Expert: Jim Avancena, CPM - 9/6/2008

Question
We are in NY. We sold a business with the lease still in our name with the
provision that the new owner take over the lease in Dec. The buyer has
defaulted on 50% of the sale price and has no intention of negotiating an
agreement. We have already exhausted legal efforts short of suing.

So we are stuck in a situation where we have someone in the premises that wont
get out. The land lord has said he will cancel the lease if we can remove the
person. No sublet agreement was signed.

What are our options? We want to remove them as soon as possible as at this
point if they default on payment we have the obligation and will be responsible
for payment.

We understand that we can give an eviction notice but if they refuse to budge
what can we do? Can we change the locks and remove their belongings?

Any advice would be greatly appreciated.

Answer
Karen-

This is a matter that will be best addressed by an attorney - you may have to actually file legal action.  You probably would like a way to end this problem without having to pay an attorney to handle the legal actions required, however, it may be too late for that now.   Although you saved money initially by not having a written sales and sublease agreement with this difficult subtenant, what you are going through now is why to have those terms written down and signed by both parties.

It seems to me that the group that is in your space now operating is there without your permission, and definitely without the landlords approval.  Does your lease require you to get the landlord's written permission to sublet your space?   I believe the landlord could directly take action to terminate your lease for subletting without his permission, then file to evict both you and the current tenant.

Your lease probably required that the tenant maintain certain insurance coverage on the premises throughout the lease term.  The landlord could also send you official legal notice requesting a copy immediately of the current insurance certificate that is NOW IN EFFECT for the premises.  If you and the subtenant do not have the lease stipulated insurance coverage in effect for the leased premises, that would likely put the lease in default and be another reason for the landlord to terminate the lease.    

Why is the landlord waiting you you to remove the tenant before he will cancel your lease?  The landlord appears to have the ability to terminate the lease even if the illegal subtenant is in the space.  Ask your attorney if according to New York Law the landlord has essentially recognized the subtenant's occupancy of the premises if the subtenant has been paying the rent each month and the landlord has been knowingly accepting the monthly rent payment from your illegal subtenant.  Perhaps something has happened that limits what the landlord can do in this situation.

Consider the landlord's position; it may be that the landlord will not take any action until the monthly rent stops being paid for your space.  If the monthly rent is being paid - either by you or by the illegal subtenant - the landlord isn't losing any money, so what financial incentive does your landlord have for getting involved in this dispute?

Again, this matter would have been easier to manage if your sale and sublease agreements were in writing and executed by both you and the subtenant.  This is really a matter for an attorney to handle because they know the local laws and can quickly get you into a courtroom.

Finally, I do not know if the State of New York allows "Self Help", which is what changing the locks and related actions are often called.  If it is illegal in New York, you could be exposing yourself to a lawsuit by the sub-tenant.  Some states do and some do not allow such actions.  You will need to check with counsel on this.  

Good luck.

-Jim