NYC Landlord/Tenant Disputes May Arise in Hurricane Sandy Aftermath

November 30, 2012

Our New York City landlord and tenant lawyers hope this finds you well as we all continue our recovery from Hurricane Sandy. undertherain.jpg

The exact toll of the damage is still not yet clear, though we know that the Federal Emergency Management Agency, or FEMA, has approved nearly $665 million in federal aid for victims of the storm. We understand that some 230,000 New Yorkers have requested assistance from the agency. The hardest-hit areas include Nassau County, which will receive roughly $225 million, while Queen County will get about $170 million. In Richmond County, where Staten Island is, FEMA will dole out about $70 million.

Thusfar, FEMA has carried out more than 130,000 home inspections in the state, and those are ongoing.

As we all piece our lives and livelihoods back together, it's important for both landlords and tenants to understand their obligations and rights following a disaster.

Clauses in a lease agreement that cover such disasters are called "force majeure" agreements, and they derive from the French term, "greater force." Essentially, these clauses may relieve one party of certain obligations due to some force beyond their control, i.e., a natural disaster, such as a hurricane, tornado or earthquake.

Following the 9/11 terror attacks, there were a host of lawsuits filed under the force majeure clause, and now case law in the state has established that the clause must explicitly spell out the event or act that would prevent one of the concerned parties from performing their obligations under the lease term. That case was 1 World Trade Ctr. LLC v. Cantor Fitzgerald Sec. What this means is that you cannot underestimate the importance of a well-written lease agreement that addresses all possible scenarios. To give you an idea of how specific this must be, in the case of the attacks by terrorists, the phrase "acts of war" alone might not be enough to protect one from failure to uphold obligations under the lease. That's why since 2001, we've seen terms on some leases that include phrases like, "public enemies" or "enemies of the state" and even references to dirty bombs.

If it seems excessive, the last 11 years in New York City have taught us you must be prepared for almost anything.

Failure to do this may result in a case of liability, such as what happened in Marketfare St. Claude, L.L.C. v. Melba Margaret Schwegmann Brown. This was a case that was filed in the U.S. District Court in the Eastern District of Louisiana after Hurricane Katrina. A grocery store tenant held a lease with the owner of the building. The grocery store contended that the owner failed to make any repairs on the building after the storm. The argument was that the building could have re-opened in April 2007, had the building owner complied with his obligation to address the damages and restore the structure in a "timely manner" after the storm. The terms of the lease required that in the event of a disaster, the owner had a responsibility to begin restoration as soon as it was "reasonably practical."

A jury sided with the plaintiff, which it awarded $2.3 million in lost profits. Plus, the landlord is required to fix the building at a cost of $3 million and pay the tenant upwards of $40,000 in future lost profits for each month that the repairs go unfinished.

It's a costly lesson, and one we hope New Yorkers can learn from.

If you are a landlord or tenant whose property was damaged in the wake of the storm, call us to learn more about your legal rights and obligations.

The Law Offices of Ira S. Newman provides representation to landlords and tenants in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
Hold Owner to Repair Obligations After Storm Damage, Sept. 14, 2012, Staff Report, Commercial Tenant's Lease Insider

Force Majeur Clauses in Leases, 2007, By Jessica S. Hoppe and William S. Wright, Probate Property Magazine, The American Bar