USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
approval, and that the tenant ensures that all work be performed in a good and workmanlike manner and be free from defects. Tenants may try to negotiate that the landlord’s granting of consent will not be “unrea - sonably withheld, conditioned or delayed”, rather than being at the landlord’s “sole discretion”. 6.15 Specific Regulations Residential tenancies (apartment rentals) in urban areas are often regulated in various ways according to state and local jurisdiction, including with respect to rent control or rent stabilisation, requiring lease renew - als, prohibiting discriminatory practices, and imposing health and safety rules. Commercial leases are subject to common law, including “nuisances”, as well as a variety of regulations including (for example) building codes, zoning laws, land-use regulations, and health and safety laws, all of which vary by jurisdiction. Also, the Americans with Disabilities Act (ADA), a federal civil rights law that prohibits discrimination against individuals with disabilities, guarantees accessibility to buildings and public properties, including commer - cial properties and multi-family residential properties. During the COVID-19 pandemic, various eviction and foreclosure moratoria were put in place to protect both residential and commercial tenants. However, virtu - ally all pandemic-related regulations to assist tenants have expired. 6.16 Effect of the Tenant’s Insolvency A tenant’s insolvency will usually enable the landlord to terminate the lease and commence proceedings to evict the tenant. However, if the tenant files for federal bankruptcy protection, an “automatic stay” is triggered and all creditors of the tenant – including the landlord – are required to immediately cease all collection enforcement or eviction efforts against the tenant. This notwithstanding, the landlord may be per - mitted to continue pursuing an eviction if it obtained a judgment of possession prior to the tenant’s filing for bankruptcy. Under the federal bankruptcy code, the commercial tenant must choose to either assume or reject an unexpired lease. If the tenant assumes the lease, it must continue performing under the lease and must pay any past due amounts. If the tenant rejects the lease, the landlord is permitted to take back pos -
session of the premises, and it may make a claim for damages as provided for in the bankruptcy code. 6.17 Right to Occupy After Termination or Expiry of a Lease Generally, when a commercial tenant “holds over” after the lease expires or has been terminated, the tenant no longer has a right to continue occupying the leased premises, and the landlord can either bring a proceeding to evict the tenant or acquiesce for a peri - od of time and continue collecting rent. Commercial leases typically provide for a significantly higher “hold - over rent” (eg, 1.5 times or even twice the amount of base rent) which applies after the lease has expired or has been terminated. This strongly incentivises ten - ants to vacate the leased premises upon the expiry or termination of the lease. Landlords also seek to pro - tect themselves against a “holdover” tenant through their enforcement of any personal guarantees (which are commonly provided by the tenant’s principal(s)) that have been executed in connection with the lease. 6.18 Right to Assign a Leasehold Interest Most leases provide that the tenant cannot assign the lease or sublease any portion of the premises without the landlord’s prior written consent. Landlords usually condition their consent on the assignee: • being bound by the terms of the lease; • having a certain net worth; and • providing a personal guaranty (of some kind) by its principal(s). An issue often arises as to whether or not the ten - ant and the lease guarantor(s) will be released from their respective obligations once the assignment takes effect. Tenants often seek a modification providing that the landlord’s consent to a lease assignment will not be “unreasonably withheld, delayed or conditioned”. Tenants may also negotiate a revision providing that the landlord’s consent is not required for certain trans - fers (ie, transfers between existing principals, to a prin - cipal’s family member or to an affiliated entity). Some franchisors require their franchisees to include a pro - vision in a lease rider indicating that the landlord will be deemed to have consented to an assignment (or sublease) of the lease to the franchisor, its affiliate or another franchisee (either existing or newly approved).
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