By Matthew Zwiren
The rights and remedies a commercial landlord has under a lease are largely derived from the terms and provisions of the lease itself. For residential landlords, there are several New York State statutes that supplement and/or modify the various obligations and remedies a landlord may have; such statutes affect commercial landlords much less. As such, in a commercial lease, unless the lease terms are void as against public policy, the drafting and language of the lease determines the obligations, privileges, rights and remedies of the landlord and tenant (the typical parties to a lease).
When interpreting lease language, a court will use traditional methods of contractual interpretation. For this reason, it is important that commercial landlords in New York State clearly define the events of default under any lease. Events of default typically fall into two categories: (i) monetary defaults and (il) non-monetary defaults. Monetary defaults are triggered whenever a tenant to a lease does not make a payment required pursuant to the lease. A non-monetary default involves the tenant not performing any of non-payment related obligations under a lease, such as using the leased premises for a use other than that specifically allowed under the lease.
What are monetary defaults? Monetary defaults occur when the tenant under a lease does not tender a specific payment required by the lease. A landlord can hold a tenant in monetary default under a lease if the tenant misses any payment required by the lease – not just base rent amounts. A monetary default can extend to a missed payment of additional rent amounts, such as for the tenant’s property tax contribution, common area maintenance charges, security deposits (or increases of security deposits), and insurance contribution. Under a relatively recent New York State law passed in the summer of 2019, commercial landlords must now serve a tenant at least a 14-day notice of monetary default. A landlord must provide a longer notice and cure period for monetary defaults if required pursuant to the lease. If a tenant remains in default after the service of a notice to cure and the expiration of the identified cure period, a landlord can sue to regain possession, sue to receive all the rent and other amounts owed, or retain an appropriate portion (or all) of the security deposit.
What are non-monetary defaults? Non-monetary defaults involve a tenant’s non-performance of other obligations under the lease besides those requiring the payment of funds. Examples of a tenant’s non-monetary defaults include:
- causing damage to the premises or other units in the building,
- vacating the premises prior to the expiration of the lease,
- using the premises for purposes other than those identified in the lease,
- failing to maintain adequate insurance policies,
- failing to obtain landlord consent and/or approval for certain tenant actions,
- the tenant filing a bankruptcy action,
- and the failure to discharge a mechanic’s lien that the tenant caused to be placed.
A landlord’s remedies for such defaults are very similar to those for monetary defaults, including:
- bringing suit to obtain possession of the leased premises;
- bringing a legal action for monetary damages incurred; and
- retaining the tenant’s security deposit.
The legal actions that can be brought against a tenant in default consist of:
1. Summary non-payment proceedings
Summary non-payment proceedings require there to be a landlord-tenant relationship between the parties to the suit, the tenant to be in possession of the leased premises, and a default in the payment of rent to have occurred and be continuing.
2. Holdover proceedings
A holdover proceeding is brought against a party in possession of the premises, and whose right to occupy the premises has expired or been revoked.
3. Civil proceedings for damages due to non-performance of the tenant’s obligations under the lease.
Lastly, a suit or civil proceeding for damages can be brought under a breach of contract theory because leases are seen as a particular species of contract. This type of suit allows a landlord to recover monetary damages that resulted from a tenant’s non-performance under the lease.
If you are a commercial landlord who believes one of its tenants may be in default under its lease, please contact KI Legal’s knowledgeable real estate attorneys today to be made aware of your rights and the remedies available to enforce those rights.
 New York State Housing Stability and Tenant Protection Act; New York State Real Property Actions and Proceedings Law sec. 711(2).
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