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Affirm to lease violation?

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Wtcelesta

Junior Member
What is the name of your state (only U.S. law)? New York

(Please let me know if I should move this question to Business)

Our LLC had a 10-year commercial (retail) lease that we decided to vacate after 2 years. The personal guarantee was already over, the LLC will be dissolved shortly, and we gave a 6-month "good guy" notice in writing regarding our intention to vacate. After we vacated, we had a walkthrough with the landlord (no issues found) and surrendered the keys. Now the landlord sent us a "moveout certification" document to sign that includes the following:

"Tenant has vacated the Premises in violation of the Lease.

1) Tenant is current with its Rent obligations, and, as of the date hereof, neither Landlord (to the best of its knowledge) nor Tenant is owed any sums by the other party due under the Lease.

2) Notwithstanding Paragraph 1 above, the Lease and all its terms and conditions, including without limitation, the Security Deposit, remain unchanged and in full force and effect and nothing contained in said Paragraphs shall be deemed a waiver of any terms, conditions rights or remedies available at law, equity or under the Lease."

They also informed us that they would not be returning the security deposit. It is a very substantial amount to us, 3 months of rent.

My question: is this "moveout certification" typical for an early termination situation? Paragraph 2 sounds to me like a statement that the landlord is not terminating the lease from his end, so what would be the benefit, if any, for us to sign this document?
 


LdiJ

Senior Member
What is the name of your state (only U.S. law)? New York

(Please let me know if I should move this question to Business)

Our LLC had a 10-year commercial (retail) lease that we decided to vacate after 2 years. The personal guarantee was already over, the LLC will be dissolved shortly, and we gave a 6-month "good guy" notice in writing regarding our intention to vacate. After we vacated, we had a walkthrough with the landlord (no issues found) and surrendered the keys. Now the landlord sent us a "moveout certification" document to sign that includes the following:

"Tenant has vacated the Premises in violation of the Lease.

1) Tenant is current with its Rent obligations, and, as of the date hereof, neither Landlord (to the best of its knowledge) nor Tenant is owed any sums by the other party due under the Lease.

2) Notwithstanding Paragraph 1 above, the Lease and all its terms and conditions, including without limitation, the Security Deposit, remain unchanged and in full force and effect and nothing contained in said Paragraphs shall be deemed a waiver of any terms, conditions rights or remedies available at law, equity or under the Lease."

They also informed us that they would not be returning the security deposit. It is a very substantial amount to us, 3 months of rent.

My question: is this "moveout certification" typical for an early termination situation? Paragraph 2 sounds to me like a statement that the landlord is not terminating the lease from his end, so what would be the benefit, if any, for us to sign this document?
I absolutely would NOT sign it. You are not benefited at all, and they have already made it clear that they are not going to return your deposit. The way they worded things could make you liable for the rest of the lease even if they get another tenant.
 

Zigner

Senior Member, Non-Attorney
While I do agree that you shouldn't sign that, a three-month penalty to get out of the remaining eight years of your lease seems VERY reasonable to me.
 

Wtcelesta

Junior Member
While I do agree that you shouldn't sign that, a three-month penalty to get out of the remaining eight years of your lease seems VERY reasonable to me.
I would indeed take it stoically if it comes to that (losing the deposit). However, I wonder if that's not what the 6-month notice period was for. We continued to pay for 6 months even though it was harming the business. Our real estate agent speculated that we could leave right away and forgo the deposit or give a 6-month notice and receive the deposit and an amenable termination in the end.

As far as I understand, in New York there is no landlord obligation to apply a reasonable effort to find a new tenant, otherwise it could also be argued that it was very fair of us to give the landlord this opportunity to look for a new tenant while still collecting rent for 6 months.

He was talking about returning the deposit until three months ago when he found a new lawyer who advised him to keep the money.
 

Zigner

Senior Member, Non-Attorney
I would indeed take it stoically if it comes to that (losing the deposit). However, I wonder if that's not what the 6-month notice period was for. We continued to pay for 6 months even though it was harming the business. Our real estate agent speculated that we could leave right away and forgo the deposit or give a 6-month notice and receive the deposit and an amenable termination in the end.

As far as I understand, in New York there is no landlord obligation to apply a reasonable effort to find a new tenant, otherwise it could also be argued that it was very fair of us to give the landlord this opportunity to look for a new tenant while still collecting rent for 6 months.

He was talking about returning the deposit until three months ago when he found a new lawyer who advised him to keep the money.
You could owe for 96 additional months! Doesn't 3 months seem fair? :rolleyes:
 

adjusterjack

Senior Member
I would indeed take it stoically if it comes to that (losing the deposit). However, I wonder if that's not what the 6-month notice period was for. We continued to pay for 6 months even though it was harming the business. Our real estate agent speculated that we could leave right away and forgo the deposit or give a 6-month notice and receive the deposit and an amenable termination in the end.
So much for taking legal advice from a real estate agent. He was wrong.

