© 1993 by Jay B. Itkowitz and Barry Gottlieb
While the same statutory scheme--Article 7 of the Real Property Actions and
Proceedings Law--controls both residential and commercial evictions, there are
numerous aspects of practice "on the ground" where summary proceedings against a
commercial tenant differ from like proceedings commenced against a residential
tenant. The chief reason for the difference is the well-established public
policy of New York State (and New York City) regarding the relations between
tenants and landlords of residential property. Both New York's legislature and
its courts have developed the view that in the relationship between residential
landlords and tenants, landlords will typically have much greater economic (and
therefore bargaining) power than tenants. Now York has therefore limited
landlord power by promulgating statutes and regulations, and developing
doctrines of law, designed to protect residential tenants from the untrammeled
economic power of landlords. In contrast, in the commercial landlord-tenant
context, there is a presumption of greater parity of bargaining power between
the parties. New York landlord-tenant law attributes a greater sophistication to
commercial tenants than residential tenants, and also presumes that commercial
tenants are much more likely than residential tenants to have legal counsel in
lease negotiations. Since commercial tenants are thought to be more able to look
out for their own interests, New York typically allows the parties to a
commercial lease to freely negotiate and enforce their lease without significant
interference from without.
For a very long time, Now York courts viewed the tenant's obligation to pay rent
as independent of the landlord's obligations to provide services, make repairs,
etc. as set forth in the lease. The independence of the covenants on each side
meant in practice that no matter how egregiously the landlord failed to keep up
his side of the bargain, the tenant still had to pay rent, and could not
successfully plead the landlord's breach of the lease as defense--so long as the
tenant remained in possession. As a corollary, Now York courts typically severed
from a non-payment proceeding brought by the landlord any counterclaims of
tenant alleging the landlord's breach of its duties under the lease--even in the
absence of the tenant's waiver of counterclaims--in order to preserve the
"summary" character of the proceeding.
However, the enactment of RPL Sec. 235-b by the New York Legislature in 1975 led
to the substantial abrogation, in the residential context only, of the aforesaid
rule regarding the independence of landlord versus tenant obligations. Section
235-b provides that in every residential lease, the landlord is deemed to
covenant and warrant that the leased premises and common areas used in
conjunction therewith "are fit for human habitation and for the uses reasonably
intended by the parties and that the occupants residential tenant of such
premises shall not be subjected to any conditions which would be dangerous,
hazardous or detrimental to their life, health or safety." Subsection 2 of RPL
Sec. 23S-b further provides that any agreement by a tenant waiving or modifying
his rights under Section 235-b "shall be void as contrary to public policy. New
York courts have interpreted RPL Section 235-b as making the tenant's obligation
to pay rent "dependent upon the landlord's satisfactory maintenance of the
premises in habitable condition." Park West Management Corp. v. Mitchell,
47 N.Y. 2d 316, 327 (1979). Moreover, the courts have interpreted Subsection 2
so as to allow counterclaims based on an alleged breach of the warranty of
habitability to be interposed by residential tenants in non-payment proceedings
even where the lease contains a waiver of counterclaims. E.g., Century
Apartments, Inc. v. Yalkowsky, 106 Misc. 2d 762 (Civ. Ct. N.Y. Co. 1980;
Lebodeff, J.).
In the commercial context, there is no warranty of habitability. New York courts
typically give effect to lease provisions by which a tenant waives the right to
assert counterclaims in a non-payment proceeding. E.g., Bomze v.
Jaybee Photo Suppliers, Inc., 117 Misc. 2d 957 (App. T. 1st Dep't 1983).
Accordingly, since most commercial leases contain a tenant's waiver of
counterclaims an a matter of course, the issues of fact litigated in a typical
commercial non-payment proceeding will be limited to whether or not the tenant
has paid the rent, to a much greater extent than in the typical residential
non-payment. In the commercial context, there are no "rent-impairing"
violations, as there are in the residential setting, per RPAPL Sec. 755 and
Multiple Dwelling Law Sec.302-a.
There is, however, a way for commercial tenants to use the landlord's failure to
provide services, make repairs, etc. as a defense in a non-payment proceeding.
Now York courts have long recognized that a tenant who abandons the entire
premises because of conditions which substantially interfere with his proper use
of the premises (which conditions it was the landlord's duty to cure or prevent)
may plead these circumstances as the defense of constructive eviction. However,
Minjak v. Randolph, 140 A.D. 2d 245 (1st Dep't 1988) appears to have
extended the availability of this defense to situations where the tenant has
been denied the beneficial use of a portion of the premises, and has thereby
been forced to abandon only a portion of the premises: a partial constructive
eviction. Bijan Designer for Men, Inc. v. St. Regis Sheraton Corp.,
142 Misc. 2d 175 (Sup. Ct. N.Y.Co. 1989), aff'd, 150 A.D. 2d 244 (1st Dept.
1989) makes clear that where there has been a partial eviction, the tenant's
obligation to pay rent is completely suspended.
1. In a holdover proceeding, RPAPL Sec. 753(i) allows residential tenants to
obtain a stay of the issuance of the warrant of eviction for up to six months,
to give the tenant (the term of whose lease has expired) time to find new
quarters. Such a stay is not available to commercial tenants.
2. RPAPL Sec. 753(4) provides that where a residential tenant's lease has been
terminated due to the tenant's breach of a material provision of the lease, "the
court shall grant a ten day stay of issuance of the warrant, during which time
the respondent (tenant) may correct such breach," and thereby avoid eviction.
This cure period is not available to commercial tenants.
