In a recent appellate decision, the Second Department reaffirmed that a commercial tenant who continues to possess the leased premises cannot withhold rent from its landlord, notwithstanding the landlord’s failure to fulfill certain obligations, unless the lease agreement specifically states otherwise. See Tolou Realty Assocs., Inc. v. Dolphin Diner Corp., 87 Misc. 3d 131(A) (App. Term. 2d Dep’t 2025). The Second Department has issued multiple decisions reinforcing the commercial lease principle that where both parties are represented by counsel, “[t]he obligation of a commercial tenant to pay rent is not suspended if the tenant remains in possession of the leased premises, even if the landlord fails to provide essential services.” Westchester Cnty. Indus. Dev. Agency v. Morris Indus. Builders, 717 N.Y.S.2d 279, 280 (2d Dep’t 2000).
These holdings raise an important question for our commercial tenants: If withholding rent is not allowed, what remedies do commercial tenants have when a landlord breaches the lease? And on the other side, for our commercial landlord clients, what remedies do they have when a tenant breaches the lease? Is self-help a viable option or are court proceedings the way to go?
Understanding the answers to these questions will enable both commercial tenants and landlords to identify appropriate recourse when the other party fails to fulfill their contractual obligations under the lease, thereby saving both parties time, goodwill, and hundreds of thousands of dollars in legal fees.
Tenant Remedies for Landlord Breach – What Tenants Cannot Do
1) Withhold Rent Payments
As noted above, the Second Department has repeatedly held that a commercial tenant cannot remain in possession and withhold rent, unless permitted by the lease. In Tolou, the court arrived at this same result even though the parties had entered into a stipulation in which the landlord promised to make certain repairs Had the stipulation expressly granted the tenants the right to withhold rent upon the landlord’s failure to perform those repairs, the landlord’s subsequent nonpayment proceeding might have been resolved in the tenants’ favor. However, because the tenants could not identify any provision in either the lease or the stipulation authorizing such withholding, the court concluded that they were not entitled to any rent abatement and ordered them to surrender possession of the premises to the landlord and to pay over $700,000 in rent arrears.
Tolou serves as a clear reminder to commercial tenants, landlords, and their counsel to negotiate lease terms carefully, as those terms largely define the parties’ respective rights and remedies. Had the tenants in Tolou recognized that the right to withhold rent is not automatic absent an express contractual provision, they might have negotiated the stipulation or lease differently or elected to pay the landlord on time, thereby avoiding the nonpayment proceeding altogether. Ultimately, the case highlights the importance of thoughtful lease negotiations to ensure that remedies and protections are clearly secured before disputes arise.
Tenant Remedies for Landlord Breach – What Tenants Can Do
1) Be Proactive
Generally, the lease terms dictate what constitutes a landlord default and as noted above, the remedies available to the tenant. Accordingly, when negotiating a commercial lease, tenants’ counsel should try to include language specifying that the landlord will be in default if it fails to perform certain obligations, such as providing promised services or amenities; repairing, replacing, or maintaining common areas outside the tenant’s control; supplying or maintaining required utilities; or ensuring the tenant’s full use and quiet enjoyment of the leased premises.
Additionally, tenants’ counsel should negotiate lease provisions that preserve all rights and remedies available at law and in equity, including the right of setoff and the ability to recover legal fees in any action against the landlord. In the event the landlord initiates a proceeding against the tenant, the tenant should prepare by ensuring the lease does not contain clauses that prevent the tenant from asserting counterclaims.
2) Seek Injunctive Relief
If the landlord refuses to fulfill their obligations, such as providing agreed-upon maintenance, utilities, or access to the leased premises, you can seek a court-ordered injunction. This court order compels the landlord to take immediate action to remedy the issue. The tenant should document any correspondence with their landlord regarding the landlord’s breach as evidence supporting their need for injunctive relief.
3) Sue for Damages
If the landlord breaches the lease in a way that causes the commercial tenant to suffer a loss of business, the tenant may bring a claim for monetary damages. Before initiating legal action, the tenant should carefully review the lease to ensure it does not contain provisions that shift responsibility for obligations the landlord is alleged to have breached to the tenant. Additionally, tenants should keep a detailed record of the earnings lost due to the landlord’s failures to support their claim for monetary damages.
4) Evacuate Premises and Claim Constructive Eviction
One way that a commercial tenant may be relieved of its obligation to pay the full amount of rent is where it has been actually or constructively evicted from either the whole or part of the leased premises. A constructive eviction occurs when the landlord’s wrongful acts substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises. Because a claim for constructive eviction requires the tenant to vacate the leased premises before withholding rent, this remedy should be used as a last resort, as there are risks associated with abandoning the premises and claiming constructive eviction, such as the court finding that no constructive eviction has occurred.
