LIEB BLOG

Legal Analysts

Showing posts with label Commercial Real Estate. Show all posts
Showing posts with label Commercial Real Estate. Show all posts

Thursday, March 12, 2020

Coronavirus & Commercial Leasing: What happens when your tenant doesn't pay rent?

Landlords - Here is your future:
  • There is a Coronavirus quarantine (voluntary or mandatory), which closes your property;
  • Tenant is forced to close;
  • Being closed, tenant makes no revenue or limited revenue from working from home;
  • Without revenue, tenant defaults on rent;
  • Without rent, landlord is now at risk of foreclosure and bankruptcy; and
  • Consequently, landlord will need to enforce its lease to stave off foreclosure and bankruptcy.


Can landlord successfully enforce its commercial lease?

If landlord seeks to enforce the lease, tenant will likely counterclaim for a rent abatement (reduction or elimination of rent) because of its inability to utilize the property. 

Who is going to win? 

The result likely depends on whether the lease has a clause called a "Force Majeure" or "Non-Performance" or something like that. 

This clause may read something like this: 
The Parties shall not be liable for any failure, delay or interruption in performing such Party's respective obligations hereunder due to causes or conditions beyond the control of such Party. Further, such Party shall not be liable unless the failure, delay or interruption shall result from the failure on the part of such Party to use reasonable care to prevent or reasonable efforts to cure such failure, delay or interruption.
"Causes or conditions beyond the control of such Party", shall mean and include acts of God ... war ... acts of third parties for which such Party is not responsible ... or any other condition or circumstances, whether similar to or different from the foregoing (it being agreed that the foregoing enumeration shall not limit or be characteristic of such conditions or circumstances) which is beyond the control of such Party or which could not be prevented or remedied by reasonable effort and at reasonable expense.
If the clause exists, the landlord has a shot at victory, but without the clause, the tenant will likely prevail, at least in part.

If the clause exists, the landlord's victory is dependent on the specific language of the clause. That is because of the rule that "[o]rdinarily, only if the force majeure clause specifically includes the event that actually prevents a party's performance will that party be excused." As a result, the language of the clause is everything.

Assuming the sample clause exists in the lease, here are the impending battlegrounds for ensuing litigation on enforcing the lease:

  • Is Coronavirus an act of god? 
  • If yes, is a quarantine resulting from Coronavirus also an act of god?
  • If no, is a quarantine resulting from Coronavirus an act of third-parties? 
  • If yes, did landlord undertake efforts to prevent the quarantine at the property? 
  • If yes, were those efforts reasonable? 
  • If no, did landlord undertake efforts to remedy the Coronavirus spread at the property?
  • If yes, were those efforts reasonable?  

We know that these lawsuits are coming and they are going to come fast. These lawsuits came after 9/11 - see One World Trade Center LLC v. Cantor Fitzgerald Securities. Only this time they are going to be everywhere because unlike 9/11, Coronavirus is everywhere.

Landlords - now is the time to ascertain your rights, determine your enforcement plan and create a contingency strategy. If you cannot enforce your lease, it's time to contact your lender and seek a forbearance (temporary reprieve from mortgage payments to avoid foreclosure). Doing nothing will create a strong likelihood of foreclosure and bankruptcy. It's time to act.





  

Friday, March 06, 2020

Real Estate Tips: Evaluating Projected Revenue

Tune in Sunday 3/8/20 at noon on LI News Radio 103.9 FM where Real Estate Investing Coach Andrew Lieb discusses projected revenue in real estate. Find out what information to request prior to negotiating terms of the deal. Discover tips to enhance future revenue and how to protect yourself from acquiring bad leases.

After the show airs - the Podcast will be available here. 


Monday, February 17, 2020

Real Estate Investing with Andrew Lieb - Guest Interview Opportunity

Tuesday, December 24, 2019

New Law: The Return of the Yellowstone Injunction

On December 20, 2019, A2554 was enacted to "[p]rohibit[] commercial leases from including a waiver of the right to a declaratory judgment action and states that the inclusion of such a waiver in a commercial lease shall be null and void as against public policy."

New Real Property Law section 235-h took effect immediately on signing.

Welcome back Yellowstone Injunctions - it's like you never left us in the commercial arena. Commercial tenants facing eviction should consult with an attorney to get an injunction immediately before they are evicted.

Friday, September 20, 2019

Closed Captioning On TVs In Public Accommodations Must Now Be Provided Upon Request

Televisions in an area of public accommodation that have a closed captioning feature must be enabled upon request. However, business owners will not be penalized if the television does not have a closed captioning feature.

The specific law S1650 signed by Governor Cuomo states:
“A place of public accommodation, resort or amusement. . . shall upon request be required to have closed captioning enabled on all televisions that are located in the public area . . . during regular business hours.”
Owners/Managers of public accommodations should train staff on this new requirement to avoid potential exposure to costly lawsuits.