You could have packed up and left without notice, been in breach, and lost your deposit.

You could have given 12 months notice, you would still have been in breach, and lost your deposit.

As far as I understand, in New York there is no landlord obligation to apply a reasonable effort to find a new tenant,
Right.

The NY Court of Appeals refused to recognize a duty to mitigate in a commercial case. Holy Properties Ltd., L.P. v. Kenneth Cole Prods., Inc., 87 N.Y.2d 130, 637 N.Y.S.2d 964, 661 N.E.2d 694 (N.Y. 1995)

He was talking about returning the deposit until three months ago when he found a new lawyer who advised him to keep the money.
Smart lawyer. Gave good advice.

Maybe you should get yourself a smart lawyer, too. Not for this situation but to guide you through your future business endeavors.

And, yes, I also think you shouldn't be signing that agreement and that the loss of the deposit is quite fair compensation to the landlord for your breach. Be thankful if he doesn't start billing you for monthly rent after the deposit runs out.
 

Wtcelesta

Junior Member
And, yes, I also think you shouldn't be signing that agreement and that the loss of the deposit is quite fair compensation to the landlord for your breach. Be thankful if he doesn't start billing you for monthly rent after the deposit runs out.
I am worried if that's exactly what he's going to do, based on the wording of the certification. We got a lawyer who said that since our personal guarantee has expired and the LLC is dissolved, it would be difficult for landlord to attempt to collect. I am very anxious about it though. If dissolving a business was the end of it, wouldn't everyone do just that and walk away from any obligations?

I am not trying to be cavalier about the deposit, by any means. I just hear two conflicting opinions on this matter that confuse me. I've been given an opinion that we should go to mediation to try and collect the deposit, and an opinion like yours that it's not going to happen (and I do lean towards your opinion). My priority is to walk away without further obligations.
 

LdiJ

Senior Member
I am worried if that's exactly what he's going to do, based on the wording of the certification. We got a lawyer who said that since our personal guarantee has expired and the LLC is dissolved, it would be difficult for landlord to attempt to collect. I am very anxious about it though. If dissolving a business was the end of it, wouldn't everyone do just that and walk away from any obligations?

I am not trying to be cavalier about the deposit, by any means. I just hear two conflicting opinions on this matter that confuse me. I've been given an opinion that we should go to mediation to try and collect the deposit, and an opinion like yours that it's not going to happen (and I do lean towards your opinion). My priority is to walk away without further obligations.
Your attorney is correct if your personal guarantee has expired. It would be very difficult for the landlord to collect anything. Commercial landlords do have a very difficult time collecting from commercial tenants who default on leases.
 

Wtcelesta

Junior Member
Can I pick your brains with a follow-up question? We told the landlord we were advised against signing this form, and he is saying that he can't then "close our account". The lease agreement does not call for any walkthrough checklists to be signed. The premise is an empty box (no equipment, furniture or fixtures beyond the bare minimum - sink, HVAC, exit signs and such).
Also, I am thinking that the certification they emailed us for signing should speak for itself, should there be any claims in the future that walkthrough was not complete or was not satisfactory, because the letter says: walkthrough was completed and no issues found. Even if we don't sign this form, the fact that the landlord emailed it to us should imply he found the walkthrough satisfactory?
Can we basically just say no to signing his letter and leave it behind?
 

Zigner

Senior Member, Non-Attorney
Did you attempt to negotiate an alternative?

You may wish to consult with a local attorney. I'm not talking about a retainer, just an hour of time to confirm exactly where you stand and to figure out your options.
 

Wtcelesta

Junior Member
Did you attempt to negotiate an alternative?

You may wish to consult with a local attorney. I'm not talking about a retainer, just an hour of time to confirm exactly where you stand and to figure out your options.
Yes, we've been through several discussions with the landlord about various alternatives and achieved a verbal agreement that leaving was the best outcome for both us and the landlord. That's why we gave a 6-month notice. The landlord even hinted he has a new tenant waiting for our space. But I still wouldn't sign any paper suggesting that we are in violation. I just wonder if we should counter with a moveout letter of our own wording or it is not even necessary.
 

Zigner

Senior Member, Non-Attorney
Yes, we've been through several discussions with the landlord about various alternatives and achieved a verbal agreement that leaving was the best outcome for both us and the landlord. That's why we gave a 6-month notice. The landlord even hinted he has a new tenant waiting for our space. But I still wouldn't sign any paper suggesting that we are in violation. I just wonder if we should counter with a moveout letter of our own wording or it is not even necessary.
You ARE in violation by moving out early.

You need to come to an agreement on the wording of that letter.
 

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