Tenants Services Article

Defending the Commercial Tenant in Civil Court

New York Law Journal, 2/1/2002
New York Law Journal, 2/1/2002
Introduction

Numerous laws define and protect the rights of the residential tenant. Commercial tenants, on the other hand, appear to enjoy far fewer protections.

When defending a summary eviction proceeding, a residential tenant in New York State may invoke a number of statutes, all of which are unwaivable. These include the warranty of habitability, the right to sublease, the right to summary proceedings, the defense of retaliatory eviction, prohibitions against unlawful occupancy restrictions, and the reciprocal right to recover attorney fees.

To pursue or defend these rights, a residential dispute in NYC will be adjudicated in the Housing Part of the Civil Court, which is devoted to the enforcement of all state and local laws pertaining to or affecting the maintenance and enforcement of housing standards(1). In the Housing Part, a residential tenant may seek injunctive relief to compel improvements in living conditions at home(2).

Commercial tenants have limited statutory rights. The warranty of habitability and local codes that regulate housing standards apply to residences, not to businesses(3). Consequently, the defenses available in a commercial non-payment proceeding are more limited. A commercial summary proceeding is tried in the Civil Court, but not in the Housing Part. Traditionally, tenant attorneys look to Supreme Court for injunctive relief.

Statutes

Although the commercial tenant lacks fundamental protections that are available to the residential tenant, it does not follow that commercial tenants have no statutory rights with respect to conditions and services.

If conditions get bad enough, a commercial tenant has the right to break its lease. In any building where a rental is destroyed or injured without the fault of the tenant, so as to be "untenantable and unfit for occupancy", a commercial tenant may quit and surrender possession of its rental space and thereafter be relieved of further liability to pay rent(4).

Thus, a downtown commercial tenant whose office space was destroyed or made completely unviable by the events of September 11th may invoke its statutory right to cancel the lease, provided there is no written agreement with the landlord that states otherwise.

Uninterrupted building services are often crucial to a commercial tenant. A business may collapse if it cannot use a freight elevator. Receiving a rent abatement after trial is not a solution.

Where the lease provides for or implies provision of an essential service, and a landlord intentionally fails to provide that service, and the service is necessary to the proper or customary use of any building or portion thereof, the conduct is a criminal violation(5), carrying a penalty of up to 15 days in jail(6).

Sometimes, the police can be called upon to intervene on a tenant's behalf when an essential service is obviously being denied. More importantly, courts should not be reluctant to enjoin the deprivation of services experienced by a commercial tenant where the deprivation would otherwise constitute a crime. In this regard, the power of injunction is not limited to the Supreme Court.

Injunctions in Civil Court

It may come as a surprise to learn that the Civil Court has the power to issue an injunction in a commercial summary eviction proceeding. During the pendency of a civil proceeding to recover possession of real property, "no party may commit waste upon, or do any other damage to, the property in controversy"(7). To prevent the commission of waste or damage, the Civil Court, may issue an injunction or restraining order, without notice or security(8).

This remarkable statute does not distinguish between commercial and residential tenancies, and the offending party clearly includes either a tenant or a landlord. In the context of a summary eviction proceeding in Civil Court, the ability to enjoin acts of waste and damage is a powerful legal tool for an aggrieved commercial tenant and could have widespread application.

Commercial storefronts, for example, are particularly susceptible to water leaking from above or from the effects of building-wide deterioration and neglect. Permitting a building to go into decay for want of repair is a form of waste(9), which could be enjoined.

Judging from the absence of case law and its omission from the treatises, this jurisdictional provision appears to be unknown to practitioners and to commentators. There is only one, unreported decision on the issue(10), in which the author was involved.

Defenses Without Abandonment

There is no substitute for a well-drafted commercial lease. Even though a business may depend upon services, its lease will often fail to set forth what the tenant is entitled to receive and when, leaving a commercial tenant with a poorly written lease without recourse(11). These omissions include items as basic as heat, hot and cold water, electricity, telephone, gas, elevator, egress, and so on.

A hair salon, for example, may depend upon gas service from Con Edison to generate heat and hot water for its customers. But its lease may be silent on this point. What happens if the gas pipe in the basement is destroyed?

In commercial landlord tenant proceedings where conditions are an issue, the rights of the parties mostly hinge on the terms of the rental agreement, which may appear contradictory. This calls for careful reading.

Where the services to which the tenant is entitled are clearly enumerated in the lease, the courts have awarded commercial tenants substantial damages(12).

Where the right to services are not specified in the lease, the tenant ordinarily pleads the defense of constructive eviction. But the constructive eviction defense(13), and its companion, breach of the covenant of quiet enjoyment(14), requires proof of abandonment by the tenant(15). Without some level of abandonment, the constructive eviction defense fails, no matter how great the problems(16).

In many cases, a commercial tenant will choose to work around a problem; it may be unfeasible to abandon the business location and the financial investment. Residential tenants do not have to abandon to receive a rent abatement. How does a commercial tenant defend a claim for rent when it did not abandon?