Landlord Remedies for Tenant Breach – What Landlords Cannot Do
1) Initiate Proceedings against Tenant without Prior Notice
When a commercial tenant’s conduct breaches the lease, commercial landlords may consider remedies such as filing court proceedings against the tenant for nonpayment and/or initiating eviction proceedings. A commercial landlord, however, cannot bypass the terms of the lease and must first carefully review the agreement to identify all required notice and cure provisions before taking action. Where the lease provides a notice-and-cure period, typically determined by the severity of the breach, the landlord cannot proceed until the tenant has been fully notified of the alleged default and given the opportunity to cure it.
Even after the notice and cure period expires, a landlord cannot automatically initiate court proceedings against the tenant. Additional notice may be required depending on the type of breach and the specific relief sought, whether it be possession or repayment. Failure to strictly comply with these notice requirements may bar or delay the landlord’s ability to enforce its rights under the lease, both in and out of court.
2) Wrongfully Resort to Self-Help Eviction
While a landlord may peaceably reenter the commercial premises and regain possession upon a tenant’s default if such remedy is explicitly stated in the lease (and the landlord has provided the tenant with prior notice and the opportunity to cure), hastily resorting to self-help eviction is not recommended as it can expose the commercial landlord to liability and treble damages under New York Real Property Actions and Proceedings Law (“RPAPL”) § 853. While self-help may appear more expedient than court proceedings, the law governing self-help eviction is particularly nuanced, and landlords must avoid any conduct that could be deemed a “breach of the peace.” This includes actions perceived as violent, threatening, or intimidating, which may give rise to claims sounding in trespass or harassment.
These risks are further heightened for New York City premises by the relatively recent passage of the Non-Residential Tenant Harassment Law, codified in Chapter 9 of Title 22 of the New York City Administrative Code, which prohibits conduct that “substantially interferes” with a commercial tenant’s rights. Conduct that could be actionable under this law includes removing personal property from the premises belonging to the tenant or preventing the tenant from entering the property or changing the locks. Violations of the Non-Residential Tenant Harassment Law may result in monetary penalties, as well as the landlord owing significant damages to the tenant, including punitive damages.
Landlord Remedies for Tenant Breach – What Landlords Can Do
1) Utilize the Security Deposit
In New York, the terms of most commercial leases require the tenant to deposit funds with the landlord or provide a letter of credit as security for the tenant’s obligations under the lease. When the tenant causes a breach of the lease, the landlord may be able to use the security deposit to remedy the breach. Generally, when a default does not justify termination or litigation, the landlord may use the security deposit to cure it, and most leases require the tenant to restore the deposit after written notice. Most commercial leases also allow the landlord to apply the security deposit to cure any outstanding obligations after the tenant vacates, with any unused portion returned to the tenant.
2) Initiate Nonpayment Proceeding and Petition for Eviction
If the tenant’s default is caused by nonpayment of rent pursuant to the terms of the lease, and the landlord has either made a rent demand or served a 14-day notice requiring possession of the premises, the landlord may commence a nonpayment proceeding, seeking both recovery of the outstanding rent owed and possession of the premises.
Under RPAPL § 731, the proceeding is commenced by notice of petition. Service of the notice and petition must be made in accordance with RPAPL § 735, and, together with proof of service, be filed with the court. Pursuant to RPAPL § 741, the petition must set forth the facts upon which the proceeding is based and the relief sought by the landlord. It must also include an accurate and complete description of the premises sought to be recovered; the petitioner’s interest in the premises from which removal is sought; and the respondent’s interest in the premises and its relationship to the petitioner. Although courts generally excuse technical or de minimis errors in summary proceedings, certain defects, such as errors relating to the description of the premises, may result in motion practice or dismissal if they’d prevent a marshal or other officer of the court from identifying and locating the premises and evicting the proper party. Accordingly, commercial landlords and counsel should ensure the petition complies with the applicable statutes and court rules prior to filing.
3) Sue for Collection of Rent
Most commercial landlords that elect to bring a nonpayment proceeding also seek recovery of past due rent. Alternatively, landlords may elect to collect past due rent by filing a suit for breach of contract without going through the eviction process. Keep in mind that these cases must be brought in New York Supreme Court and can take much longer to litigate than electing to seek past due rent in the nonpayment proceeding. Prior to commencing an action for past due rent, a commercial landlord and counsel must ensure that the lease includes a provision giving the landlord the right to recover all rent and other sums owed up to the time of recovery or possession.
Takeaway: For commercial tenants and landlords, remedies for the other party’s breach depend primarily on the lease agreement. Accordingly, commercial tenants and landlords should focus on proactive lease negotiation and determining appropriate legal remedies prior to engaging in any drastic measures that may result in liability. By being aware of their rights under the lease, commercial tenants and landlords can protect their businesses, minimize financial risk, and respond effectively to commercial lease breaches.