Tenant Rights – Commercial Lease

Commercial tenants in New York have various rights and remedies available if the landlord defaults under
the lease agreement. The remedies may be available at law (including by statute) or in equity, but also
largely consist of contractual rights and remedies under the terms of the lease agreement. When negotiating
a commercial lease, the tenant must negotiate to include certain rights and remedies to protect the tenant if
the landlord defaults.

The parties to a commercial lease may negotiate and voluntarily agree to any provision in a lease if it is not
against public policy. A lease is subject to the rules of construction applicable to any other agreement. Once
a contract is made, a court will only relieve the parties of the duty of abiding by it or grant a party additional
rights not provided for in the lease in unusual circumstances (George Backer Mgmt. Corp. v. Acme Quilting
Co., Inc., 413 N.Y.S.2d 135, 137-38 (1978); see also Accurate Copy Serv. of Am., Inc. v. Fisk Bldg. Assocs.
L.L.C., 899 N.Y.S.2d 157 (1st Dep't 2010) leave to appeal denied, 912 N.Y.S.2d 575 (2010)).

Landlord Defaults

Depending on the agreement of the parties, landlord defaults under a commercial lease may include:

✓ Failure to deliver the leased premises:

o At the time provided in the lease; or
o In the agreed condition.
✓ Foreclosure or default of the landlord's mortgage.
✓ Breach of the covenant of quiet enjoyment (see Quiet Enjoyment).
✓ Failure to comply with applicable zoning requirements.
✓ Failure to pay property taxes.
✓ Filing bankruptcy.
✓ Failure to timely return a tenant's security deposit.
✓ Failure to provide and maintain the leased space in a habitable condition.
✓ Failure to repair, replace, or maintain common areas, including:
o driveways;
o parking lots;
o sidewalks;
o curbs; and
o loading areas.
✓ Failure to maintain adequate insurance.

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 ✓ Failure to comply with Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. §§
12181 to 12189).
✓ Failure to provide or maintain services such as utilities (for example, electric, water, and gas)
or appropriate or promised amenities.
✓ Failure to provide a tenant with an allowance for construction, if applicable.
✓ Failure to execute an estoppel certificate, if applicable.
✓ Failure to submit to arbitration, if applicable.

Tenant Remedies and Defenses

New York law provides commercial tenants with certain rights and remedies when a landlord fails to
perform its legal and contractual obligations. Many tenants actually claim these rights and remedies as
defenses in a landlord's action to enforce the terms of the lease.

When a landlord-tenant dispute arises, a commercial landlord commonly responds by filing a summary
proceeding (eviction) action against the tenant. The landlord's summary proceeding may only be used where
certain statutory grounds for removal are present, which may include nonpayment of rent or holdover (NY
RPAPL §§ 711 and 713). For more information on eviction actions in New York, see Evictions Checklist
(NY) and Practice Note, Summary Proceeding to Recover Possession of Commercial Real Property
(Evictions) (NY).

Section 743 of the New York Real Property Actions and Proceedings Law (NY RPAPL) gives a tenant the
right to answer a petition in a summary proceeding either orally or in writing. A tenant may not waive its
right to answer and defend a summary proceeding (Lipkis v. Gilmour, 606 N.Y.S.2d 503 (1st Dep't 1993)).

New York courts have enforced lease provisions that preclude commercial tenants from asserting
counterclaims in summary proceedings (Bomze v. Jaybee Photo Suppliers, Inc., 460 N.Y.S.2d 862 (1st
Dep't 1983)). A landlord should include a similar provision in the lease to avoid a delay in the summary
proceeding. This waiver does not deprive the tenant of a remedy. The tenant must assert the cause of action
in a separate plenary action.

The court may make an exception to the enforceability of a provision precluding the tenant's right to
interpose a counterclaim when the counterclaim:

• Is so intertwined with the landlord's claim that joint resolution expedites the matter.

