Last fall, New York City, through regulations enacted by the City Council, strengthened existing protections for small business tenants from perceived landlord "harassment." Much has happened since—as we in the COVID era know too well—but these protections, largely without parallel in this country, have recently been judicially applied and interpreted for the first time. These developments bear exploring, as some tenants may well deploy such harassment claims when needing otherwise unavailable relief in lease disputes following the re-opening of the courts and easing of governmental closures. The laws and times change—litigants adapt.

The Law

Some background: almost four years ago, Mayor Bill de Blasio signed the Non-Residential Tenant Harassment Law that, for the first time, prohibited New York City landlords from "harassing" commercial tenants. See Local Law No. 77 (2016) of City of N.Y. §22-902. Though the need for such protections has been questioned, the 2016 Harassment Law defined "harassment" as any conduct by a landlord "intended" to cause a commercial tenant to vacate a commercial space, or to surrender or waive any rights (whether under a lease or otherwise) to such covered property. See id. at §22-902(a).

The law identified 10 types of prohibited conduct, like using force or threats, interrupting essential services, and bringing "frivolous court proceedings," with several tied to causing "substantial interference" with the tenant's business. Id. at §22-902(b). Ensuing case law suggested that the specific intent requirement was too difficult to prove, thus frustrating the very purpose for the regulations. See Schulman, Blitz & Williamson, LLP v. VBG 990 AOA LLC, 2018 NY Misc. LEXIS 5612, 2018 NY Slip. Op. 32993(U) (Sup Ct, NY County [Nov. 28, 2018]).

The City Council went on to relax that intent requirement with new provisions that went into effect on Oct. 26, 2019. Those amendments redefined "commercial tenant harassment" as any act or omission by a landlord that "would reasonably cause a commercial tenant to vacate covered property, or to surrender or waive any rights under a lease or other rental agreement or under applicable law in relation to such covered property," and expanded possible harassing acts to include continued interruption of essential services, discrimination based on a protected class, or threatening a tenant based on such protected status. See 22 NYCRR §902. Possible civil penalties were also increased from $1,000-$10,000 to $10,000-$50,000. See 22 NYCRR §903(a).

A Case of "Shenanigans"

Now, amid the pandemic shutdown, we have seen the amended Harassment Law applied for the first time in a reported decision. In One Wythe LLC v. Elevations Urban Landscape Design Inc, 2020 NY Misc. LEXIS 1477, 2020 NY Slip. Op. 50437(U) (Civ Ct, Kings County [Apr. 17, 2020]), the Civil Court, Kings County (Roper, J.), following a hearing on a tenant's harassment claim (among other issues), found that the landlord had resorted to "shenanigans" and violated the 2019 Harassment Law by commencing successive eviction proceedings and serving multiple lease notices deemed to be frivolous. This conduct, according to the factfinding, had interfered with the small-business tenant's landscaping design business, caused financial injury (in the form of business disruption, loss of time away from clients, and legal fees), and made the tenant want to waive legitimate contractual rights.

Using the new "reasonableness" standard, Judge Sandra Roper reasoned that it would be wholly inconsistent with the spirit of the law, and not in the interest of justice, to hold "that redress pursuant to Harassment Law may not be sought procedurally in a summary proceeding brought by the landlord, as [such proceeding] in and of itself may be wholly or in part thereof the alleged offending act or omission that constitutes a basis for the harassment at issue." See id. at *11.

The amended Harassment Law was also given retroactive effect to encompass harassing acts that occurred before the Oct. 26, 2019 effective date—an application that could see a challenge under the recent Court of Appeals decision in Matter of Regina Metro. Co., LLC v. N.Y.S. Div. of Hous. & Comm. Renewal, 2020 NY LEXIS 779, 2020 NY Slip. Op. 02127 (Apr. 2, 2020). All told, Roper affirmed her previous dismissal of the holdover proceeding, awarded costs and sanctions for frivolous conduct, and entered judgment of $19,509.32 based on the tenant's harassment claims.

Cue the Landlord-Tenant Cases

With so many businesses now closed or restricted, we should expect many commercial lease disputes to reach the courts whenever new filings are generally permitted. Courts, sympathetic though they may be to businesses affected by the pandemic restrictions, have limited grounds for relieving commercial tenants of payment obligations. For example, leases do not usually afford force majeure protections that might suspend the duty to pay rent—even when tenants cannot operate as a result of pandemic, governmental orders, and the like. See Kel Kim Corp. v. Cent. Mkts., Inc., 70 N.Y.2d 900, 902-03, 524 N.Y.S.2d 384 (1987).

And, common law defenses like impossibility of performance and frustration of purpose are only available under very limited circumstances, such as when the predicate event is wholly unforeseeable. See id. at 902; Urban Archaeology Ltd v. 207 E. 57th St. LLC, 68 A.D.3d 562, 562, 891 N.Y.S.2d 63 (1st Dept. 2009); A + E TV Networks, LLC v. Wish Factory, 2016 US Dist. LEXIS 33361, at *38-41 (S.D.N.Y. Mar. 11, 2016). That high standard has obviated relief even after events like the September 11 terrorist attacks, the 2008 global financial crisis, Hurricane Sandy, the 1918 influenza, and the SARS outbreak in 2002. See Robitzek Inv. Co. v. Colonial Beacon Oil Co., 265 A.D. 749, 753, 40 N.Y.S.2d 819 (1st Dept. 1943); Urban Archaeology Ltd, supra; Axginc Corp., supra.

Against this backdrop, landlord harassment claims might, under certain circumstances, allow for otherwise unavailable relief. As One Wythe shows, the new reasonableness standard has made pleading and proving harassment claims easier, so courts, when confronted by landlords that pressed claims against their small business tenants too aggressively, could use harassment claims, if raised appropriately, either to broker settlements or, by awarding counterclaim damages, as end-runs around strict no set-off provisions typical of commercial leases.

We should expect, then, that some tenant litigants, cornered by post-coronavirus suits, will assert harassment claims, while invoking courts' equitable powers—extended to landlord and tenant courts through Civil Court Act §110(a)—and other malleable concepts like the covenant of good faith and fair dealing. How the courts will respond to such adaptive positions is an open question, as is how harassment claims might interact with personal guaranties (some of which may be affected by a City Council bill recently signed into law by the Mayor [Council of City of NY Intro. No. 1932-2020-A, amending Administrative Code § 22-1005]), and whether future commercial leases could validly disclaim or waive tenant harassment claims. But, if the past few months are any indication, we should rule out nothing.

Maxwell Breed is a partner at Warshaw Burstein. Lisa Liu is an associate at the firm.