In suing their Times Square landlords, Gap and Old Navy cited a city law that protects their lease during the pandemic, even if they didn’t pay rent.
Now that may come back to bite them.
The law, which prohibits a landlord from harassing a commercial tenant hurt by Covid-19, is among three statutes being challenged by two small landlords. Documents filed in court today say big retailers’ lawsuits show the protections go too far — and curb landlords’ right to commercial speech.
The City Council had billed the measures as efforts to help small businesses survive the pandemic. National chains’ use of them to withhold rent doesn’t fit that narrative, and might be a legal vulnerability as well.
“In order to survive constitutional scrutiny, you have to have a narrowly tailored statute,” said the landlords’ lawyer, Stephen Younger, a partner at Patterson Belknap Webb & Tyler. “This is anything but, and the fact that Old Navy and Gap are taking advantage of this confirms to us that the statute is overly broad.”
The chains sued their landlord at the Bow Tie Building, at Seventh Avenue and West 44th Street. Other lawsuits included as exhibits in the case involve The Gap’s 170 Broadway location, Bath & Body Works’ 304 Park Avenue store and Victoria’s Secret’s Herald Square flagship. The latter two lawsuits are against SL Green.
Younger’s clients aim to overturn laws shielding commercial and residential tenants from harassment and another measure protecting the personal assets of tenants who break commercial leases, all of which were enacted in May, by showing they harm small landlords.
Marcia Melendez and Ling Yang, the plaintiffs, are first-generation immigrants who own two properties each. Melendez owes over $20,500 in taxes and Yang has incurred approximately $100,000 in losses related to the pandemic.
However, Melendez and Yang’s properties do not house large retailers, according to Younger.
“We’re using [the lawsuits] as emblematic of the extraordinarily broad reach of these laws. The laws are so broad that they cover parties that shouldn’t be getting relief from the government,” Younger said. “And correspondingly, the burden of this is being put on the property-owning community of New York City.”
Concerns about the bills’ constitutionality were raised upon their introduction. City Council member Kalman Yeger noted in April that the city can’t interfere with such agreements between landlords and tenants.
But other lawmakers have continued to side with commercial tenants over landlords. On Wednesday, the state Assembly passed a bill that would deter commercial landlords from holding out for higher rent after a tenant quits a lease early, so the departed tenant would not be liable for rent during a long period of vacancy.
While such bills have been hailed by restaurants and retailers, landlords have been seeking ways to penalize non-paying tenants. In the residential sector, landlords across the country have been suing local governments to lift eviction moratoriums.
Contact Sasha Jones at sasha.jones@therealdeal.com