• Avoids multiple lawsuits to accomplish the same result.

• Eliminates further delay and expense.

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(Ring v. Arts Int'l, Inc., 792 N.Y.S.2d 296, 305 (Civ. Ct. 2004).)

For example, in a nonpayment of rent proceeding, the court may permit a counterclaim seeking a rent
abatement for constructive eviction because it is closely related to the issue of nonpayment of rent.

The defendant-tenant's answer may contain any defense (legal or equitable) and, if the tenant does not waive
its right in the lease, counterclaims. Common defenses include:

• Breach of the covenant of quiet enjoyment.

• That the leased premises are:
o untenantable; and
o unfit for occupancy.

(See Constructive Eviction and Rent Abatement.)

A tenant successfully claiming a breach of the covenant of quiet enjoyment generally has the remedy of
constructive eviction. This allows the tenant to:

• Terminate the lease.

• Vacate the premises.
• Recover a rent abatement.

(See Constructive Eviction and Rent Abatement.)

The rights, remedies, and defenses available to a commercial tenant under New York law generally include:

• A suit for damages (see Suit for Damages).

• A right to surrender (see Right to Surrender (Warranty of Habitability)).

• Constructive eviction (see Constructive Eviction).

• Actual eviction (see Actual Eviction).

• Rent abatement (see Rent Abatement).

• An unlawful entry or detainer action (see Unlawful Entry or Detainer).

Suit for Damages

A commercial tenant's primary legal remedy is monetary damages for losses resulting from the landlord's
default under the lease. A tenant typically seeks monetary damages in a breach of contract action against
the landlord, often based on either:

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• The landlord's failure to supply certain services.

• A violation of the covenant of quiet enjoyment contained in the lease agreement.

(See Constructive Eviction.)

The tenant's claim generally includes pecuniary damages (out-of-pocket expenses) for losses suffered by
the tenant that resulted from the landlord's breach and any liquidated damages provided under the lease.
New York permits liquidated damages in commercial lease agreements where the amount of damages:

• Is not a penalty.

• Could not be anticipated when the lease was executed.

• Is not plainly or grossly disproportionate to the probable loss.

(Tenber Assocs. v. Bloomberg L.P., 859 N.Y.S.2d 61 (1st Dep't 2008) and Truck Rent-A-Center, Inc. v.
Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 425 (1977).)

In addition, if the lease provides, a tenant may also recover the costs of the suit and reasonable attorney's
fees.

If a commercial landlord attempts to forcibly re-enter the leased premises in violation of the law, a tenant
may pursue a claim against the landlord for unlawful entry or detainer (NY RPAPL § 853). A successful
claim for unlawful entry or detainer may include an award of treble damages (see Unlawful Entry and
Detainer).

For more information on filing a civil action in New York, see Commencing a New York Lawsuit Toolkit.

Duty to Mitigate Damages

Absent an express provision in the lease to the contrary, commercial landlords in New York have no
obligation to mitigate damages if the tenant materially breaches the lease (New 24 West 40th St. LLC v.
XE Capital Mgmt., LLC, 961 N.Y.S.2d 139 (1st Dep't 2013)).

If a commercial tenant abandons the premises before the expiration of the lease, the landlord may:

• Do nothing and collect the full rent due under the lease.

• Accept the tenant's surrender, reenter the premises, and re-let them for its own account, thereby
releasing the tenant from further liability for rent.

• Notify the tenant that it is entering and re-letting the premises for the tenant's benefit.

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(Holy Props. Ltd. v. Kenneth Cole Prods, Inc., 87 N.Y.2d 130, 133-134 (1995).)

If the landlord re-lets the premises for the benefit of the tenant, the rent collected is apportioned:

• First, to repay the landlord's expenses in reentering and re-letting the premises.
• Second, to pay the tenant's rent obligation with the tenant remaining liable for any
deficiency.