3. RPL Sec. 223-b prohibits a residential landlord from attempting to evict a
tenant in retaliation for the tenant's assertion of its leasehold rights under
the lease or applicable tenant-protection law. It does not apply to commercial
tenancies.
4. RPL Sec. 234 provides that where a residential lease gives the landlord the
right to recover attorneys' fees incurred in any action or proceeding as a
result of the tenant's breach of the lease, the law will imply in such lease a
tenant's reciprocal right to attorneys' fees where the tenant has successfully
defended the landlord's legal action, or where the landlord has breached a
covenant of the lease. No such reciprocal right is read into commercial leases,
where the parties remain free to provide for attorneys' fees in any manner they
desire.
5. Many commercial leases contain conditional limitations, whereby the landlord
may terminate the lease upon enumerated tenant defaults. Conditional limitations
allowing a landlord to terminate the lease for a default in paying rent are
enforceable in the commercial context, but not in the residential context.
E.g., 205 West End Avenue Owners Corp. v. Adler, N.Y.L.J., November
2, 1990, p. 21, col. 4 (App. T. 1st Dep't).
6. The collection of laws and rules concerning rent-controlled and
rent-stabilized apartments in New York City essentially entitles tenants to
renewals of their tenancies, absent extraordinary circumstances (such as a
tenant's serious misconduct or chronic non-payment of rent). There is no such
entitlement to renewals in the commercial context.
7. Section 10-a of the Emergency Tenant Protection Act of 1974, Sec. 2507.7 of
the ETPA Regulations and RPL Sec.226-b assure residential tenants a limited
right to sublet. In the commercial context, the parties are free to contract as
they please regarding subleasing and assignment; typically, commercial leases
prohibit a tenant from subleasing the premises or assigning the lease without
the landlord's consent.
8. RPL Sec. 235-f gives residential tenants the right to share their apartments
with their dependents, other adults, and the dependents of such other adults,
notwithstanding the limitations contained in the lease. In a commercial lease,
however, landlords are free to require that the named tenant not allow any other
person to use or occupy the premises.
9. General Obligations Law Sec. 5-702 requires that all residential leases be in
"plain language"; there is no such requirement for commercial leases.
10. CPLR Sec. 4544 makes residential leases printed in fine print unenforceable;
there is no such rule for commercial leases.
1. In a non-payment proceeding involving a rent-stabilized or rent-controlled
apartment, the petitioner-landlord must plead and prove that the rent charged is
not in excess of the rent allowed by law. No such pleading or proof is required
in commercial nonpayment proceedings.
2. Simply proving that rent was in fact due can be much more difficult in a
commercial case than in a residential one. Commercial leases frequently contain
escalation clauses, whereby a tenant may be responsible for a percentage of
increases in energy costs, real estate taxes assessed against the whole
building, etc., according to a formula contained in the lease. (Such escalation
charges are typically called additional rent.) In a commercial case, a tenant's
attorney will try to put the landlord to his proof as much as possible regarding
charges of additional rent, forcing the landlord to document and justify the
facts and calculations underlying every such charge.
3. Many of the headaches engendered in attempting the service of petitions and
notices of petition upon residential tenants are absent from the commercial
context, because commercial premises are typically open during business hours or
other substantial periods of time in order to conduct business. It is not
necessary to try and "catch" a tenant at home during certain limited hours, as
it is in residential cases.
4. The provisions of commercial leases may vary tremendously from one lease to
the next, even where pre-printed forms with accompanying riders are used. The
law does not constrain the freedom of a commercial landlord and tenant to
bargain and contract nearly as much as it constrains the parties to a
residential lease. Moreover, commercial leases must accommodate the myriad needs
and considerations of modern business in an infinite variety of situations.
Accordingly, the range of issues cropping up in commercial cases is very broad;
commercial cases often require the interpretation of language drafted out of
whole cloth by the parties--not the standard clauses of a residential lease
whose meaning has typically been essentially pre-determined.
5. Notices and notice provisions often have important functions in commercial
leases. A lease may require one party to give the other written notice of some
event or condition, and it may condition a party's right upon the giving of
written notice. For instance, a lease may require a tenant to cure certain
defaults within X days after the landlord has given the tenant notice of such
default, and if the default be uncured, the lease may allow the landlord to
thereupon terminate the lease upon X days' additional written notice. Or a lease
may provide that a certain escalation charge become due only after the landlord
has given the tenant the requisite written notice. It is therefore imperative
for the attorney representing the landlord to make sure that such notices are
given in strict accordance with the notice provisions of the lease, in every
instance where the lease requires the formal giving of written notice.
Particularly troublesome are the instances where the lease requires that all
notices be sent by certified or registered mail or hand-delivered, and such a
notice is required in order to sake an escalation charge become due. If the
landlord bills the tenant for escalation charges by ordinary first-class mail
and the tenant doesn't pay, the tenant may argue in the ensuing non-payment
proceeding that the escalation charge never became due because no notice thereof
was ever sent to the tenant in the manner specifically required by the lease.
Landlords' attorneys should also ensure that notices are sent to every person or
entity even arguably entitled to receive such notice under the lease. When in
doubt as to whether a person or entity should be sent a notice, err on the side
of caution and send the notice.
Publications
Some Basic Differences Between Commercial Dispossess Cases and Residential
Dispossess Cases
INTRODUCTION
A. COUNTERCLAIMS, THE WARRANTY OF HABITABILITY, AND CONSTRUCTIVE
EVICTION
B. OTHER PRO-TENANT RULES NOT APPLICABLE TO COMMERCIAL CASES
C. CIRCUMSTANTIAL DIFFERENCES