A commercial tenant who stops paying rent puts the landlord in a fundamentally different position than a residential nonpayment situation. Commercial landlord-tenant law in New York is governed primarily by the lease — not by the extensive statutory protections that apply to residential tenants under the Housing Stability and Tenant Protection Act, the Good Cause Eviction Law, or the Right to Counsel program. That distinction cuts both ways: commercial landlords have more remedies available (including self-help lockouts in some cases), but those remedies are only as strong as the lease provisions that authorize them.
This guide walks through what a New York commercial landlord can do when a lessee stops paying rent — the demand letter, lease-based remedies, summary proceedings in court, the commercial lockout, personal guaranty enforcement, and the considerations that determine whether negotiation, litigation, or re-entry is the right first move. It is written by a New York landlord-tenant attorney and is intended as a general overview, not as legal advice for any specific situation.
Commercial lease terms vary widely. The remedies discussed in this post depend on the specific language in your lease. Have your lease reviewed by counsel before taking any enforcement action.
Start With the Lease
Before taking any action, review your lease. In commercial tenancies, the lease is the controlling document. Unlike residential tenancies, where statute imposes minimum notice periods, mandatory cure rights, and judicial process requirements regardless of what the lease says, commercial lease enforcement is largely governed by the terms the parties negotiated.
The critical lease provisions to identify at the outset are:
- Default and cure provisions: What constitutes a monetary default? Does the lease require written notice before the landlord may act? Is there a contractual cure period (commonly 5 to 30 days for monetary defaults)? Some leases distinguish between monetary defaults (unpaid rent) and non-monetary defaults (lease violations), with different notice and cure periods for each.
- Re-entry and lockout provisions: Does the lease grant the landlord the right to re-enter the premises upon default? Has the tenant expressly waived the right to a stay of re-entry or a Yellowstone injunction? These provisions determine whether a self-help lockout is available.
- Acceleration clause: Does the lease allow the landlord to accelerate all remaining rent for the lease term upon default? Acceleration clauses can dramatically increase the landlord’s recoverable damages.
- Attorney’s fees: Does the lease require the defaulting party to pay the prevailing party’s reasonable attorney’s fees? Under Real Property Law § 234, a one-sided attorney’s fees clause is implied as reciprocal.
- Personal guaranty: Is the lease guaranteed by an individual? If the tenant is an LLC or corporation, a personal guaranty may be the only practical path to collecting a money judgment.
- Security deposit and letter of credit: What security does the landlord hold, and what are the conditions for drawing on it?
- Surrender provisions: What does the lease require if the tenant vacates? Are there restoration obligations?
A well-drafted commercial lease gives the landlord a powerful toolkit. A poorly drafted lease — one without a clear re-entry provision, without an acceleration clause, without a personal guaranty — may limit the landlord to the comparatively slow process of a court proceeding. The time to address these gaps is at lease negotiation, not at default.
The Demand Letter: Setting the Clock
The first formal step in any commercial nonpayment situation is a written demand for payment. Unlike residential tenancies, where RPL § 235-e mandates a specific 14-day written demand, commercial landlords are governed by whatever notice requirements the lease specifies. If the lease requires 10 days’ written notice before the landlord may terminate, the demand letter is the document that starts that clock.
A well-drafted commercial demand letter should:
- Identify the lease by date and parties
- Specify the exact amount of rent due, broken down by month
- Cite the lease provision that has been violated (the rent payment clause)
- State the cure period provided by the lease (or by applicable law if the lease is silent)
- State the consequences of failure to cure — termination of the lease, re-entry, acceleration of rent, and any other remedies the lease authorizes
- Be sent by the method specified in the lease’s notice provisions (typically certified mail, return receipt requested, to the tenant’s notice address)
The demand letter is both a procedural prerequisite and a strategic communication. It establishes the factual record for any subsequent litigation, triggers the contractual cure period, and often prompts the tenant to engage in negotiation. Many commercial nonpayment situations resolve at the demand stage because the tenant understands that the landlord is prepared to act. For this reason, the demand letter should be drafted by counsel — a letter from an attorney carries substantially more weight than an informal email from the landlord, and it ensures the notice complies with the lease’s technical requirements.
The Commercial Lockout: Self-Help Re-Entry
One of the most significant differences between commercial and residential landlord-tenant law in New York is the availability of the self-help lockout. In residential tenancies, a landlord may never lock out a tenant without a court order and a marshal or sheriff’s execution — doing so is a criminal offense under Real Property Law § 235. In commercial tenancies, a landlord may lock out a tenant without a court proceeding, provided the lease authorizes it and the proper procedures are followed.
