Effective September 26, 2016, New York City adopted an ordinance giving commercial tenants a cause of action against their landlords for "harassment." Clearly modeled on a similar law adopted in favor of residential tenants some few years ago, the authors of this bill may not fully have considered just how well the ideas of residential law port over to commercial settings. The operation of this law will call into question matters of policy, disparities in economic power, difficulties in enforcement, and potential chilling effects on legitimate commercial development. Beyond doubt, the authors of the law, as in its residential counterpart, have not given adequate consideration to the possibility that in this City tenants may or may not harass landlords with the same frequency that landlords harass tenants, but the giving of the remedy to only one side may have unfortunate economic consequences.
The Residential Ordinance
Like the earlier residential ordinance(1), the commercial ordinance (2) forbids a landlord from taking actions "intended to cause a ... tenant to vacate covered property, or to surrender or waive any rights" while engaging in certain forbidden activities. While the residential and commercial lists of forbidden activities include matters not covered in the other list, both lists have in common: 1. using force or threats; .2 interrupting or discontinuing essential services; 3. using frivolous lawsuits; 4. removing property from the premises; 5. interfering with the entrance locks; 6. unspecified miscellaneous acts intended to interfere with the legitimate use of the premises. To this core list of common forbidden activities, the commercial list adds: 1. preventing people from entering the premises and 2. interfering with business by commencing unnecessary construction or repairs on or nearby the tenant's business.
While the residential ordinance has been around since 2008, it has not developed a significant body of case law that would answer any questions one might have about what does and does not come under the ambit of the activities forbidden under both sets of laws. Four of these core activities are not particularly needing further definition: 1. force; 2. frivolous lawsuits; 3. removing property; 4. entrance locks. But, both "essential services" and miscellaneous would not only benefit from such a body of case law, but are obviously different in the residential and commercial contexts, regardless of the similarity of the language. While a front desk receptionist would not normally be an "essential service" in a residence, such a person could be vital to certain businesses. Similarly, the scope of "miscellaneous" is going to be vastly different in the residential and commercial settings.
Who Has The Power?
Before examining the specifically commercially forbidden activities, it is useful to step away from the ordinance itself and to examine the economic reality in which it lives. By and large, it is a reasonable assumption that a residential landlord has more economic heft than its residential tenant. While there are undoubted exceptions to this rule, in the overwhelming majority of cases in New York City, this principle holds true. However, the same cannot be said of commercial tenancies. Many are the landlords in such situations who are "Mom and Pop" operations with tenants who are well heeled multi-location operations, some even international operations. In such tenancies, the power the tenant currently holds can be and often is extremely significant. Let us therefore read the remainder of this statute considering both the possibility that the landlord is holding the trump cards and the possibility that the real power resides with the tenant.
Interfering With Entry
Indeed, specifically against that background let us consider the two forbidden activities we have not yet discussed under the commercial statute. These are "preventing a commercial tenant or such tenant's invitee from entering a covered property occupied by such tenant" and "substantially interfering with a commercial tenant's business by commencing unnecessary construction or repairs on or near covered property." (3)
Consider the things that can prevent a tenant or invitee from entering the commercial premises. These can be real and substantial barriers like boarding up a store or they could be more metaphoric barriers like failing to remove snow from the sidewalk or tolerating disreputable people congregating immediately in front of the store, or allowing a disreputable or disgusting business to operate immediately next door to the complaining tenant. Which of these is sufficient to rise to the level of "harassment" under this ordinance? With a law that is less than a year old, we are in no position to know.
Motivation to Sue
But, now doubt, you will want to quibble that the ordinance in forbidding these activities requires not only that the activity take place, but that it be done with the specific intent of chasing the tenant away from its tenancy. And that is where the question of economic disparity comes in. The remedy called for in this ordinance is principally an expensive supreme court proceeding as the Civil Court has no jurisdiction to handle either the injunctive aspect of the case nor the damages aspect of the case if they exceed $25,000 as they are likely to do. If the tenant is a small operation, the tenant will lack the wherewithal to bring the suit unless counsel is willing to take the case on a contingency. If the landlord is a small operation, the landlord will lack the wherewithal to defend the suit and no one is going to take such a suit on a contingency because there is allowance in the statute of attorneys' fees for the landlord who successfully rebuffs the suit or indeed for a landlord who is being harassed by the suit.
Of course, that leads one to ask what a commercial tenant would be doing harassing a landlord in such manner and the answer is simple. Let us say that the tenant is in the 17th year of a 20 year lease and the landlord has indicated it does not plan to allow a renewal. This new ordinance could, in the hands of a sufficiently wealthy tenant, be used to terrorize a landlord into giving the lease extension it did not want to give, even if only to avoid a completely invalid, but very expensive lawsuit. For this reason, the City Council might want to consider the possibility of awarding attorneys' fees not merely to the prevailing party, but allowing for interim awards during the course of the action.
