Manhattan sees spike in suits by commercial landlords against tenants

April 22, 2009 12:27PM

The number of commercial landlords suing their Manhattan tenants for non-payment surged in the first quarter of 2009 as the economy deteriorated and retail sales slumped.  

There were 40 percent more commercial non-payment landlord-tenant cases in Manhattan’s Civil Court in the first three months of the year compared with the same period last year, according to data provided exclusively to The Real Deal by the Clerk of the Court of New York City.

A review of the first-quarter cases found many of them were landlords suing their retail tenants such as General Growth Properties filing suit against Subway sandwich shop at the South Street Seaport for $193,422 in January; the owners of 3 Sheridan Square suing one of John Catsimatidis’ Gristedes locations at the building in January for $154,178; and Young & Rubicam suing men’s clothier Reflessi for $32,970 in March for a street-level location at 285 Madison Avenue, court records show.

The greatest jump was in the third term of 2009 — roughly equivalent to March — in which the number of non-payment cases jumped 50 percent to 570 from 378 in the same period in 2008.  

Instead of months, the court uses a system of 13 terms comprised of four weeks each to set its annual calendar.

Real estate attorney Lloyd Shor, a partner at law firm Blank Rome, said the surge was to be expected given the economic downturn which would put further downward pressure on rents if the tenants are eventually evicted.

“It has an impact on rents because as space becomes vacant it gets added to the availability list and since there are a very limited number of takers it just further exacerbates a problem,” Shor said.  

The uptick bucked a trend that has seen a decline in commercial non-payment cases in Manhattan. There were 5,396 cases in all of 2006 but only 4,723 in 2008, the Clerk’s records showed.

Retail brokers cautioned that historically many non-payment cases are resolved without evicting tenants.

In fact, a spokesman for Gristedes said the company was sued because of a dispute over the wording in a lease contract that has since been resolved.

Henry Goldfarb, a retail broker and vice chairman at Grubb & Ellis who has not had a client sued for non-payment in the current downturn, expected that in many cases the landlord, tenant and judge will work out a payment deal.

“There are not that many evictions that happen,” he said.