NYC’s Commercial Harassment Law and Tenant Relocations

New York Real Estate Journal recently published an article authored by Olshan Real Estate Of Counsel Thomas Kearns entitled “NYC’s Commercial Harassment Law and Tenant Relocations.” In the article, Tom explains how New York City’s Commercial Harassment Law could become more relevant given the increase in conversions of office buildings for residential use and the risks that creates for landlords. “While the definition of harassment in the code includes some obvious wrongs (using force or threats),” Tom writes, “another less obvious prohibited act is ‘commencing unnecessary construction’ near the tenant’s business that would ‘reasonably cause’ the tenant to vacate. Work to convert an office building to residences may be deemed by New York courts to be unnecessary.” He notes that liability can arise if landlords intend for tenants to vacate and that even starting conversations about relocation—common during large redevelopment projects—can trigger scrutiny under the statute. Moreover, New York courts are likely to side with tenants affected by disruptive construction, making tenant remedies a central issue. While damages are capped at $50,000 (likely per property), courts can also award additional damages, legal fees and injunctions that could delay or restrict construction: “Perhaps most troubling for landlords is the express right of the Court to issue an injunction against future harassment which could complicate the construction,” Tom writes. “While a court might be hesitant to permanently enjoin all construction, it could easily issue a temporary injunction pending an initial hearing and might require permanent steps such as after-hours requirements for noisy construction that could be expensive for landlords.” He provides some practical solutions to this issue:  include early termination clauses in leases where redevelopment is anticipated; exercise caution in communications with tenants; offer relocation compensation; and evaluate whether relocation costs outweigh construction savings, especially for below-market leases. Tom concludes that, given the potential risks for landlords pursuing building conversions, a strategic and well-advised approach to tenant relocation is essential.