However, that is the comparatively innocuous of the two special forbidden activities of the commercial ordinance. The other is "interfering with business by commencing unnecessary construction or repairs on or nearby the tenant's business." Now, consider this scenario in the context of a commercial tenancy: The owner of the property has two immediately adjacent properties, one where the subject commercial tenancy is located and the other an open lot recently acquired in which the owner intends to erect a new building. The first thing one notes about this new building is that one is hard pressed to come up with an argument that it is "necessary." Yet, the commercial ordinance allows the tenant to enjoin the construction of this building upon a finding that it is "unnecessary" if the tenant can demonstrate to the court that the construction is interfering with its business (a relatively easy showing) and that the landlord intends for the tenant to vacate the subject premises. In some circumstances, this may be a very easy showing as the landlord actually does want the tenant to vacate the premises so as to be able to do more elaborate development of the two properties. Yet, what is perfectly legitimate business becomes, under this ordinance, something that is made to look evil and, if the tenant plays it correctly, something that provides the tenant with a completely unearned cudgel.
Many commercial occupancies are formulated not in the classic form of a lease, but rather as a license. It is unclear whether this ordinance will receive broad enough application to confer its benefits on licensees, but since the law spreads the benefits of so-called "remedial statutes" as broadly as possible, licensees may be included as well. A remedial statute "should be accorded its broadest protective meaning consistent with legislative intent. (4)
Unlike the residential ordinance which finds enforcement as either an inexpensive proceeding in the Housing Part of the Civil Court or as a counterclaim to a landlord's proceeding in the same court, from a practical point of view, the only known use of the commercial ordinance is in State Supreme Court. While the commercial ordinance says that the tenant, "may bring an action in any court of competent jurisdiction for a claim of commercial tenant harassment," that does not on its face allow or disallow "commercial tenant harassment" as a counterclaim instead, indeed a counterclaim in a summary proceeding. While RPAPL §743 allows an answer in a summary proceeding to "contain any legal or equitable defense, or counterclaim," that does not confer plenary equitable jurisdiction on the New York City Civil Court. Such equitable jurisdiction as the Civil Court does possess is to be found in Civil Court Act §201 which confers various kinds of equitable powers, none of them applicable to this ordinance. However, §212 does state that, "In the exercise of its jurisdiction the court shall have all of the powers that the supreme court would have in like actions and proceedings." Will a court determine therefore that the Civil Court does have sufficient equitable power to entertain the kinds of general injunctions this ordinance calls for?
We note that when the tenant brings its own suit under this ordinance, it is as an "action" under the general provisions of the CPLR rather than a special proceeding governed by CPLR Article 4 and there is no provision for the kind of summary proceeding under RPAPL Article 7. Thus, when brought as an action, the tenant and the landlord are both entitled to plenary discovery with all the papers, delays, and expenses that such proceedings entail. If it is a direct action, there really is no curtailing all of these procedural aspects of the case, but, if it is brought as a counterclaim in a summary proceeding in Civil Court, it is an unresolved question as to what the scope of discovery proceedings would entail, especially since it is unresolved that the case is properly brought as a counterclaim at all.
The remedies the ordinance calls for include but not be limited to, "injunctive relief, equitable relief, compensatory damages, punitive damages and reasonable attorneys' fees and court costs." The ordinance also mandates that there is a mandatory "civil penalty in an amount not less than one thousand dollars and not more than ten thousand dollars." One wonders why the court does not have jurisdiction to award a penalty of less than one thousand dollars. A ceiling on the penalty makes sense, but one struggles to justify the floor.
One place where the City Council did clearly seek to balance the parties rights is in the provision in the ordinance in which the tenant is not relieved of the obligation to pay rent and the penalties and awards set forth in the ordinance can be set off against the rent.
Since the ordinance does call for such a set off, there is a clear interaction in the rights of the landlord and the tenant. While there is an extremely long line of authority that discourages tenants from bringing State Supreme Court actions and using them to remove and consolidate summary proceedings from the Civil Court (5), this provision of the ordinance may be sufficient to overturn that line of thought. This too is one of the unanswered questions.
The City Council appeared to believe that with a light rewriting of the residential tenant harassment ordinance, a similar law could be enacted to protect commercial tenants. However, it appears that the provision was insufficiently thought through, giving, in some cases, the upper hand to one who already had greater economic power. If indeed this law is necessary at all, time under it pay point the way to the amendments which may be necessary to refine the law to something that is both more just and more practical.
1. Principally NYC Administrative Code 27-204(a)(48), added Local Law 7 of 2008 § 1, eff. Mar. 13, 2008.
2. NYC Administrative Code §§22-901, 22-902, 22-903 & 22-904.
3. The definitional section of the statute makes "covered" mean essentially "legally commercial."
4. 245 Realty Assocs. v. Sussis, 243 A.D.2d 29, 673 N.Y.S.2d 635 (1998).
5. See, for example, Cox v. J.D. Realty Assoc., 217 A.D.2d 179, 637 N.Y.S.2d 27 (1st Dept. 1995).