Using Self-Help to Remove Unwanted Hotel Management
In their Real Estate Litigation column, Todd E. Soloway and Joshua D. Bernstein write: Though hotel managers typically argue otherwise, under New York law hotel owners are permitted to effectuate the removal of their managers by using self-help without the need for judicial intervention.
August 18, 2015 at 08:28 PM
13 minute read
The term “self-help” reflexively sends shivers down the spines of practitioners and judges alike. Engrained in our collective legal-psyches is the sense that every consequential act performed by our clients while in the throes of litigation requires the imprimatur of the court. Perhaps it is time for another perspective. Rights of self-help regularly make appearances in various contexts including commonly in commercial leases and have become a regular adjunct to a hotel owner's right to remove an unwanted hotel management company even with years remaining on the parties' management agreement.1
The concept is not novel: A hotel owner whose business is suffering is entitled to chart her own course irrespective of any contract claims she might face or assert against the manager. Just as with the removal of an unwanted employee or contractor, the right and the ability to remove quickly an unwanted manager is of critical importance to hotel owners in order to gain control over their own business, to ensure that loyalty to the owner prevails, and to provide a smooth and peaceful transition of the hotel operation with the least possible disruption to the business.
All too often, despite having been terminated, hotel management companies refuse to leave and continue to commandeer the operation of the hotel against the owner's wishes and even while acting with disloyalty (shocking as that may be). Hotel management companies take this position even after the hotel owner has (i) exercised her absolute right to terminate the management contract under personal services contract and agency theories; and/or (ii) exercised her contractual right to terminate the contract after the management company failed to cure a noticed material default. In both circumstances, the hotel management company may refuse to comply with a termination notice, refuse to comply with subsequent demands that they vacate, and refuse to comply with contractual procedures for transitioning the business of the hotel following a termination of the contract. Although not articulated, the apparent reason is to leverage the hotel owner in the context of litigation and negotiations even where the management company has no defense to removal.
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