When a Commercial Lockout Is Available
A lawful commercial lockout requires two elements in the lease: a re-entry clause granting the landlord the right to re-enter the premises upon the tenant’s default, and a waiver by the tenant of the right to a stay of re-entry or injunctive relief against the landlord’s re-entry. Both provisions are common in well-drafted New York commercial leases, but they must be present and enforceable. A lease without a re-entry clause or without a waiver of injunctive relief does not support a lockout — the landlord must proceed through court.
Executing the Lockout
Before executing a lockout, the landlord must comply with whatever notice and cure requirements the lease specifies. If the lease provides for 10 days’ written notice of a monetary default and a 10-day cure period, the landlord must serve the notice, wait for the cure period to expire without payment, and only then proceed to change the locks. The lockout should be executed peacefully — no confrontation with the tenant or employees, no removal of tenant property (which remains the tenant’s property and must be safeguarded), and no interference with the tenant’s ability to retrieve personal belongings.
After the lockout, the landlord should post a notice on the premises informing the tenant that the lease has been terminated, that the premises have been secured, and providing instructions for retrieving personal property. The landlord should also send written notice by the method specified in the lease.
The Yellowstone Risk
A commercial tenant facing a lockout or lease termination may seek a Yellowstone injunction in Supreme Court. Named after the Court of Appeals decision in First National Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 N.Y.2d 630 (1968), a Yellowstone injunction preserves the tenant’s right to cure the default and maintains the status quo pending litigation. If the tenant obtains a Yellowstone injunction before the landlord executes the lockout, the lockout is stayed. If the landlord has already executed the lockout and the court finds it was improper — because the lease did not authorize it, because the notice was defective, or because the tenant’s waiver of injunctive relief is unenforceable — the tenant may be restored to possession and the landlord may face damages.
The Yellowstone risk is the primary reason commercial lockouts should never be attempted without counsel. An attorney reviews the lease provisions, confirms the re-entry and waiver clauses are enforceable, ensures the notice and cure procedures are followed precisely, and prepares the landlord to respond to a Yellowstone motion if one is filed.
Summary Proceedings in Court
If the lease does not support a lockout, or if the landlord prefers the certainty of a court proceeding, the landlord may commence a summary nonpayment proceeding under RPAPL § 711(2). A summary proceeding is available for both residential and commercial tenancies, but the procedural rules differ in important respects for commercial cases.
Key Differences from Residential Proceedings
Commercial nonpayment proceedings do not require the 14-day statutory demand that applies to residential tenancies under RPL § 235-e. Instead, the landlord must comply with whatever demand or notice requirement the lease specifies. If the lease is silent on demand requirements, the landlord should serve a written demand for rent giving the tenant a reasonable opportunity to pay before filing — courts have generally held that 3 to 10 days is sufficient for commercial tenancies absent a lease provision.
Commercial tenants do not have the benefit of the Right to Counsel program, the Good Cause Eviction Law, or the HSTPA protections. Commercial proceedings in New York City are heard in Civil Court (not Housing Court, which handles only residential matters). Proceedings involving commercial leases with annual rent above a certain threshold may be heard in Supreme Court.
What the Landlord Recovers
In a summary nonpayment proceeding, the landlord may recover possession of the premises and a money judgment for the rent arrears. Unlike residential nonpayment proceedings, where recovery is limited to base rent, commercial proceedings may allow recovery of additional charges the lease classifies as “additional rent” — CAM charges, real estate tax escalations, insurance charges, and other pass-throughs — if the lease defines them as rent for purposes of the nonpayment remedy.
The Tenant’s Right to Cure
A commercial tenant in a nonpayment proceeding generally has the right to defeat the proceeding by paying the full amount of rent due (plus any costs or fees the court orders) at any time before the warrant of eviction is executed. This “pay and stay” right exists in commercial cases, though the tenant’s leverage to negotiate favorable payment terms is typically less than in residential cases because of the absence of statutory tenant protections.
The Plenary Action: Recovering the Full Scope of Damages
A summary proceeding recovers possession and rent arrears, but it does not recover the landlord’s full damages in many situations. A plenary action — an ordinary civil lawsuit in Civil Court (for claims up to $50,000) or Supreme Court (for larger claims) — allows the landlord to pursue:
- Accelerated rent: If the lease contains an acceleration clause, the landlord may recover all remaining rent due for the balance of the lease term
- Damages for the landlord’s cost of re-letting: Brokerage commissions, tenant improvement costs, and rent concessions incurred to find a replacement tenant
- Attorney’s fees: If the lease provides, the landlord may recover reasonable attorney’s fees
- Consequential damages: In some cases, damages beyond the rent itself that flow from the tenant’s breach
- Judgment against the personal guarantor: If the lease is personally guaranteed, the plenary action names the guarantor as a defendant
Many commercial landlords pursue both a summary proceeding (to recover possession quickly) and a plenary action (to recover the full scope of monetary damages). The two proceedings can run in parallel, though the money judgment in the summary proceeding is typically credited against the plenary judgment to avoid double recovery.
