Jeffrey Levine - When tenant's alterations can constitute a breach of lease entitling evictions

Commercial tenants often perform material alterations in their leased premises, with the landlord's consent, either prior to or after taking possession of the premises. However, regardless of when the alterations are performed, they must be performed so as to comply, in all respects, with all applicable governing laws, codes, rules and regulations, including, without limitation, those promulgated by the N.Y.C. Department of Buildings (DOB). Thus, the alterations must be "code compliant." Most commercial leases require the tenant to, at all times during its tenancy, be in compliance with all applicable laws, codes, rules and regulations, thereby allowing the landlord to hold the tenant in breach of its lease if it performs alterations that are not code compliant or otherwise violate the law. In a recent case commenced by BBWG on behalf of a commercial landlord, the tenant had performed alterations within its retail premises, and the alterations resulted in the issuance of a violation by the DOB against the landlord because the tenant had not obtained a required work permit from the DOB with regard to the alteration work. As a result of the issuance of the violation, the landlord served the tenant with a written notice advising the tenant that it was in breach of the provision of its lease requiring the tenant to at all times be in compliance with all applicable laws, codes, rules and regulations. The notice also directed the tenant to cure the breach of its lease by having the DOB violation corrected and removed. However, the tenant failed to have the violation removed, so the landlord served a subsequent notice advising the tenant that its lease was being terminated on a specified date, based upon the tenant's failure to cure the DOB violation. Following the lease termination date, the landlord commenced a summary holdover proceeding seeking to evict the tenant from the premises and seeking recovery of all unpaid rental arrears. At the trial of the case, the landlord successfully demonstrated that the tenant had performed the work that had resulted in the issuance of the DOB violation and that the issuance of the violation constituted a breach by the tenant under the terms of its lease. The court awarded the landlord a judgment of possession, which allowed the landlord to obtain a warrant of eviction, and a monetary judgment for all rental arrears that were due (approximately $180,000). This case demonstrates the importance of code compliant alteration work and a landlord's right to remove a tenant whose alteration work is performed without a work permit or is otherwise not code compliant. In addition, the failure of a landlord to take steps to enforce the terms of the lease could have detrimental consequences, such as the imposition of fines by the Environmental Control Board or stop work orders respecting other areas of the landlord's building. To protect their interests, landlords should promptly consult experienced counsel when they receive notice of violations that have been issued by any governmental agency. Jeffrey Levine is a partner at Belkin Burden Wenig & Goldman, LLP, New York, N.Y.