USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
6.16 Forms of Security to Protect Against a Failure of the Tenant to Meet Its Obligations Upon the signing of the lease, the landlord typi - cally requires a “security deposit” from the ten - ant to protect against a default by the tenant. The amount of the security deposit is a matter of negotiation and may be in the form of cash or a letter of credit. A letter of credit is a document through which the issuing bank promises to pay the security deposit to the landlord. A letter of credit is generally considered more desirable to a landlord than a cash security deposit because it puts the landlord in a better position in the event of the bankruptcy of the tenant. 6.17 Right to Occupy After Termination or Expiry of a Lease A tenant typically does not have a right to occupy the relevant real estate after the expiry or termi - nation of a commercial lease. However, commer - cial leases typically have a “holdover” provision that states that if a tenant continues to occupy the premises after the expiry or termination of the lease, the tenant must pay a multiplier of the rent for the last month of the lease (typically 150% to 200%) and become a month-to-month tenant or a tenant at sufferance. A landlord can only evict a month-to-month tenant upon notice, whereas a tenant at sufferance may be evicted at any time after the expiry or termination of the lease, subject to applicable laws. In addition, leases may give the landlord the right to impose consequential damages on the tenant for failure to timely vacate.
6.18 Right to Assign a Leasehold Interest
Assignment of leasehold interests are negotiated by landlords and tenants. Typically, tenants are permitted to assign their leasehold interest or sublease all or a portion of the leased prem - ises with the landlord’s consent, or to assign to an affiliate or a successor to the tenant by merger, consolidation or acquisition of all or sub - stantially all of the tenant’s assets without the landlord’s consent. Landlords will want to see financial information regarding the new subten - ant and may require tenants to pay the landlord’s attorney costs in relation to the consent for the assignment or sublease. 6.19 Right to Terminate a Lease There are several events that typically give the landlord or the tenant the right to terminate the lease. For example, the lease typically states that if the landlord fails to complete the build-out of the space, the tenant has the right to terminate after a certain date. The parties typically have a right to terminate in the event of a casualty if the space is not restored within a certain period of time. In addi - tion, a landlord can terminate the lease if the tenant defaults and fails to cure the default, eg, by failing to pay rent. A tenant may negotiate the right to an early ter - mination of the lease, but such early termination rights are often expensive. A landlord may negotiate the right to relocate the tenant to other space or even terminate the lease if the landlord wants to redevelop the subject property.
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