Landlord Harassment of Commercial Tenants<font="-1"><b><i>What Can Be Done?</b></i></font>

One example of legislation applicable to landlords and their commercial tenants can be found in the codes of the City of New York, where last year a new law went into effect prohibiting landlords in the City from harassing their commercial tenants. The law, titled “Non-Residential Tenant Harassment,” is codified as Chapter 9, Title 22 of the New York City Administrative Code. It is aimed primarily at protecting small business owners and operators from being bullied by their landlords, as evidenced by the emphasis City Council members put on the plight of the small businessperson when discussing the boon the law would be to such parties. The law offers its protections to tenants operating big businesses as well, however, providing all commercial tenants a private right of action when they are subjected to harassment by their landlords.

Not everyone was in favor of the bill's passage, of course. The New York City Bar's Real Property Committee and Cooperative and Condominium Law Committee issued a report in 2015 documenting opposition to the then-proposed law. Among other things, the report's authors were concerned that the law as then proposed attempted to impose commercial rent controls by making it unlawful for a landlord to refuse to engage in negotiations with a tenant for renewal or extension of an existing lease or requiring that the tenant pay an “unreasonable sum” (which was not defined) before consenting to enter into such negotiations. These concerns were apparently heard, as this provision is not in the final version of the law.

To establish a violation under New York's Non-Residential Tenant Harassment law, the tenant must show:

1. That the landlord offensively acted or omitted to act in one of several enumerated ways with the intent of causing the tenant to leave the leased premises or to surrender or waive all or some of the tenant's rights under the lease or the law (N.Y.C. Admin. Code § 22-902(a)); and
2. That the leased premises is in “any building or portion of a building: a) that is lawfully used for buying, selling or otherwise providing goods or services, or for other lawful business, commercial, professional services or manufacturing activities; and b) for which a certificate of occupancy authorizing residential use of such building or such portion of a building has not been issued” (N.Y.C. Admin. Code § 22-901).

Examples of landlord wrongful acts that may constitute harassment under the law are:

1. Use of force or threats of same;
2. Interrupting or permanently cutting off essential services;
3. Filing frivolous lawsuits;
4. Changing locks;
5. Removing tenant property;
6. Preventing tenants' customers or other invitees from entering the premises; and
7. Conducting unnecessary repairs or renovations to the leased property or nearby premises in order to interfere with the tenant's conduct of business.

The law specifically states, however, that it is not actionable harassment for a landlord to lawfully terminate a tenancy, lawfully refuse to renew or extend a lease, or lawfully reenter and repossess the leased property. N.Y.C. Admin. Code § 22-902(b). Defenses are available to landlords under the law, too, though if physical force or the threat of it is proven, the landlord is out of luck. If the accusation is of the more mundane type, such as curtailing services, the defense can be made that “(i) such condition or service interruption was not intended to cause any commercial tenant to vacate a covered property or waive or surrender any rights in relation to such covered property, and (ii) the landlord acted in good faith in a reasonable manner to promptly correct such condition or service interruption, including providing notice to all affected lawful tenants in a covered property of such efforts, where appropriate.” N.Y.C. Admin. Code § 22-904.

Penalties under the law include a mandatory landlord payment of between $1,000 and $10,000, along with such other remedies as issuance of a restraining order against the landlord, award of compensatory and punitive damages and attorney fees. N.Y.C. Admin. Code § 22-903(a). Tenants that owe back rent will find any award received under the law “reduced by delinquent rent or other sum for which a court finds such commercial tenant is liable to the landlord.” N.Y.C. Admin. Code § 22-903(b).