If an eviction is actual rather than constructive, the tenant need not abandon the premises(17). And because a landlord "is not allowed to apportion his own wrong"(18), in the case of an actual eviction, the tenant's liability for the entire rent is suspended, even if it remains in partial possession of the premises.

In the eyes of the law, what may appear on its face to be a constructive eviction may be treated as an actual eviction. Examples of partial actual evictions include lost use of floor space(19), lost use of a vault space(20), lost use of an easement to use a parking lot(21), denial of use of a freight elevator(22), and lost use of an entry door(23).

Moreover, the commercial tenant that is denied a necessary building service not enumerated in its own lease may benefit from the concept of appurtenances, which are "incorporeal easements or rights and privileges which may pass with a grant or demise(24).

Commercial tenants may successfully argue that a building-service withheld by the landlord - for example, use of a freight elevator or use of a second means of ingress - are appurtenances that are reasonably essential to the beneficial enjoyment of the demised premises(25). If the landlord denies a commercial tenant the use or benefit of building appurtenances, it is an actual partial eviction(26), and abandonment is not required.

Finally, in some cases, commercial tenants that remained on the premises and did not abandon have been awarded rent abatements based upon lease provisions regarding destruction, fire and other casualties(27).

Conclusion

Although there is no commercial warranty of habitability, it is evident that the commercial tenant has legal and equitable rights and remedies when seeking repairs and services from the landlord or when defending a summary eviction proceeding.

Before embarking on a lengthy legal battle, the commercial tenant must determine its potential liability for attorney fees. Unlike residential cases, the prevailing tenant's right to attorney fees in commercial cases is not reciprocal(28), unless the lease so provides.


  1. McKinney's, NY City Civ. Ct. Act 110
  2. Supra. at 110(a) and 209(4).
  3. Bonze v. Jaybee Photo Suppliers, Inc., 117 Misc2nd 957 (App. Term, First Dept., 1983); Manhattan Mansions v. Moe's Pizza, 149 Misc2nd 43, 44 (Civ. Ct. NY Co. 1990); McKinney's, Real Property Law, 235(b).
  4. Real Property Law, supra. at 227.
  5. Id. at 235.
  6. McKinney's, Penal Law, 70.15(4).
  7. McKinney's, Real Property Actions and Proceedings Law, 211.
  8. NYCCA, supra. at 209(b)(2).
  9. Rogers v. Atlantic, Gulf & Pacific Company, 213 NY 661 (1915); Rasch, Landlord and Tenant, 15:6 at 656 (4th ed.).
  10. Lenox, LLC v. Grocery Store, Index No. L&T 58624/01, (Civ. Ct., NY Co.).
  11. 721 7th Ave. Operating, Inc. v. Davshel Int'l., Inc., NYLJ May 13, 1996, page 28, col.2 (App. Term, First Dept.).
  12. Johnson v. Cabrera, 246 AD2nd 578 (First Dept. 1998; Union City Union Suit Co. v. Miller, 162 AD2nd 101 (First Dept. 1990).
  13. Manhattan Mansions v. Moe's Pizza, supra.
  14. Herstein v. Columbia Pictures Corp., 4 NY2nd 117, 121 (1958); Dinicu v. Groff Studios Corp., 257 AD2nd 218, 224 (First Dept. 1999).
  15. Barash v. Pennsylvania Terminal Real Estate Corp., 26 NY2nd 77, 81 (1970).
  16. MDS Properties v. Lincoln Plaza Tenants Corp., 169 AD2nd 509 (First Dept. 1991).
  17. Barash, supra., at 83.
  18. Id. at 84.
  19. Camatron Sewing Machine, Inc. v. Ring Assoc., Inc., 179 AD2nd 165,168 (First Dept. 1992); 81 Franklin Co. v. Ginaccini, 160 Ad2nd 558 (First Dept. 1990).
  20. Fifth Avenue Bldg. Co. v. Kernochan, 221 NY 370 (1917).
  21. Elmwood v. Hassett, 107 AD2nd 285 (4th Dept. 1985).
  22. 132 Spring Street Associates v. Helversen Enterprises, Inc.,NYLJ May 18, 1990, page 21, col. 1 (App. Term First Dept); Broadway Spring Street Corp. v. Jack Berens Export Corp., 12 Misc2nd 460 (Munic. Ct., Borough of Manhattan 1958).
  23. Siegel v. Neary,38 Misc.279 (App. Term NY 1902).
  24. Rasch, supra. at 834.
  25. Broadway Spring, supra. at page 464; Siegel v. Neary, supra. See also, Elmwood, supra. at 287.
  26. Id. at page 465.
  27. 241 West 37th Street Associates v. International Fashion Club, Inc., NYLJ June 28, 2000, page 29, col. 3 (Civ. Ct. NY Co.); Parkchester Apartments v. Metropolitan Retail Recovery, NYLJ Nov. 23, 1994, page 27, col. 4 (Civ. Ct. Bnx Co.).
  28. Real Property Law, supra. at 234.
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