"Covid" Cases against Non-Paying Commercial Tenants

1. NYC Landlord v. National Retail Clothing Company – Settlement for approximately $4,500,000 (75% of arrears) (names withheld due to confidentiality agreement)

2. NYC Landlord v. International Organization – Settlement in excess of $5,000,000 (100% of arrears) (names withheld due to confidentiality agreement)

3. NYC Landlord v. Hayim Grant – Pre-Discovery Summary Judgment in the amount of $500,000 against guarantor of office sharing company (full amount of lease guaranty)

4. NYC Landlord v. Not-For-Profit Corporation – Settlement for $700,000 (nearly 90% of the outstanding arrears (names withheld due to confidentiality agreement).

5. NYC Landlord v. Bread and Butter - Money Judgement against two personal guarantors in the sums of $186,067.07 and $344,855.85, and against the corporate tenants in the sum of $186,067.07.

6. In March 2021, we commenced a lawsuit against a high-end women’s clothing store in Manhattan. Approximately $1,400,000 in rent was owed at the time. There were two guarantors of the Lease, the current proprietor and the former partner who both acted as Good Guy Guarantors for the lease. Within a period of approximately two months both cases were prepared, filed and served upon all of the defendants. Immediately thereafter, a summary judgement motion was prepared and filed with the Supreme Court. The proprietor and her former partner were investigated and determined to have significant and material personal assets, including real estate. It was clear to us that they would come to the table sooner or later. That is indeed what happened. We reached a settlement for the payment of $1,050,000 (approximately) and the balance was forgiven conditioned upon a good payment record for the following six months. Additionally, the short lease period that remained was restructured with some small reductions in the monthly fixed rent. The good guy guarantees were preserved intact based upon the settlement stipulation. As part of the settlement, $23,500 in legal fees were paid by the tenant as well (approximately 50% of the legal fees). Even with the lifting of the eviction moratorium/closedown of the Landlord-Tenant Courts, on January 15, 2022, Landlords and their counsel must evaluate whether it would be more efficient to file a case in Supreme Court for the large sums of money owed by tenants or to only utilize Commercial Landlord-Tenant court. We believe that Commercial Landlord-Tenant court will be bogged down for at least the next three to six months. Those delays will likely make filing a Supreme Court action more appealing to ownership in many cases. Obviously, this is a case-by-case evaluation depending on many factors.

7. We commenced suit against a Subway franchise and a dry cleaner (two stores) in the same building located on West 26th Street. There was a guarantor, Mr. JJ who acted as the good guy guarantor for both of the subject leases. There was also a partial guaranty from the Subway parent company. Within a period of three months, both cases were prepared, filed, and served upon all the defendants. In addition, summary judgement motions were prepared and filed with the court, in a short timeframe. The good guy guarantor/principal of both tenants realized the folly of litigating two summary judgement motions when Landlord was sure to prevail in court. As such, a settlement was negotiated; whereby approximately ninety percent of all arrears were paid in a one-time payment. The remaining ten percent was deferred until the principal identifies another party to take over one of the two premises at which time the arrears will likely be paid. Any default in payment until lease termination sometime in late 2022 will automatically incur liability for the balance due of ten percent of the arrears; plus $30,000 in legal fees by way of a judgment which would be entered against guarantor without further notice to the court. Tenants and guarantor paid almost $300,000 to settle these cases. Obviously, that was a big shot in the arm for the Landlord.

The Klein Law Group CRE, PLLC, takes an aggressive approach to protect our clients’ legitimate interests, which at the moment, requires the commencement of these plenary actions against commercial tenants and their guarantors.

Cleaning Up a Mess

The tenant, a commercial taxi repair facility, spilled nearly 60,000 gallons of waste fuel oil underneath 11th Avenue, adjacent to the Jacob Javits Convention Center. The FBI and Coast Guard uncovered the spill and commenced a massive environmental clean-up on an adjacent, vacant piece of property. The tenant failed to notify the landlord that it was the source of the oil spill, and intentionally misled the landlord about the nature and extent of the environmental clean-up.

After four years of litigation, including a successful trial in Albany County against the tenant, and another two years of collection efforts against the tenant and its principal, The Klein Law Group was able to defend the property owner against a $1.3 million State clean-up lien and collect more than $1.1 million from the tenant to settle and resolve the State’s environmental claim.

The client-owner then decided to sell the property. After receiving an offer of $25,000,000, the property owner again consulted The Klein Law Group. Believing the offer to be below market for a prime development site, The Klein Law Group tapped its contacts and secured a better offer of $29,000,000, which ultimately closed.