Right to Surrender (Warranty of Habitability)

In New York, the doctrine of warranty of habitability does not apply to commercial leases (Rivera v. JRJ
Land Prop. Corp., 812 N.Y.S.2d 63, 66 (1st Dep't 2006)). However, a commercial tenant does have statutory
rights regarding conditions and services.

New York Real Property Law Section 227 gives a tenant the right to quit and surrender possession of the
leased premises if it is untenantable and unfit for occupancy, provided:

• No written agreement has been made to the contrary.

• The damage to the leased premises was not:
o the tenant's fault; or
o due to the tenant's neglect.

(See also Constructive Eviction.)

In a commercial lease, a tenant may waive its right to quit and surrender possession of the premises. If a
tenant waived its rights under Section 227 of the New York Real Property Law, the tenant:

• May not claim constructive eviction.

• Is limited to the remedies contained in the lease.

(Dance Magic, Inc. v. Pike Realty, Inc., 926 N.Y.S.2d 588, 592 (2nd Dep't 2011) and Hudson Towers Hous.
Co., Inc. v. VIP Yacht Cruises, Inc., 881 N.Y.S.2d 46 (1st Dep't 2009).)

Constructive Eviction
A constructive eviction is a wrongful act or omission of a landlord that either:

• Causes the premises to be unsuitable for the permitted or intended use under the lease.
• Seriously interferes with the tenant's beneficial enjoyment of the premises.

The tenant must have been deprived of something it was entitled to under the lease. Failure to provide air
conditioning or heat may cause a constructive eviction if the lease requires the landlord to provide them.

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To claim a constructive eviction, the tenant must abandon all or part of the premises because continued
beneficial use is impossible (Manhattan Mansions v. Moe's Pizza, 561 N.Y.S.2d 331 (Civ. Ct. 1990)).

A commercial tenant may be relieved of its obligation to pay the full amount of rent due where it has been
actually or constructively evicted from either the whole or a part of the leasehold (Barash v. Pa. Terminal
Real Estate Corp., 26 N.Y.2d 77, 82-83 (1970) and Johnson v. Cabrera, 668 N.Y.S.2d 45 (2nd Dep't 1998)).

In addition, when a commercial tenant claims constructive eviction, the tenant has the option of either:

• Terminating the lease and recovering the damages caused by the constructive eviction.
• Continuing to lease the remaining premises and recovering rent abatements and damages.
(See Rent Abatement.)

Quiet Enjoyment
Actions or omissions by a landlord that create a constructive eviction often result in a breach of the covenant
of quiet enjoyment. Tenants often raise this defense in actions brought by landlords.

Most commercial lease agreements contain an express covenant of quiet enjoyment that is conditioned on
the tenant complying with all of its obligations under the lease. A commercial tenant should:

• Ensure that the lease contains an express covenant of quiet enjoyment, if it is not already
contained in the landlord's initial draft.
• Limit any conditions placed on the covenant by the landlord.

For more information on the covenant of quiet enjoyment in a New York commercial lease, see Standard
Document, Office Lease Agreement (Multi-Tenant Base Year Model Gross Lease) (Pro-Landlord Long
Form) (NY): Drafting Note: Quiet Enjoyment.

When a commercial lease agreement contains an express covenant of quiet enjoyment, the tenant may use
the doctrine of constructive eviction as a remedy to address conditions that cause the premises to be
unusable by the tenant.

Actual Eviction
An actual eviction takes place when a landlord wrongfully ejects the tenant or prevents the tenant from
accessing all or part of the leased premises. An example of actual eviction would be a landlord changing
the locks to the premises.

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If the landlord causes an actual eviction, even if it is only a partial eviction, liability for the entire rent is
suspended. This is true even if the tenant remains in possession of a portion of the premises (Barash, 26
N.Y.2d at 82-83).

