When can a New York City commercial tenant report harassment by a landlord?
In any commercial lease, a major issue concerns the work to be carried out to prepare a space for the tenant’s occupancy. Usually, the landlord will deliver the space pretty much as is, or with some limited work completed. It is then up to the tenant to arrange the space so that it meets their needs.
In this process, the tenant wants to ensure that they can change their plans if necessary while rethinking how they will use the space. At the same time, the landlord wants to make sure the tenant doesn’t do anything crazy.
To resolve these conflicting concerns, the landlord will often pre-approve all of the tenant’s plans that are advanced enough to be approved when signing the lease. If the tenant wants to change something, they may need to go back to the landlord and get approval for the change.
Usually, the landlord agrees to be “reasonable” when it comes to approving the change of tenant. This essentially means that the owner must approve it if an ordinary owner in the same situation – without any particular agenda or strange idiosyncratic agenda – would approve it.
Sometimes, however, the lease will state that the landlord may withhold consent “in its sole and absolute discretion.” This language might suggest that the landlord can always disapprove anything and everything, without any obligation to be “reasonable,” thereby preventing the tenant from making changes.
A New York City waiting dispute suggests that a landlord cannot act as unreasonably as a lease appears to permit. In this dispute, the lease indicated that the owner could disapprove changes to the plan in his sole and absolute discretion. The landlord apparently used this power to disapprove of virtually anything the tenant wanted to change.
Ultimately, the landlord proposed a new, different plan for the tenant’s work, which would have cost twice as much as the tenant’s original budget. Implicitly or explicitly, it became clear that the owner would not approve of anything except his new, different (and very expensive) plan. Finally, the owner asked the tenant to stop the work.
The tenant sued the landlord on various grounds, including based on a New York City ruling. law which prohibits the “harassment” of commercial tenants. This law defines “commercial tenant harassment” in incredible breadth: it is anything a landlord does or fails to do that “would reasonably cause a commercial tenant to vacate.” The law then lists some examples, including any “repeated or sustained act or omission that materially interferes with the operation of a commercial tenant’s business.”
The court had no difficulty finding that the landlord’s repeated disapprovals, if properly proven, would constitute commercial harassment of the tenant because they continued over time and prevented the tenant from opening and operating his company. Ultimately, they would lead the tenant to leave the rented space. So the litigation continued, with the possibility (among other things) of a court ordering the landlord to behave better.
Moral of the story: In New York, at least, if a lease indicates that a landlord may act unreasonably or disapprove of things in his or her sole and absolute discretion, the landlord should not necessarily believe that. This principle could apply to much more than approving changes to the tenant’s building plans. For example, if a tenant wanted to sell their business but a nasty landlord disapproved of a range of reasonable buyers proposed by the tenant, could the tenant claim “commercial tenant harassment”?
However, other cases clearly show that ordinary one-off disagreements regarding a lease or a tenant’s activities cannot constitute “commercial tenant harassment.” New York City law also states that a landlord’s efforts to collect rent and enforce remedies for nonpayment do not constitute harassment. Finally, a tenant generally cannot recover more than $50,000 from a landlord guilty of “commercial harassment between tenants.” Tenants should therefore not necessarily be happy to have an all-purpose weapon against landlords.
The writer tips his hat Michelle Maratto Itkowitz for bringing this matter to his attention.