USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
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 termi - nated, the tenant no longer has a right to con - tinue occupying the leased premises, and the landlord can either bring a proceeding to evict the tenant, or it can acquiesce for a period of time and continue collecting rent. Commercial leases typically provide for a significantly high - er “holdover 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 tenants to vacate the leased premises upon the expiry or termina - tion of the lease. Landlords also seek to protect themselves against “holdover” tenant through their enforcement of any personal guarantees (which are commonly provided by the tenant’s principal(s)) that have been executed in connec - tion 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 con - sent 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 tenant and the lease guarantor(s) will be released from their respective obligations once the assign - ment takes effect. Tenants often seek a modifi - cation providing that the landlord’s consent to a lease assignment will not be “unreasonably with - held, delayed or conditioned” . Tenants may also
criminatory 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 regula - tions, 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 individu - als with disabilities, guarantees accessibility to buildings and public properties, including com - mercial 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, virtually all pandemic-related regula - tions 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 credi - tors of the tenant – including the landlord – are required to immediately cease all collection enforcement or eviction efforts against the ten - ant. This notwithstanding, the landlord may be permitted 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 possession of the premises, and it may make a claim for damages as provided for in the bank - ruptcy code.
1113 CHAMBERS.COM
Powered by FlippingBook