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Wednesday, September 22, 2010

A Squatter in the Empire State Building

There is a short article in yesterday's New York Times that provides an interesting landlord/tenant issue for students to unravel.

Landlord leased an office suite in the Empire State Building to a mortgage broker.  Mortgage broker (apparently contrary to the terms of the lease) sub-leased a portion of the space to a law firm.  Law firm, through no written agreement, arranged for a solo practitioner to use "an alcove."  The attorney had keys to the suite and a building-issued security ID.

Mortgage broker defaulted on the lease and landlord pursued eviction proceedings.  Everyone but the solo practitioner left.  It apparently took the landlord seven months to officially notice that the solo practitioner was still there.

So question #1 would be to try to characterize the legal status of the solo practitioner both before and after the eviction of the mortgage broker. 

But the other interesting aspect of the article is that the lawyer didn't think he did anything wrong. 

Mr. Perlman said he did not consider himself a squatter or law-breaker. Yet he had no sympathy for the building’s management, which he complained had been trying to push out small tenants to make way for larger tenants. The mortgage broker was one of several small tenants that sued the Empire State Building over their electricity bills. “I didn’t think of it as a scam,” Mr. Perlman said. “If I’m guilty of anything, I’m guilty of procrastinating.”

Perhaps I represented landlords for too long, but I find it striking that an attorney can think that he can take something of value (possession of space in the Empire State Building) for seven months without paying the owner a dime and then think that he has done nothing wrong. 

Thoughts?

Tanya Marsh

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In response to your query about his lack of sense of doing anything wrong, here are a few possibilities: (1) He's bought into a social norm which is to treat businesses as callously as they sometimes treat consumers, reasoning that if the company can't keep track of its tenants and provide notice for seven months, they don't deserve the money; (2) He's reflecting America's longstanding but recently muted anti "big business" tradition; (3) He's just an irresponsible person who is defensive when caught in his wrongdoing.

Posted by: Tim Iglesias | Sep 22, 2010 9:42:52 AM

If you give me a moral argument I can provide my own moral counterargument. The question, then, is if he did anything legally "wrong."

Possibly. There is potentially trespass. What are the damages, however? Potentially electricity bills.

Then you have the fact that the law does not absolutely favor property owners in the U.S. Look at adverse possession. Look at the various landlord-tenant laws across the nation.

Did the owner try to dispossess this guy? If the owner did and he refused, then sure there is a legal wrong

Was the owner guilty of procrastination as much as the attorney? If so, then the issue of wrong is less clear.

Then you have to drill down to the legal arrangements. The original tenant in a similar situation might be said to be an at-will, month-to-month tenant if they stayed after the lease cancellation. The rent would be clear as well.

The law firm sub-lessor would be less clear. What would the rent be in that case?

In the immediate case, the solo practitioner, the question is even murkier. Is he an at-will tenant? An implied at-will tenant? How much knowledge did or should the landlord have had of his possession of the space?

And, even if he is an at-will tenant, what would be the cost to make the landlord whole? A portion of the office space? The rental cost for the entire office space? Should it be offset for the lost opportunities suffered by the landlord (which might be nothing since it seems like the solo might have been ignored).

Finally, the concept of "taking something of value" is an interesting argument as well. Was anything actually taken? Sure, he occupied space, but was it at the exclusion of someone else the landlord preferred? Does this matter -- can there be a constructive taking just by the fact he did not have a lease?

And then there is the security badge -- is it a license? In that case, was he even a trespasser or a licensee who's rights could be revoked at any time?

Oh, I think this could make a fabulous property problem. If I ever become a property professor I am going to try and remember it.

Posted by: John Nelson | Sep 30, 2010 11:59:40 AM

Assuming by your post the 'squatter' did not have any signed lease agreement with the lender I really don't see how he has any legal ground to stand on. On the flipside of this the building has to take some responsibilty for poor management. They must have known he was doing business in the building because he was issued the security badge. This is a very intriguing case. If he had no lease with the building but had signed a contract with evicted tenant would it be any different than a renter in foreclosed home that is not mentioned in the foreclosure notice. He has every right under the 'lease' agreement to occupy the property up until the Building can pursue the case in courts. The question is...did he have a signed contract with the evicted tenant?

Posted by: Matt Nixon | Mar 11, 2011 8:01:52 PM

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