Owner Runs into a Series 1 Problem When it came Time to Evict a Long-Time Bar Tenant So the Building Could Be Sold; and Commercial Tenant Rips Store Front Off During Eviction
March 23, 2018
Obviously, I couldn’t decide which blog post title to go with above – so I went with both. The first one is the more boring of the two, but not if you are a reader who owns real estate in New York in a Series 1 company. The second title is more fun, but it’s really just about some interesting color at the end of the story.
Let’s set the stage: Commercial building in Brooklyn; Long-owned by the same family who are now out of state; Time to sell; Main tenant was a night club; It gets referred to me to get it vacant for the sale. This is a typical day at work for me. But, as I always say, cases are like snowflakes, no two are ever alike.
The twist here was that the deed holder was a Series 1 entity, a creature of Delaware law that protects holding companies. The problem was that a Series 1 company is not recognized as a legitimate owner of real property in New York State, except in very limited circumstances. Thus, the entity was not authorized to do business in New York State, according to the New York Secretary of State. I, therefore, would not bring a case on behalf of the entity. I told referring counsel that she was free to hire another landlord and tenant counsel, who would be willing to bring the technically-defective case. Counsel stuck with me, however, and took the time to transfer the property into a regular limited liability company. Once that happened, I could confidently commence a nonpayment proceeding by service of a rent demand. The parties stipulated to let the bar have another ten months. Tenant’s promise to vacate was backed up by a judgment of possession and a warrant of eviction.
Lest that successful conclusion not be dramatic enough, I offer the following. The tenant didn’t leave gracefully. We had to get Marshal Renzulli out there to conduct the eviction. The tenant left the place a complete mess with debris and garbage strewn throughout. Tenant destroyed much of the interior, including taking down the walls to the bathroom. Strange choice. But that wasn’t the biggest problem. The biggest problem was the tenant tore off the storefront. The premises couldn’t be secured. It was wide open. The situation was exacerbated by the fact that there was graffiti painted on the outside of the building saying, “Free Candy”, with a huge arrow pointing to the big gaping hole in the front of the building where the store front used to be. Also, the remaining plate glass window was decorated with a collage of condoms. You can’t make this stuff up. We needed to get an emergency crew in to board the place up. It took until midnight.
What’s the lesson in this one?…Ok…
Don’t hold New York State real estate in a Series I and always have a good contractor on speed dial in case your dive-bar-departing-tenant decides to rip the front of your building off.
Respectfully submitted,