Rent Abatement
A commercial tenant is bound by the terms of the lease and may not abate its rent for factors that are not
contemplated by the lease, even if the landlord fails to provide essential services (Towers Org., Inc. v.
Glockhurst Corp., N.V., 554 N.Y.S.2d 242, 244 (1st Dep't 1990)). Under New York law, however, the
doctrines of constructive and actual eviction of commercial tenants are lawful defenses to a claim for
nonpayment of rent (Barash, 26 N.Y.2d at 82-83).

If the court determines that the landlord's action or inaction rose to the level of constructive eviction, a New
York tenant is not required to pay rent:

• From the time the untenantable condition arises.

• During the rest of the term of the lease.

New York courts consider whether the landlord's action or inaction rose to the level of constructive eviction
by considering whether the landlord's act or omission significantly affects the tenant's use and enjoyment
of the property.

In New York, the measure of abatement is the difference between the rent due and the reasonable rental
value of the premises in its defective condition. For example, if a landlord does not provide heat as required
by the lease and constructively evicts the tenant, the tenant may deduct from rent the cost of the electricity
to run portable electrical heaters.

Other conditions that may constitute a constructive eviction allowing for the abatement of rent may include:

• Recurring flooding at the leased premises.

• The presence of mold or other hazardous substances.

Unlawful Entry or Detainer

Commercial leases typically provide the landlord with the right to re-enter and take possession of the
premises after a tenant's default. However, if the landlord re-enters the leased premises by force or in an
unlawful manner, the tenant may bring a claim for unlawful entry or detainer (NY RPAPL § 853).

A commercial tenant who successfully obtains a judgment in a claim for unlawful entry or detainer may be
entitled to:

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 • Possession of the leased premises.
• Compensatory damages caused by the unlawful entry, including court costs and attorney's
fees.
• Treble damages under NY RPAPL Section 853 which allows a court to triple the amount
of compensatory damages.

Negotiating Contractual Rights and Remedies

Most commercial leases are drafted by the landlord and give the landlord a wide array of rights and
remedies. The tenant is often asked to expressly waive its statutory rights and protections and counterclaims.
Unless expressly negotiated by a tenant, a commercial lease is typically silent regarding the remedies
available to the tenant. The tenant should negotiate with the landlord to add rights and remedies to the lease
to protect it from specific breaches by the landlord.

A tenant should try to preserve as many rights as possible in case of litigation with the landlord. A tenant
with a strong bargaining position should also try to eliminate or limit clauses that deprive the tenant of any
effective remedy if the landlord fails to perform its obligations. For example, commercial leases often state
that all rent must be paid without:

• Abatement.
• Diminution.
• Reduction.
• Set off.

Depending on the strength of the tenant's bargaining position, the tenant should attempt to negotiate the
right to abate, offset, or withhold rent against a landlord's default under the commercial lease, even though
most landlords will refuse those provisions. A commercial tenant should minimally attempt to negotiate for
the right to place rents in escrow if the landlord breaches the lease in a manner that significantly affects the
tenant's business.

Other common concerns of commercial tenants and the rights and remedies a tenant may attempt to obtain
from the landlord during negotiations involve:

• Construction or renovation carried out by:

o the landlord (see Construction by Landlord); or
o the tenant (see Construction by Tenant).
• Possession of the leased premises (see Possession of Leased Premises).
• Return of the tenant's security deposit (see Return of Security Deposit).

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 • The calculation and billing of operating expenses and taxes (see Statement of Operating
Expenses and Taxes).
• Condemnation (see Condemnation).
• Indemnification (see Indemnification).
• Acceleration of rent payments (see Right to Collect Rent Payments).
• Tenant's rights if a landlord defaults (see Right to Perform Landlord's Obligation (Self-
Help)).
• Remedies for fire or other casualty (see Remedies for Fire or Other Casualty).

Construction by Landlord
Before the commencement date of the lease, the landlord often builds out or renovates the leased space to
meet the tenant's needs and specifications. Construction of the tenant's space is generally complete when
the municipality issues a certificate of occupancy signifying that the leased space can be occupied by
the tenant for its permitted use.

