The judges in Long Island are more likely to grant it, but I don't know if they will," he said. "I can't imagine the courts in NYC granting that kind of order. Even if an appellate court issued a ruling saying it's permissible, the judge in New York City will find a way of getting around it."
And if the nuisance can be ignored, time can be on the owner's side. Braverman recalled a woman who picketed one of his client co-op properties some years ago over an incident with a shareholder. Rather than going to court and subjecting the building to even more public ridicule, they ignored her, "and eventually she got tired and went away."
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|Publication:||Real Estate Weekly|
|Date:||Mar 8, 1995|
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