One of most common problems any landlord will face involves nonpayment of rent by their tenants. There is substantial overhead and risk involved in leasing commercial property in New York City. When a lessee is not paying rent, you could have serious problems on your hands.
It is critical to understand the various regulations and limitations as to what you are allowed to do if a commercial tenant is not paying rent.
It is important to keep in mind that there is currently a moratorium on eviction and collection proceedings for any commercial tenant claiming hardship based on COVID-19. This moratorium is scheduled to expire on January 15, 2022. Once the moratorium expires, landlord can bring claim for all rent which has accrued throughout the pandemic. It is anticipated that due to the large volume of cases that will be filed once the moratorium expires, it will take substantially longer than usual to fully litigate a claim through the courts.
What you should not do:
- Do not prevent tenants from accessing their premises or lock them out without discussing any right to do so with counsel. This could constitute an illegal lockout and subject you to substantial damages.
- Do not threaten or badger tenants with improper rent demands. This could be considered tenant harassment.
The first thing you should do:
- Call an attorney with experience handling commercial real estate matters in New York like those at Tane Waterman & Wurtzel.
There are numerous limitations and statutory requirements regarding how you can handle arrearages in commercial lease agreements. If you fail to follow these rules, you could not only lose your opportunity to collect the rental payments and costs owed to you, but you could also end up owing your tenant damages.
Generally, the process of handling a non-paying commercial tenant involves:
- Rent demand: The rent demand, which must be served at least 14 days before filing a petition, and should be served by a licensed process server, is a demand for base rent and items designated as additional rent under the lease such as surcharges, taxes, utilities, late fees and other additional rent charges.
- The petition: If the lessee fails to pay in full per the 14 day demand, landlords can commence a summary proceeding by filing a non-payment petition and notice of petition which is a formal document which asks the Court to award the landlord a judgment of possession of the property.
- Litigation: The petition is the beginning of the litigation process. As in most litigation, there will be answers and defenses and a possible trial of any disputed issues. The Court will eventually determine how much money is owed by the tenant or the parties may enter into a stipulation, which I simply an agreement between the landlord and tenant which often includes such things as how much money is owed by the tenant, when it will be paid and if and when the tenant may surrender and vacate the premises.
- Judgment and eviction proceedings: If the tenant fails to comply with the stipulation or pay the monies ordered by the court, the landlord can request that a warrant of eviction be issued to the City Marshall (or sheriff) who would then have the authority to physically remove the tenet from the premises and deliver possession of the premises to the landlord.
Many of these requirements are highly technical and if not properly done will result in the dismissal of the case requiring the landlord to commence the proceeding all over again (often after many more months of unpaid rent have accrued). Before doing anything, talk with an experienced New York commercial real estate lawyer like those at Tane Waterman who can help you through the process while avoiding legal problems.