The Bankruptcy Stay

In addition to statutory laws prohibiting landlord harassment, the courts also have been willing to step in to protect tenants. The case of In re Lansaw v. Zokaites, 2015 Bankr. LEXIS 106 (2015) (affirmed in Zokaites v. Lansaw, 2016 U.S. Dist. LEXIS 33118 (W.D. Pa., Mar. 15, 2016)), shows the depth of trouble a landlord can get into if it attempts to push a tennant out through harassing actions. Of course, the fact that the tenants, Garth and Deborah Lansaw, had filed for bankruptcy impacted the outcome considerably, but even the landlord's actions taken before the bankruptcy filing came under fire from the court (though damages were denied).

The bankruptcy petitioners in Lansaw had operated a daycare facility in premises leased to them by landlord Frank Zokaites. By the time the tenants filed their petition, there had already been several years of disputes between the landlord and tenants, sometimes landing all of them in state court. Apparently, the final straw for the tenants (which led them to file for bankruptcy) was the landlord's self-help service on them in 2006 of something he called a “Notice of Distraint,” purporting to place a lien on their personal property to compensate the landlord for unpaid rent.

Several harassment incidents were discussed by the bankruptcy court. One of these occurred prior to the bankruptcy filing and the others after.

Pre-Petition: 'False Light Invasion of Privacy'

In the complained-of pre-bankruptcy petition incident, the landlord put a four-foot-square sign at the entrance to the daycare facility's parking lot informing any passers-by that the tenants were in arrears on their rent and were going to be evicted by him. The Lansaws sought damages for this incident under a theory of “false light invasion of privacy” — in essence, they asserted that the placement of the sign invaded their privacy by causing them to be put into a false light. The bankruptcy court noted that the tort of false-light-invasion-of-privacy requires publicity of a matter which would be highly offensive to a reasonable person, and the actor who publicized it must know the statement is false or must have had reckless disregard as to the falsity of the publicized matter. Restatement (Second) Torts § 652E.

Bankruptcy Judge Thomas P. Agresti analyzed the facts of the case and found that although there was publication (the sign was seen by at least the daycare center's employees and the parents of children attending, and probably also by the many motorists who passed the driveway), the landlord's statements — that the tenants were behind in their rent and that the landlord was in the process of evicting them — were true. As to the other elements of the tort, the court found that although any reasonable person would likely be offended by having these things publicized, the Lansaws could not show that Zokaites knew his statements were false (because, in fact, they were not). Therefore, the petitioners' pre-petition harassment claim failed.

Judge Agresti was not finished with this pre-petition harassment incident, however. After finding that the Lansaws had not proven the elements of their claim, he went on to state that “the Court would further note for the record that this decision should in no way be viewed as any sort of approval of Zokaites' conduct in placing the sign. The Court believes what he did regarding the sign was reprehensible, and unfortunately consistent with the same sort of 'bullying' tactics that he would display a year later when he violated the automatic stay, as will be discussed below. Had the Lansaws pleaded and argued a different cause of action, perhaps Zokaites' conduct could have been found actionable. The Court, however, can only adjudicate matters as presented to it by the Parties, and the facts of the case do not establish any liability for the false light invasion of privacy.”

As an example of a cause of action that might have succeeded, Judge Agresti pointed to the Restatement (Second) of Torts § 652D, which discusses unreasonably publicizing the matter of a private debt. See, e.g., Vogel v. W.T. Grant Co., 458 Pa. 124, 130, 327 A.2d 133 (Pa. 1974) (citing as the classic example of Brents v. Morgan, 221 Ky. 765, 299 S.W. 967 (1927), where the court concluded that an automobile repairman could be liable for an invasion of the plaintiff's privacy where he placed a five-by-eight-foot notice in his window calling attention to a customer's overdue account, even though the notice was true).

In next month's issue, we discuss how the court treated the post-petition harassment of the Lansaw petitioners, and what consequences were imposed on the landlord.

*****
Janice G. Inman is Editor-in-Chief of this newsletter.

Landlord harassment of tenants is a common problem, not only in the housing arena, but also in the commercial leasing sector. Certainly, landlords often have good reasons to be angry with their tenants: from failure to pay rent to destruction of property to nuisance to co-tenants, the list can get long. However, a landlord that resorts to bullying tactics does so at its own risk.