If the landlord agrees to build out or renovate the premises before the tenant takes possession, the tenant
should negotiate for:

• Notice and inspection on substantial completion. The tenant should negotiate for a provision that
requires the landlord to provide notice to the tenant when the construction is substantially complete. Within
a reasonable time after receipt of the notification, the tenant should schedule a pre-occupancy inspection
that provides the tenant with the right to prepare a punch list of items that are deficient or remain
outstanding.

• A specified time for completion of punch list items. The tenant should negotiate for a provision
that requires a specified time to complete the punch list items. The landlord generally must complete these
items within a "commercially reasonable" time. While the time period is negotiable, 30 to 60 days is typical.
Landlords usually negotiate to add a grace period. If so, the tenant should ensure that any grace period
requires the landlord to diligently pursue completion of the construction at all times.

• The tenant's reasonable satisfaction standard for construction. The tenant should negotiate a
provision allowing the tenant to determine whether the construction was finished in a reasonably
satisfactory manner. Landlords typically negotiate to have the reasonable satisfaction requirement be a
defined term.

• A fixed rent abatement and right to terminate. The tenant should negotiate a provision that if
the landlord's construction is not substantially completed by a specified date, the tenant is provided:

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 • a fixed rent abatement for each day after the construction completion date that the landlord
fails to complete until the construction is actually completed in accordance with the terms
of the lease; and
• an option to terminate the lease if the landlord's construction is not completed by an outside
date (which is negotiable but is typically 60 or 90 days after the scheduled completion date)
by providing written notice to the landlord. The tenant should negotiate for a requirement
that if the tenant exercises the option to terminate thelease, the landlord must promptly (or
within a short period, such as ten days) refund all prepaid rent and any security deposit to
the tenant.

• A construction warranty. Generally, a landlord will not warrant the construction. This is common
because landlords typically subcontract the construction to third parties. The landlord may, however,
enforce on the tenant's behalf any warranty provided by the landlord's contractors. The tenant should
negotiate a provision that the landlord agrees to include in its contract with any contractor a warranty
against:

• defects in workmanship and materials (typically one year); and

• latent defects (typically two years).

Construction by Tenant
The tenant often would rather perform its own construction of the tenant improvements (TIs) in the leased
space. This is typical in situations where the tenant is:

• A large company.
• A franchisee that must comply with presentation or aesthetic guidelines set out in a separate
agreement.

The landlord may agree in these situations to provide the tenant with an allowance for the construction.

When a lease agreement provides an allowance for the tenant's construction, the tenant should negotiate
the:

• Specific terms of the construction allowance. The tenant should negotiate that the landlord must
reimburse any construction allowance, or pay such allowance directly to the tenant's contractor, within a
certain time period after the tenant submits any invoices to the landlord. Although the time period is
negotiable, 30 days is typical.

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• Right to apply any unused construction allowance towards rent. The tenant should negotiate
that the tenant can use any remaining construction allowance as a rent credit.

• Right to a fixed rent abatement. The tenant should negotiate a fixed rental abatement during the
time it takes to complete the tenant's construction. If the landlord wants to review the plans, make sure
adequate time is allowed for the review process.

Possession of Leased Premises

Leases in New York contain an implied covenant of possession on the commencement date. If a landlord
fails to deliver possession of the property on the commencement date, and there is no express provision in
the lease to the contrary, the tenant may rescind the lease and recover any consideration paid (N.Y. Real
Prop. Law § 223-a).

The lease term typically begins on the commencement date as defined in the lease. Depending on the
specifics of the transaction, the lease may define the commencement date in one of several different ways,
such as:

• The date both parties execute and deliver the lease.

