Firm Resolves Complex Certificate of Occupancy Issue Related to Retail Space in Midtown

Situation

Zeidel & Associates P.C. was retained to represent a client in a retail leasing transaction in an upscale area in midtown Manhattan. The firm has represented the client in multiple leasing transactions throughout the city.

Approach

As part of our negotiations, we asked the landlord to represent that the leased space, which included portions of the building’s ground floor and basement and a mezzanine floor, had a valid certificate of occupancy (C of O), but the landlord rejected the request. Our research uncovered that the landlord did not have a C of O for the entire leased space: the original 1956 C of O permitted the basement to be used for storage and shipping and the ground floor to be used for a retail store. There was no mention of the mezzanine level. However, an expired temporary C of O from 2018 did reference the mezzanine’s use for retail but made no reference to the use of the ground level.

Zeidel & Associates consulted with the tenant’s architect to confirm our conclusion: the lack of specificity in the C of Os, coupled with the landlord’s unwillingness to make representations regarding them, exposed our client to unwanted risk, which, worst case, could involve the city requiring our client to demolition the mezzanine for an illegal installation. After exhaustive negotiations, the landlord agreed to obtain a C of O at its cost, which indicated that the mezzanine level would be used for a store.

Result

At the 11th hour, however, the landlord refused to represent in the lease that it owned the premises, as we had asked. Zeidel & Associates learned that the landlord did not, in fact, own the building but rather leased it under a ground lease. While this complication might have puzzled another firm and derailed the negotiations, our extensive experience with ground leases enabled us to quickly review and understand what representations, warranties and covenants we needed to protect our client. The landlord agreed, and we closed the deal quickly.

Our client was so pleased with our ability to navigate the complexities of this transaction and negotiate a favorable lease that they asked us to represent them in other leases.