The laws that apply to all citizens and entities of the jurisdiction in which the property sits apply to landlords and tenants in the same way that they apply to any other person or entity. In addition, some laws are more specifically aimed at landlord/tenant relations.

Legislation Directed At the Problem

One example of legislation applicable to landlords and their commercial tenants can be found in the codes of the City of New York, where last year a new law went into effect prohibiting landlords in the City from harassing their commercial tenants. The law, titled “Non-Residential Tenant Harassment,” is codified as Chapter 9, Title 22 of the New York City Administrative Code. It is aimed primarily at protecting small business owners and operators from being bullied by their landlords, as evidenced by the emphasis City Council members put on the plight of the small businessperson when discussing the boon the law would be to such parties. The law offers its protections to tenants operating big businesses as well, however, providing all commercial tenants a private right of action when they are subjected to harassment by their landlords.

Not everyone was in favor of the bill's passage, of course. The New York City Bar's Real Property Committee and Cooperative and Condominium Law Committee issued a report in 2015 documenting opposition to the then-proposed law. Among other things, the report's authors were concerned that the law as then proposed attempted to impose commercial rent controls by making it unlawful for a landlord to refuse to engage in negotiations with a tenant for renewal or extension of an existing lease or requiring that the tenant pay an “unreasonable sum” (which was not defined) before consenting to enter into such negotiations. These concerns were apparently heard, as this provision is not in the final version of the law.

To establish a violation under New York's Non-Residential Tenant Harassment law, the tenant must show:

1. That the landlord offensively acted or omitted to act in one of several enumerated ways with the intent of causing the tenant to leave the leased premises or to surrender or waive all or some of the tenant's rights under the lease or the law (N.Y.C. Admin. Code § 22-902(a)); and
2. That the leased premises is in “any building or portion of a building: a) that is lawfully used for buying, selling or otherwise providing goods or services, or for other lawful business, commercial, professional services or manufacturing activities; and b) for which a certificate of occupancy authorizing residential use of such building or such portion of a building has not been issued” (N.Y.C. Admin. Code § 22-901).

Examples of landlord wrongful acts that may constitute harassment under the law are:

1. Use of force or threats of same;
2. Interrupting or permanently cutting off essential services;
3. Filing frivolous lawsuits;
4. Changing locks;
5. Removing tenant property;
6. Preventing tenants' customers or other invitees from entering the premises; and
7. Conducting unnecessary repairs or renovations to the leased property or nearby premises in order to interfere with the tenant's conduct of business.

The law specifically states, however, that it is not actionable harassment for a landlord to lawfully terminate a tenancy, lawfully refuse to renew or extend a lease, or lawfully reenter and repossess the leased property. N.Y.C. Admin. Code § 22-902(b). Defenses are available to landlords under the law, too, though if physical force or the threat of it is proven, the landlord is out of luck. If the accusation is of the more mundane type, such as curtailing services, the defense can be made that “(i) such condition or service interruption was not intended to cause any commercial tenant to vacate a covered property or waive or surrender any rights in relation to such covered property, and (ii) the landlord acted in good faith in a reasonable manner to promptly correct such condition or service interruption, including providing notice to all affected lawful tenants in a covered property of such efforts, where appropriate.” N.Y.C. Admin. Code § 22-904.

Penalties under the law include a mandatory landlord payment of between $1,000 and $10,000, along with such other remedies as issuance of a restraining order against the landlord, award of compensatory and punitive damages and attorney fees. N.Y.C. Admin. Code § 22-903(a). Tenants that owe back rent will find any award received under the law “reduced by delinquent rent or other sum for which a court finds such commercial tenant is liable to the landlord.” N.Y.C. Admin. Code § 22-903(b).