• When a certain specified event occurs, such as the delivery of the premises by the landlord
to the tenant.
• A specified number of days after an event occurs, such as the substantial completion of the
landlord's work.
• The tenant should negotiate that if the landlord fails to deliver possession of the leased
premises by the scheduled delivery date, the landlord must provide the tenant:
o A fixed rent abatement for each day after the scheduled delivery date that the landlord fails
to deliver possession until the landlord actually delivers possession in accordance with the
terms of the lease.
o The option to immediately terminate the lease by providing written notice to the landlord
if the landlord fails to deliver possession by the scheduled delivery date or within an agreed
period of time, such as 90 or 120 days after the scheduled delivery date. The tenant should
negotiate for a requirement that if the tenant exercises this option, the landlord must
promptly (or within ten days) refund to the tenant all prepaid rent and any security deposit.

Return of Security Deposit

Article 7 of the New York General Obligations Law governs security deposits for all properties. Security
deposits in commercial leases are entirely negotiable between the landlord and tenant. For more information

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on security deposits in New York commercial leases, see Practice Note, Understanding Security Deposits
(Commercial Leases) (NY).

The tenant often negotiates for the option to choose the form of the security deposit, such as:

• A cash security deposit.

• Cash equivalents. Most commercial tenants prefer to provide a security deposit in the form
of cash equivalents, including pledged certificates of deposit or a letter of credit to avoid
tying up a large amount of cash.
• A guaranty. If the landlord agrees to accept a guaranty, the amount of the actual security
deposit is usually less.
• A combination of: a cash security deposit; cash equivalents; and a guaranty.

Regardless of the type of security deposit, the lease should clearly state the terms by which the landlord
must return the security deposit or release the guaranty. Tenants typically attempt to negotiate the period to
return the deposit to 30 days from the date of termination of the lease. The landlord is given this time period
to inspect the property for any damage caused by the tenant for which the tenant is responsible under the
lease. The tenant is typically responsible for damage beyond ordinary wear and tear. The parties may agree
to a provision in the lease that allows the tenant to inspect the premises with the landlord, including taking
photographs or video.

A tenant should negotiate for a provision that requires the landlord to provide the tenant, after
inspecting the property, with:

• A detailed statement (accompanied with contractor invoices) of any repairs the landlord
determines to be the responsibility of the tenant.
• The right to object to any of the repairs by:
o providing proof that the tenant did not cause the damage in question; or
o identifying a provision in the lease agreement that shows the tenant is not the responsible
party for the repair in question.
• The option to complete any of the repairs by:
o performing the work at the tenant's own cost and expense; or
o providing an alternate construction quote (or second opinion) from a contractor of the
tenant's choice.

The tenant should negotiate for a provision that if the landlord fails to return the security deposit or release
the guaranty within the required period of time, the landlord is responsible for all costs (including

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reasonable attorney's fees) that result from any action by the tenant to recover the security deposit.
Landlords that allow this provision often demand a corresponding provision that requires the tenant to pay
for all costs in connection with a security deposit lawsuit if the landlord is successful.

Statement of Operating Expenses and Taxes

In some commercial leases, tenants are separately billed for the tenant's allocated share of building
operating expenses and taxes, often called the common area maintenance (CAM) charges, in addition to
the fixed rent. The tenant can negotiate the exact definition of what is included in the CAM charges. For
examples of exclusions to the definition of operating expenses, see Standard Document, Schedule of
Operating Expenses Exclusions for an Office Lease.

Commercial tenants usually pay CAM charges in estimated monthly installments. The following calendar
year (or at the end of some other defined period), the landlord sends the tenant a statement showing the
actual amount of the tenant's operating expenses and taxes for the prior period.

There are times when the landlord overestimates the CAM charges and has to reimburse or credit the tenant
for the overpayment. For purposes of managing the tenant's own affairs, the tenant should negotiate a
requirement to receive the statement by a set date after the end of the calendar year (or other defined
period). The date is negotiable, but April 30th or June 30th are typical dates for CAM charges based on a
calendar year. The tenant should attempt to negotiate a provision that if the landlord fails to provide the
statement by the specified date (often within one or two years after the end of the expense year), the landlord
is precluded from providing a statement and collecting any amount still owed by the tenant. The tenant
should also negotiate that, for any overpayment, the tenant has the option to choose either:

• A reimbursement.
• A credit against future CAM payments.
• A credit against fixed rent.

