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BLOG / 07.18.18 /

Expiration of tenant’s license issued under the New York Conservation Law permits owner to remove tenant for engaging in “illegal activity” under the Real Property Law

Lease agreements typically contain a provision whereby the agreement is deemed breached and the tenant may be evicted for engaging in “illegal activities.” Eviction based upon an illegal activity is also codified in New York Real Property Law § 231(1), which sets forth that a lease agreement becomes void where an occupant or lessee uses a premises for any “illegal trade, manufacture or other business”, thereupon permitting the owner to seek an eviction.

A recent appellate decision reminds us that “illegal activity” includes more than just those nefarious criminal acts often portrayed in a television episode of “Law and Order.” Rather, a tenant’s criminal failure to maintain a license necessary to operate an otherwise lawful business may also constitute an “illegal trade, manufacture or other business” under the Real Property Law.

The Metropolitan Fine Arts & Antiques (“MFAA”) leased premises on West 57th Street in Manhattan, and its business included the sale of elephant ivory pursuant to a license issued by the New York State Department of Environmental Conservation (“DEC”) under the New York State Conservation Law. At some point, the license expired, but MFAA continued to engage in its business for about four to five months, in violation of state law which prohibits the sale, purchase, trade, barter, or distribution of elephant ivory without a DEC license. The MFAA and two principals were criminally prosecuted, and the principals admitted at their plea allocution that MFAA had continued to operate without the license.

Based upon the plea allocution, the Court held that the owner was permitted to seek the tenant’s eviction, under Real Property Law § 231(1), for its engagement in an “illegal activity”, i.e., operating without a requisite license. (Metropolitan Fine Arts & Antiques, Inc. v. 10 West 57th Street Realty LLC., App. Div. 1st Dept., 6/14/18).

Building owners should be mindful to understand their tenants’ businesses and to verify on a regular basis that their tenants are maintaining current required licenses and permits. Failing to do so can expose building owners to potential claims of “aiding and abetting” unlawful tenants, and negatively affect the owners’ insurance coverages. Other problems may arise when an owner knowingly or unknowingly permits a tenant to operate an unlicensed business on the premises.