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NYC Real Estate Update: Commercial Tenant Harassment

Mayor Bill de Blasio recently signed legislation prohibiting New York City landlords from engaging in “commercial tenant harassment.”  The new law, entitled “Non-Residential Tenant Harassment” and codified as Chapter 9 to Title 22 of the New York City Administrative Code, becomes effective on Sept. 26, 2016.

“Commercial tenant harassment” is defined as “any act or omission by or on behalf of a landlord that (i) is intended to cause a commercial tenant to vacate covered property, or to surrender or waive any rights under a lease or other rental agreement or under applicable law in relation to such covered property, and (ii) includes one or more of the following:

1. using force against or making express or implied threats that force will be used against a commercial tenant or such tenant’s invitee;

2. causing repeated interruptions or discontinuances of one or more essential services;

3. causing an interruption or discontinuance of an essential service for an extended period of time;

4. causing an interruption or discontinuance of an essential service where such interruption or discontinuance  substantially interferes with a commercial tenant’s business;

5. repeatedly commencing frivolous court proceedings against a commercial tenant;

6. removing from a covered property any personal property belonging to a commercial tenant or such tenant’s invitee;

7. removing the door at the entrance to a covered property occupied by a commercial tenant; removing, plugging or otherwise rendering the lock on such entrance door inoperable; or changing the lock on such entrance door without supplying a key to the new lock to the commercial tenant occupying the covered property;

8. preventing a commercial tenant or such tenant’s invitee from entering a covered property occupied by such tenant;

9. substantially interfering with a commercial tenant’s business by commencing unnecessary construction or repairs on or near covered property; or

10. engaging in any other repeated or enduring acts or omissions that substantially interfere with the operation of a commercial tenant’s business.”

N.Y.C. Admin. Code § 22-902(a) (emphasis added).              

Accordingly, in order for an act of commercial tenant harassment to have occurred, two distinct elements must be established.  First, the tenant must demonstrate that the landlord’s offensive act or omission was intended to cause the tenant’s vacatur of the “covered property” or a waiver or surrender of the tenant’s rights.1  Second, the tenant must show that the landlord’s offensive act or omission included one or more of the 10 specifically enumerated acts (e.g., improper use of force, repeated service interruptions, etc.).

Specifically excluded from the definition of commercial tenant harassment, however, are “[a] landlord’s lawful termination of a tenancy, lawful refusal to renew or extend a lease or other rental agreement, or lawful reentry and repossession” of the covered property.  N.Y.C. Admin. Code § 22-902(b).  Thus, the law expressly acknowledges that a landlord’s lawful exercise of its right to recover leased space is not harassment.  Additionally, even if commercial tenant harassment is otherwise found to have occurred, provided the harassment does not include threatening to use or using force (§22-902(a)(1)) or repeatedly commencing frivolous court proceedings (§22-902(a)(5)), the landlord may raise as an affirmative defense that “(i) such condition or service interruption was not intended to cause any commercial tenant to vacate a covered property or waive or surrender any rights in relation to such covered property, and (ii) the landlord acted in good faith in a reasonable manner to promptly correct such condition or service interruption, including providing notice to all affected lawful tenants in a covered property of such efforts, where appropriate.”  N.Y.C. Admin. Code § 22-904.

The law affords tenants a wide array of available remedies.  The only mandatory relief is a civil penalty of between $1,000 and $10,000.  N.Y.C. Admin. Code § 22-903(a).  In addition, however, courts may “issue an order restraining the landlord from engaging in commercial tenant harassment and directing the landlord to ensure that no further violation occurs” and/or “award such other and further relief as the court deems appropriate, including but not limited to injunctive relief, equitable relief, compensatory damages, punitive damages and reasonable attorneys’ fees and court costs.”  Id.  It is unclear how the courts will interpret and apply these broad remedies.

Several other unresolved questions are raised by the new law. For example, “commercial tenant” is defined as “a person or entity lawfully occupying a covered property pursuant to a lease or other rental agreement.”  N.Y.C. Admin. Code § 22-901.  An argument could be made that this defined term does not include licensees and others.  The definition of “landlord” could also raise issues.  The law defines “landlord” as “an owner of covered property or such owner’s agent.”  Id.  Although this definition arguably excludes anyone other than the fee owner and its agents, courts have interpreted an “owner” in other contexts to include those with dominion and control over the space (e.g., sublandlords).

It is also unclear whether tenants will be permitted to raise harassment claims in summary proceedings commenced in New York City Civil Court.  The law expressly allows a tenant to “bring an action” against its landlord in any court of competent jurisdiction.  N.Y.C. Admin. Code § 22-903(a).  Summary proceedings pursuant to CPLR Article 4 and RPAPL Article 7, however, are special proceedings and not “actions.”  Additionally, specifically enumerated remedies such as injunctive and equitable relief are generally unavailable in Civil Court.  The statute also states that tenants “shall not be relieved of the obligation to pay any rent for which [they are] otherwise liable” (N.Y.C. Admin. Code § 22-903(b)), suggesting that harassment may not be a valid defense to nonpayment of rent.

If commercial tenant harassment claims are permitted in Civil Court summary proceedings, the “summary” nature of these proceedings might be jeopardized.  Discovery is generally not permitted in summary proceedings absent a showing of “ample need.”  As noted above, a tenant alleging harassment must demonstrate that the landlord’s offensive act or omission was intended to cause the tenant’s vacatur of the covered property or a waiver or surrender of rights related thereto.  As questions of intent often cannot be determined without discovery, tenants asserting harassment in a summary proceeding may be more likely to claim and demonstrate “ample need.”  

Finally, the law contains “offset” language stating that any damages awarded to the tenant under the statute “shall be reduced by any amount of delinquent rent or other sum for which a court finds such commercial tenant is liable to the landlord.”  N.Y.C. Admin. Code § 22-903(b).  Courts may be more likely to require consolidation of a summary proceeding with a tenant’s harassment action on the ground that there are common issues of law and fact.

Landlords should consider requesting waivers of the commercial tenant harassment law in new leases.  Such waivers are frequently enforceable, for example, with respect to the protections of RPL 227.2 RPL 227, however, unlike the commercial tenant harassment statute, expressly provides that its provisions may be waived.  Although it is uncertain whether courts will enforce the waiver or deem it void as against public policy, including such a waiver in new leases together with other appropriate provisions may offer protection against potential claims.

Until the rights and remedies available under the new statute are clarified and procedural issues are resolved, landlords should be aware of the risks posed thereby.  Discussions with tenants regarding surrender and relocation could lead to future harassment claims.  Even landlords’ routine work in or around the premises or prosecution of “minor” lease defaults could give rise to claims of illegal conduct. As a precaution, landlords should consult with counsel and consider carefully documenting their actions and intentions to protect against potential claims.

1 Covered property is defined as “any building or portion of a building (i) that is lawfully used for buying, selling or otherwise providing goods or services, or for other lawful business, commercial, professional services or manufacturing activities, and (ii) for which a certificate of occupancy authorizing residential use of such building or such portion of a building has not been issued.”  N.Y.C. Admin. Code § 22-901. up

2 Among other things, RPL 227 provides tenants with the ability to surrender a premises destroyed or otherwise rendered untenantable without further liability for rent accruing subsequent to the surrender. up