A tenant should also negotiate for the right to audit the landlord's books and records relating to the CAM.
If the audit shows that the landlord overcharged the tenant, the landlord should be required to:

• Reimburse the tenant.

• Pay the costs of the audit.

Condemnation
Leased premises that are condemned or taken by eminent domain by a governmental entity likely cause
significant disruption to a commercial tenant's business operations. Depending on the extent of the

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condemnation, a commercial tenant should have the option of remaining in the leased space or terminating
the lease.

The tenant should negotiate that if there is a partial taking that affects a portion of the leased
premises, the tenant may determine when its leased premises are unsuitable for its use and
occupancy. The tenant should have the option to terminate the lease if a specified percentage of its leased
premises is impaired or if a portion of the premises is impaired that prevents the tenant from operating its
business in a reasonable manner. The percentage is negotiable but 10% to 20% of the leased premises is
typical.

The tenant should also negotiate that if the tenant does not exercise its option to terminate the lease, the
landlord must restore the building to an architecturally whole unit. Landlords typically add a provision that
the landlord is not obligated to spend more than the amount of condemnation proceeds it receives from the
condemning authority.

A commercial landlord also typically includes a provision in the lease providing that:

• The landlord is entitled to the entire condemnation award for any total or partial taking.

• The tenant has no right to assert a claim against the landlord or the condemning authority for the
value of the unexpired portion of the lease term.

In New York, condemning authorities generally make a single award for the value of all of the property
taken and the courts enforce the terms of the lease agreement when allocating awards between the landlord
and the tenant. The tenant should negotiate for the right to recover some or all of the value of its property
included in the taking and its related expenses.

Indemnification
A tenant should always try to negotiate for a landlord indemnification clause in the lease. If the landlord
refuses to provide for an indemnification provision, the tenant should try to negotiate for an exclusion from
the tenant's indemnity obligations of claims that resulted from:

• Any injury or damage caused by any negligent or willful acts of the landlord.
• The presence of hazardous materials introduced in, on, under, and about the premises
resulting from the actions of the landlord and its agents, employees, representatives, or
contractors.
• A default by the landlord under the lease.

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In New York, the landlord and the tenant are jointly and severally liable under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) and the Inactive Hazardous
Waste Disposal Sites Law (N.Y. Envtl. Conserv. Law §§ 27-1301 to 27-1323) for any environmental
contamination at the property when a hazardous substance is present during the lease term (42 U.S.C. §
9607(a) and 6 NYCRR § 375-2.2(i)). As a result, the landlord typically seeks indemnification from the
tenant for liabilities due to any hazardous materials used or released on the leased premises by the tenant.

The tenant should, therefore:

• Review any environmental reports for the property before signing the lease to identify any
pre-existing conditions.
• Attempt to carve out of the indemnification any hazardous material liabilities that arise due
to the negligence or intentional acts or omissions of the landlord and its agents.

Right to Collect Rent Payments

Issuance of a warrant of eviction terminates the landlord-tenant relationship and the tenant's obligation to
pay rent unless the lease specifically provides that the tenant remains liable for rent following an eviction.
Depending on the particular language used in the survival provision, this generally means that the landlord
may continue to collect rent for the rest of the term as it becomes due.

Rent acceleration clauses that permit the landlord to accelerate the rent due for the rest of the term on the
tenant's default in the payment of rent are generally enforceable in New York. However, if the lease does
not require the landlord to mitigate its damages, the accelerated rent clause may be deemed a penalty and
not enforceable (see Ross Realty v. V & A Iron Fabricators, Inc., 787 N.Y.S.2d 602 (App. Term.2d Dep't
2004)).