Enforcing the Personal Guaranty
When the commercial tenant is an LLC or corporation — as most are — a money judgment against the entity may be uncollectible if the entity has no assets. The personal guaranty is often the landlord’s most important asset in a commercial nonpayment situation.
A “good guy guaranty” is a common structure in New York commercial leases. Under a good guy guaranty, the individual guarantor is personally liable for rent and damages only through the date the tenant surrenders possession of the premises in good condition. Once the tenant vacates and surrenders, the guarantor’s liability terminates. This structure incentivizes the tenant to surrender quickly rather than litigate — the guarantor’s personal exposure increases for every month the tenant remains in possession without paying.
A full guaranty, by contrast, makes the guarantor liable for all obligations under the lease regardless of surrender — including accelerated rent for the remainder of the term. Whether you hold a good guy guaranty or a full guaranty determines the enforcement strategy. In either case, the guarantor should be named in any plenary action and served with a demand letter alongside the tenant entity.
When Negotiation Makes More Sense Than Litigation
Not every commercial nonpayment situation calls for immediate enforcement. In some cases, a negotiated resolution produces a better outcome for the landlord than a proceeding that may take months.
Surrender agreement: If the tenant is insolvent or its business has failed, the fastest path to re-letting may be a negotiated surrender in which the tenant agrees to vacate by a specific date, returns the premises in agreed-upon condition, and the landlord releases the tenant from future obligations (or preserves claims against the guarantor). A surrender agreement avoids the cost and delay of litigation and allows the landlord to begin marketing the space immediately.
Rent modification: If the tenant’s business is viable but temporarily distressed, a rent reduction, rent deferral, or restructured payment schedule may preserve a performing tenancy. The cost of vacancy — lost rent, brokerage commissions for re-letting, tenant improvement costs for the replacement tenant, downtime — can exceed the cost of a temporary rent concession. The modification should be documented in a formal lease amendment with a breach mechanism that restores the landlord’s full remedies if the tenant fails to perform.
Cash for keys: In some situations, paying the tenant to vacate quickly is the most economically rational outcome. This is more common in residential contexts, but it applies in commercial situations where the tenant is judgment-proof, the lease provisions are weak, and the landlord’s priority is speed of re-entry rather than recovery of arrears.
When the Tenant Files for Bankruptcy
A tenant’s bankruptcy filing triggers the automatic stay under 11 U.S.C. § 362, which immediately halts all collection and eviction activity. The landlord may not continue a pending summary proceeding, execute a lockout, or draw on a security deposit without relief from the bankruptcy court.
Commercial landlords have specific protections under the Bankruptcy Code. Under 11 U.S.C. § 365, the tenant (as debtor in possession) must decide within a specified period whether to assume or reject the lease. If the tenant assumes the lease, it must cure all defaults and provide adequate assurance of future performance. If the tenant rejects the lease, the landlord has an administrative claim for post-petition rent through the date of rejection and a general unsecured claim for damages from the rejection (capped under 11 U.S.C. § 502(b)(6)). A motion for relief from the automatic stay — often on the ground that the landlord is not adequately protected — should be filed promptly.
Bankruptcy adds significant complexity. Landlords facing a tenant bankruptcy should engage counsel experienced in both commercial real estate and bankruptcy practice immediately upon learning of the filing.
Protecting Yourself Before Default Happens
The best position to be in when a commercial tenant defaults is one where the lease was well-drafted at the outset. Key provisions that protect the landlord include:
- Strong re-entry clause with tenant’s waiver of Yellowstone injunction rights and waiver of right to stay re-entry
- Acceleration clause making all remaining rent immediately due upon uncured default
- Personal guaranty — a good guy guaranty at minimum, a full guaranty where obtainable
- Security deposit equal to two or more months’ rent, or a letter of credit that the landlord can draw on upon default
- Clear notice provisions specifying delivery method, addresses, and deemed-received dates
- Additional rent provisions defining CAM, taxes, insurance, and other pass-throughs as “rent” for default and nonpayment purposes
- Attorney’s fees clause allowing recovery of the prevailing party’s fees
- Short cure periods for monetary defaults (5 to 10 days is standard)
If your current lease lacks these provisions, a lease renewal or amendment is the opportunity to add them. If you are negotiating a new commercial lease, an experienced real estate attorney can ensure these protections are in place from day one. See our guide to residential nonpayment proceedings for a comparison of how these remedies differ in the residential context.
