Real Estate

Your rights will be determined by the provisions of your lease. There is no "standard" form of lease, and the provisions which cover these matters can vary significantly, even for different leases in the same building. A professional will need to check the provisions of your lease carefully to answer these questions for your particular case. The following is only general advice for tenants regarding damaged and untenable premises as a result of accidental destruction relating to the WTC disaster, and is based on one commonly used New York city form lease.

Is the lease automatically terminated by the destruction of the building?

No.

Is the landlord obligated to rebuild the building or can the landlord terminate the lease?

The answer depends on the severity of the damage.

In the event the demised premises are partially damaged or rendered partially untenantable, the landlord is obligated to make all necessary repairs at its expense.

If the building is so seriously damaged that the landlord decides to demolish or rebuild it, or in the event the demised premises are totally damaged or rendered wholly unusable, the landlord retains the right to terminate the lease. To terminate the lease, the landlord must provide written notice to the tenant within ninety (90) days after the casualty, or thirty (30) days after adjustment of the insurance claim for such fire or casualty, whichever is sooner.

Does the tenant have the right to terminate the lease if the landlord plans to rebuild the building?

Although a New York statute provides that, if the premises are destroyed or rendered unusable, the tenant would have the right to terminate the lease, leases almost always have specific provisions which supersede the statute. The tenant should consult his or her own lease.

If the landlord terminates the lease, is the tenant entitled to receive its security deposit?

Yes.

Is the landlord required to repair and restore the tenant's furniture and equipment?

The landlord is not required to repair any damage to the tenant's furniture and/or furnishings or any fixtures or equipment, improvements or appurtenances that are removable. This damage should be covered by the tenant's insurance company.

Is the tenant obligated to pay rent during the time that the landlord makes repairs on the building?

Again, this depends on the severity of the damage. If the premises remain useable, as a general matter, the tenant remains liable for the rent. Leased space may be considered "useable" even if it cannot be used for the particular use for which the tenant uses it and even if the tenant is unable to generate income from it. In the event that the premises are partially damaged, rent is apportioned from the day of the casualty according to the part of the premises that is useable, until such repairs are substantially completed.

In the event the premises are totally damaged or rendered wholly unusable, rent is payable up to the time of the casualty and thereafter, the rent obligation is suspended until the date when the premises are repaired and restored by the landlord (or if sooner reoccupied by tenant, then rent is apportioned according to the part of the premises that is useable). The tenant's liability for rent resumes five (5) days after written notice from the landlord that the premises are substantially ready for occupancy.

Once the landlord completes the restoration of the premises, the tenant may still have work to do to repair installations, phones, office equipment, etc. The tenant will be obligated to pay rent during this time period, but may be able to cover the cost of that rent from proceeds of the tenant's business interruption insurance policy.

How long can the landlord take to repair the premises?

If the landlord elects or is required to repair the premises, the landlord must do so reasonably expeditiously, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond the landlord's control.

What degree of damage to the premises constitutes "partially damaged" or "totally damaged" or "unusable"?

The answer depends on the individual facts involved.

If the landlord elects to terminate the lease, is the landlord obligated to help the tenant find alternative space or reimburse tenant for related costs?

No.

What if the premises have not been damaged, but damage to nearby buildings has limited the tenant's access to its space or the space is within a restricted zone?

Generally, the mere fact that access to the area in which the premises are located is restricted does not mean that the premises are deemed "unusable" for the purpose of the tenant's obligation to continue to pay rent. This is true notwithstanding that, for businesses such as restaurants and stores, the business will be unable to generate the same revenue as it previously had and, in the case of office space, that access by clients and other visitors may be restricted. While leases do sometimes provide that the inability to gain access to the premises also suspends the rent obligations of the tenant, these provisions are usually limited to a total or near total inability resulting from damage to other parts of the building where the premises are located or from the acts of the landlord itself. If you are obligated to pay rent in this circumstance, you should consult with your insurance company to determine whether you will be able to collect business interruption insurance to cover your rent costs during the period when you are displaced from the building because it is inaccessible. In the event that a tenant does not make its rent payments, the landlord has the right to terminate the lease and evict the tenant. Further, if the landlord terminates the lease, the landlord is under no obligation to mitigate its damages by re-leting the space.

I own a small building in the area which was damaged. Is there any relief from my obligation to pay property taxes?

Although Governor Pataki has issued an Executive Order allowing property tax payments due on or after September 11, 2001 to be deferred until January 2, 2002, because most commercial buildings in the area pay taxes on a semi-annual basis (July 1 and January 1), such properties will not benefit.

Who can I contact to find or offer temporary or permanent office space?

Empire State Development's (ESD) website hosts the NY Site Finder listing 90% of office space currently available in the NYC metro area. The Small Business Recovery Center in Yonkers provides temporary, free office space to small businesses displaced or otherwise directly impacted by the attack, to enable them to get back on their feet and resume operations in New York City. For more information visit ESD online at www.empire.state.ny.us or call (518) 292-5200, Monday through Friday, 9am - 5pm. See the Other Resources section of this handbook for information about Real Estate Board of New York (REBNY) and Digital NYC: Wired To The WorldSM.