This month’s blog will begin to discuss a topic that will be revisited in future installments: Is a commercial landlord entitled to engage in self-help to recover possession of demised premises and, if so, under what circumstances and what are the potential damages available to a tenant if the landlord acts improperly?

Two recent decisions, the first from the Supreme Court, Appellate Term, First Department and the second from the Supreme Court, Suffolk County (Spinner, J.) are a good starting point.

In Sol De Ibiza, LLC v. Panjo Realty, Inc., 570805/09, NYLJ 1202472860256, at *1 (App. Term, 1st Dep’t, decided September 22, 2010) the Appellate Term reversed a Civil Court Order granting tenant’s petition to be restored to the demised premises and directed an assessment of damages under RPAPL §853 based upon an unlawful eviction. The Appellate Term held “. . it is well established that a landlord may, under certain circumstances, utilize self-help to regain possession of demised commercial premises (citations omitted).” The Court identified the following factors to be considered to determine when self-help may be available:

1. The subject lease specifically reserves the landlord’s right to reenter and regain the premises upon tenant’s breach of its obligation to pay rent;
2. Prior to reentry, landlord serves upon tenant a valid rent demand;
3. Reentry was effected peaceably, and;
4. Tenant is in fact in default in its obligation to pay rent.
(Citations omitted)

The Court noted that the lease at issue did specifically reserve “landlord’s right to reenter and regain the demised premises upon tenant’s breach of its obligations to pay rent.”

While the Court also noted that the landlord did serve a rent demand it found that the record from the lower court proceeding was not sufficiently developed to allow a determination to be made as to the validity of the rent demand, whether landlord’s reentry was peaceable or whether tenant actually breached its obligation to pay rent. Accordingly, the matter was remanded to Civil Court for a hearing on these issues.

In Pernell v. 287 Albany Avenue LLC, 2006-20355, NYLJ 1202473637827, at *1 (Supreme Court, Suffolk Co., decided October 4, 2010, Spinner, J.), after a bench trial and without specifically discussing the factors identified in Panjo Realty, Justice Spinner found that the tenant was unlawfully evicted and awarded significant damages to tenant. In Pernell, the tenant occupied the subject premises for use as a delicatessen/convenience store. The lease term expired January 31, 2003, but Plaintiff/tenant remained in possession until December 2005, and made monthly rental payments “through late 2005.” Plaintiff/tenant operated his business at the premises until 2003, when his cousin took over the operation of the business. Plaintiff/tenant reentered the premises in September 2005, keeping his trade fixtures and chattels in the store but he did not operate any business and “[t]he premises were secured by padlocked gates over the two windows and the door.”

Plaintiff/tenant attempted to sell his fixtures and chattels and in November 2005, received an offer of $30,000 for the fixtures/chattels; the purchaser was to use the equipment to open a soup kitchen. However, by deed recorded December 19, 2005, the premises was conveyed to Defendant. Defendant’s members testified that Plaintiff’s “store never appeared to be open” and that its sale contract “guaranteed delivery of the premises free of tenancies and . . . Defendant . . . did not receive any rents or leases from the seller nor any assignments thereof and no representation was made regarding month to month tenancies.”

Defendant’s members also testified that “as of the date of trial [tenant’s] equipment was still present at the premises and that he could reclaim it at any time.” Plaintiff/tenant testified that he drove by the premises, as he did every day, and “saw a dumpster in front of the premises and the security gate opened, his padlocks having been forcibly removed.” Plaintiff/tenant was advised by the Suffolk County Police to retain counsel. The Court did not find the testimony offered by Defendant to be credible and found Plaintiff/tenant’s testimony that Defendant disposed of his property to be credible.

The Court therefore held “[t]he entry upon the premises at issue by Defendant without giving statutory written notice and by failing to invoke the provisions of RPAPL §711 et seq. constituted both wrongful eviction and trespass, thereby entitling Plaintiff to recover damages from Defendant.”

The Court found that Plaintiff/tenant would be entitled to “compensatory damages for wrongful eviction” in the amount of the “value to Plaintiff, above and beyond the rent, of the unexpired term of the leasehold interest plus the actual amount of damages that flow from the wrongful ejectment.” Finding that the “leasehold has no ascertainable value” the Court awarded Plaintiff/tenant damages of $30,000 for the value of the equipment (based on the offer to purchase the equipment) plus that amount trebled ($90,000) pursuant to RPAPL §853.

Taken together, these cases support the use of self-help in certain circumstances, but remind us that the exercise of self-help may come at a steep price. While commencing a summary proceeding comes at a price, including legal expenses and time, such price may very well be significantly less than the potential damages that may result from an unlawful eviction.