The Bankruptcy Stay

In addition to statutory laws prohibiting landlord harassment, the courts also have been willing to step in to protect tenants. The case of In re Lansaw v. Zokaites, 2015 Bankr. LEXIS 106 (2015) (affirmed in Zokaites v. Lansaw, 2016 U.S. Dist. LEXIS 33118 (W.D. Pa., Mar. 15, 2016)), shows the depth of trouble a landlord can get into if it attempts to push a tennant out through harassing actions. Of course, the fact that the tenants, Garth and Deborah Lansaw, had filed for bankruptcy impacted the outcome considerably, but even the landlord's actions taken before the bankruptcy filing came under fire from the court (though damages were denied).

The bankruptcy petitioners in Lansaw had operated a daycare facility in premises leased to them by landlord Frank Zokaites. By the time the tenants filed their petition, there had already been several years of disputes between the landlord and tenants, sometimes landing all of them in state court. Apparently, the final straw for the tenants (which led them to file for bankruptcy) was the landlord's self-help service on them in 2006 of something he called a “Notice of Distraint,” purporting to place a lien on their personal property to compensate the landlord for unpaid rent.

Several harassment incidents were discussed by the bankruptcy court. One of these occurred prior to the bankruptcy filing and the others after.

Pre-Petition: 'False Light Invasion of Privacy'

In the complained-of pre-bankruptcy petition incident, the landlord put a four-foot-square sign at the entrance to the daycare facility's parking lot informing any passers-by that the tenants were in arrears on their rent and were going to be evicted by him. The Lansaws sought damages for this incident under a theory of “false light invasion of privacy” — in essence, they asserted that the placement of the sign invaded their privacy by causing them to be put into a false light. The bankruptcy court noted that the tort of false-light-invasion-of-privacy requires publicity of a matter which would be highly offensive to a reasonable person, and the actor who publicized it must know the statement is false or must have had reckless disregard as to the falsity of the publicized matter. Restatement (Second) Torts § 652E.

Bankruptcy Judge Thomas P. Agresti analyzed the facts of the case and found that although there was publication (the sign was seen by at least the daycare center's employees and the parents of children attending, and probably also by the many motorists who passed the driveway), the landlord's statements — that the tenants were behind in their rent and that the landlord was in the process of evicting them — were true. As to the other elements of the tort, the court found that although any reasonable person would likely be offended by having these things publicized, the Lansaws could not show that Zokaites knew his statements were false (because, in fact, they were not). Therefore, the petitioners' pre-petition harassment claim failed.

Judge Agresti was not finished with this pre-petition harassment incident, however. After finding that the Lansaws had not proven the elements of their claim, he went on to state that “the Court would further note for the record that this decision should in no way be viewed as any sort of approval of Zokaites' conduct in placing the sign. The Court believes what he did regarding the sign was reprehensible, and unfortunately consistent with the same sort of 'bullying' tactics that he would display a year later when he violated the automatic stay, as will be discussed below. Had the Lansaws pleaded and argued a different cause of action, perhaps Zokaites' conduct could have been found actionable. The Court, however, can only adjudicate matters as presented to it by the Parties, and the facts of the case do not establish any liability for the false light invasion of privacy.”

As an example of a cause of action that might have succeeded, Judge Agresti pointed to the Restatement (Second) of Torts § 652D, which discusses unreasonably publicizing the matter of a private debt. See, e.g., Vogel v. W.T. Grant Co. , 458 Pa. 124, 130, 327 A.2d 133 (Pa. 1974) (citing as the classic example of Brents v. Morgan , 221 Ky. 765, 299 S.W. 967 (1927), where the court concluded that an automobile repairman could be liable for an invasion of the plaintiff's privacy where he placed a five-by-eight-foot notice in his window calling attention to a customer's overdue account, even though the notice was true).

In next month's issue, we discuss how the court treated the post-petition harassment of the Lansaw petitioners, and what consequences were imposed on the landlord.

*****
Janice G. Inman is Editor-in-Chief of this newsletter.