A tenant with sufficient bargaining power should attempt to avoid any covenant to pay rent for the entire
lease term and any acceleration of rent provision in the lease. If the landlord insists on an express
acceleration of rent provision, the tenant should require that:

• The accelerated rent is calculated based on a discounted present value rate that exceeds the
then fair rental value of the property.
• The landlord mitigates its damages if the tenant defaults (see Duty to Mitigate Damages).

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Right to Perform Landlord's Obligation (Self-Help)
New York law does not provide commercial tenants with the common self-help remedies that are available
to residential tenants before beginning a court action (see Tenant Remedies and Defenses and Right to
Surrender (Warranty of Habitability)). As a result, most commercial tenants want the option to complete
the repairs (typically structural repairs, such as repairs to the roof or foundation) or other obligations of a
commercial landlord if the landlord is slow to address them or fails to perform any obligations.

Although commercial landlords generally refuse any tenant self-help provisions in a lease, the tenant should
try to add standard landlord default language into a commercial lease agreement. A tenant may especially
want to negotiate certain provisions in case a landlord defaults in the performance of any of its obligations
under the lease, including:

• A requirement that the tenant provide prompt written notice to the landlord after:

• a default by the landlord under the lease; or

• damage to the leased premises that the landlord must repair.

• A certain number of days after receiving notice from the tenant for the landlord to cure the default
or repair the damage. While the time period is negotiable, 30 days is typical. If it will take longer than 30
days to cure the default or repair any damage, the tenant often allows the landlord to take additional time
so long as the landlord is diligently remedying the problem. The tenant should insist on an outside time
limit to cure the default or complete the repairs, such as 60 or 90 days.

• A provision that, if the landlord does not cure the default or repair the damage within the time
period set out in the lease, the tenant may:

• incur any reasonably necessary expense to perform the obligation of the landlord specified
in the notice; and
• deduct that expense from the rent.

In addition, a tenant should attempt to negotiate for the right to place rents in escrow if the landlord's breach
significantly affects the tenant's business. In those circumstances, any rents placed in escrow would remain
there until the landlord cures the default at the landlord's sole cost and expense.

Remedies for Fire or Other Casualty

The tenant should negotiate to include provisions in the lease agreement to protect itself if fire damage or
other casualty losses to the leased space or to the building occur.

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 16

The commonly used standard form commercial lease states that if the demised premises are partially
damaged or rendered partially unusable by fire or other casualty:

• The landlord must repair the damages at its own expense.

• The rent is apportioned until the repair is completed.

If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the
rent is abated until the premises are repaired or restored, subject to the owner's right to elect not to restore,
in which case the owner may terminate the lease by giving the tenant notice.

If there is no clause regarding casualty in a lease, New York law states that if property is destroyed or so
injured by the elements, or any other cause, that it is untenantable and unfit for occupancy, the tenant:

• May quit and surrender possession of the leasehold premises (if the destruction or injury
occurred through no fault of the tenant).

• Is not liable for rent for the time after surrendering the property. Any rent paid in advance
or which may have accrued by the terms of a lease or any other hiring are adjusted to the
date of the surrender.

(N.Y. Real Prop. Law § 227.)

A tenant should negotiate for certain provisions to cover situations where the leased premises are
partially or completely destroyed by fire or other event, including:

• A period of time for the landlord to complete the repairs (the period of time is negotiable
but 90 to 270 days is typical).
• A proportional rent abatement during the time the tenant cannot use all or part of the leased
premises because of the ongoing repair.
• An option to terminate the lease and all related obligations if the landlord fails to complete
the repairs within the required time period.
• An option to exercise any renewal rights and force the landlord to complete the restoration
if the landlord is allowed to terminate the lease because the damage occurs within a certain
time before the end of the lease term (usually anywhere from six months to two years).

© 2020 Thomson Reuters. No claim to original U.S. Government Works. 17