The Klein Law Group’s consulting expertise in that case resulted in an additional 15% return for the owner. Our knowledge of the market and pro-active involvement in properly positioning valuable assets has enhanced the purchase prices for scores of clients. Whether in the purchase or sale of real property, we counsel and guide our clients through the marketplace to ensure they receive the very best value.

When a Famous Shoe Retailer Refused to Walk

Ferragamo, the posh shoe retailer, had announced plans to vacate its storefront space at 717 Fifth Avenue. But, six months after its scheduled departure, Ferragamo was still occupying the store – and unabashedly refusing to pay long overdue rent. The building’s owner, The Equitable Life Assurance Society of the United States, hired The Klein Law Group, which ultimately secured possession of the store and a $259,000 judgment against Ferragamo. The amount represented not only Ferragamo’s back-rent but also the property owner’s legal fees.

Perseverance Pays

National Foods, a division of ConAgra Foods, obtained a $200,000 judgment against a Manhattan businessman on a defaulted loan. The debtor thwarted National Foods’ efforts to collect the judgment, and the passage of time nearly rendered it unenforceable. In the eleventh hour, National Foods renewed the judgment, but its late filing subjected the judgment to challenge by the now bankrupt debtor and his other creditors. It looked as though National Foods would never collect a cent – until the company hired The Klein Law Group.

Thanks to our legal team’s decisive filings and extensive analysis of the debtor’s assets, the debtor was forced to convert his bankruptcy to a Chapter 7 liquidation. The Klein Law Group marketed the debtor’s valuable Lower East Side property for public sale, attracting bids that significantly drove up the price. Negotiations with the bankruptcy trustee and other secured creditors culminated in a global settlement that divided the proceeds from the sale of the property.

The Klein Law Group secured $298,000 for National Foods, though there was significant interest still owed by the debtor.

Following the settlement, The Klein Law Group found that the debtor held an interest in a valuable property in Brooklyn. The Klein Law Group put together a group of creditors and forced a sale of the property, which sold at auction for $7.2 million, resulting in payment of 100 cents on the dollar on the National Foods claim, including all interest and counsel fees.

In the end, The Klein Law Group turned a dormant judgment into a half million dollar recovery for this very grateful client.

Room to Breathe

A long-time client was unable to pay its mortgage on a major commercial office building in Coney Island, Brooklyn. The client was both a part owner in the building and a major tenant.

The Klein Law Group immediately contacted the lender, Citigroup Inc., and negotiated a long-term standstill agreement that provided the client with more than a year to sell the property. Through continuous cooperation and communication with Citi executives, we delivered an extraordinarily long workout period to a client in distress.

We then acted as consultant to the client to secure the best purchase price possible. Using Ed Klein’s contacts in the real estate community, our client received multiple purchase offers from which a careful choice of the ultimate purchaser was made.

Orchestrating a Florida Foreclosure

The Klein Law Group’s client, a limited liability company, purchased a Florida shopping center in an IRC Section 1031 tax free exchange. The only tenant at the property was P-W Food Chain, one of a chain of supermarkets throughout the Southeastern United States. P-W Food Chain filed for Chapter 11 bankruptcy relief , and closed 350 of its stores, including this Florida location.

Our client’s lender, Capital Central Bank of Chicago, commenced foreclosure proceedings on the property even before P-W Food Chain vacated its space. The bank’s proceeding threatened any equity that the client built up in the property over a seven-year period.

Once a bona fide purchaser was found, The Klein Law Group set up a pre-packaged bankruptcy to provide the owner with the time necessary to sell the property while maximizing its value. It also gave the parties time to resolve creditors’ claims and litigation with P-W Food Chain, Capital Central and others.

The client put the ownership entity into bankruptcy, holding off the lender’s foreclosure proceeding. The property transfer closed, the lender was paid in full, and other creditor claims were resolved, all thanks to carefully orchestrated strategic planning – a typical result when clients trust their transactions to The Klein Law Group.

Turning a Case Around

When a commercial tenant in a landmark midtown building sued to recover alleged rent overcharges, the landlord retained The Klein Law Group. Later, when its lease expired, the subtenants, still in occupancy, failed to vacate the premises. The Klein Law Group quickly responded with a counterclaim for holdover damages.

Because of our legal analysis of the tenant’s case, the court was persuaded to dismiss the tenant’s overcharge claims and award the landlord twice the lease rental rate as holdover damages, plus legal fees and expenses. The landlord won nearly $1.2 million.

On appeal, the tenant claimed that extensive construction in the building during the holdover period interfered with its use of the premises. The Appellate Division was not convinced. Accepting The Klein Law Group’s counterarguments, the appellate court unanimously upheld the lower court’s decision.