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Regular Monitoring of Guaranty Litigation is Critical

February 3, 2019

1. Most guarantors are just as broke as the single-asset restaurant corporation that was the defunct tenant.

2. If the guarantors are not broke, the amount owed is not worth pursuing in a New York Court if it is under $100,000.

3. I questioning the wisdom of a post-possession collection effort against many guarantors.

But I will counter that somewhat here in the Our Stories blog by giving a recent example from my practice of how to do Good Guy litigation successfully.

My healthy skepticism of this type of legal work prompts me to keep a careful watch on such litigation. I track each matter I work on with a spreadsheet such as this[1]:

Here are the important things to look for in these situations. Each case on the sample spreadsheet took a year. That’s not bad. On XYZ Case, the client made, even after paying legal fees, 67 cents on the dollar and on ABC Case, even after legal, the same client made 12 cents on the dollar. The average over the two cases was about 35 cents on the dollar. Again, not bad. Moreover, notice that what my firm was paid in legal fees was LESS than what the client netted. That, too is important. These cases should not exist for a lawyer to make out better than a client.

What’s the lesson? Regular monitoring of these matters, including the legal fees spent and the likelihood of success as these guaranty matters unfold, is critical.

Respectfully submitted,

[1] This is an example of a spreadsheet I made for an actual client, but with details slightly changed.

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No Matter How Many Times You Ask, the Answer is the Same

January 16, 2019

We defeated a plaintiff-mortgagee’s summary judgment motion in a mortgage foreclosure case in Kings County. Our defendant-client, the mortgagor, steadfastly denied at depositions that he signed the mortgage documents in question. The court found that the denials were consistent throughout the client’s examination before trial and, therefore, presented a material question of fact.

What’s the lesson? The lesson is that an attorney can ask the same question of a deponent at a deposition one hundred different ways, but doing so does not mean he will get a different answer. In this case, asking over and over only reinforced deponent's version of events and made his testimony stronger.  

Respectfully submitted,

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Itkowitz PLLC Helps Tenant Get a Physical Culture Establishment Special Permit from the Board of Standards and Appeals for a Luxury Spa

December 12, 2018

As I have said before in these pages, we don't do a lot of leasing anymore. I like to concentrate on litigation and consulting. But occasionally an old client of my husband and partner will insist on him doing their lease or lease renewal. In this case, we represented a luxury spa looking to open a new location in Manhattan. Because the spa is offering full-body massages by licensed massage therapists, it was necessary for the business to receive a special permit called a “physical culture establishment” (“PCE”) permit from the Board of Standards and Appeals (“BSA”). 

The rest of this story was written by the associate attorney on the matter, Ashley Winters, who did all the hard work! Take it away Ashley:

We worked with the owner, the architect on the project, and BSA for over seven months to gather paperwork, get permits, receive feedback and approvals, and revise our application. Finally, when it came time to present our application to BSA and the community for a vote, the Board immediately voted to approve without question or comment. Because we spent the extra time making sure the application was done correctly before it came to a vote, we saved a significant amount of time by getting the response we wanted the first time around. 

What’s the lesson? Give yourself plenty of time to prepare application materials, put the application together, communicate with BSA members, and await community and Board approval. Even for relatively simple applications, the process is a long (and somewhat painful) one, full of hoops and hurdles to overcome. Be prepared and allow for extra time to get the permit. 

Thank you, Ashley.

Respectfully submitted,

Michelle Itkowitz

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When a Residential Owner Needs Access For Building-Wide Work, Which Will Be Highly Disruptive and Which Will Take a Long Time – A Case Study

November 25, 2018

I represented a client in an interesting case.[1] The building was in Queens and there was a structural problem. The bricks on a load-bearing wall were cracking. Owner had a reputable licensed engineer engaged, who had rendered a report about the crack and a licensed contractor lined up to repair the problem. Four Rent Stabilized tenants of the building would be severely disrupted by the work. For a period of six-weeks, at least, they would need a support beam to shore up their living rooms and contractors would be in and out of their units constantly. Three of the four tenants had agreed to move temporarily, while the work was occurring. The fourth tenant was not only refusing to move temporarily, he was refusing to communicate. The LNY member hired me to work on the matter.

The first thing I did was speak with the engineer. He assured me that the condition was not life threatening. Nevertheless, it would become life threatening if not addressed in the next few years.

I reviewed the New York City Department of Buildings (“DOB”) application filed by the contractor. The application indicated that tenants would NOT need to be displaced during the work. I asked the engineer about this, and he agreed that the tenants could remain in place during the work. If the tenants remained in place during the work, however, then (a) the work would take longer and cost more and (b) the tenants would be living through very unpleasant circumstances.

The typical next step in a situation like this would not be to serve tenant with a notice to cure a lease default, followed by (if the default remained uncured) a notice of termination of the tenancy, and a summary holdover proceeding in Housing Court. That procedure works just fine most of the time. I determined, however, that it was inappropriate here for the following reason. 

Even if Housing Court eventually resulted in a stipulation whereby tenant agreed to grant access, that would not ward off my biggest fear here. My biggest fear here was that tenant would allow access for the first few days or weeks of the work, but then, at a crucial stage in this structural work, he would refuse access to the workers, halting the project and causing all kinds of problems. Then I would be left going back, after a default notice, into Housing Court to wait around, while this critical work remained half done. THAT, was the situation I was trying to avoid. 

Therefore, I instinctively felt like Supreme Court was the better place to be for a situation this serious. The problem, however, is that seeking an injunction in Supreme Court would be extremely expensive for the owner. The ultimate goal in these situations is to avoid litigation. 

Therefore, I wrote a carefully drafted letter to the tenant. In my letter, I was very open about the situation, including the engineer’s report and the DOB application for a permit. Many owners seem to resist sharing information with tenants, even when, as here, the information is a matter of public record. The DOB application was obviously available online, as was the engineer’s report, which was on file with the Landmarks Preservation Commission.

In my letter, I included an “Access Agreement”. Owner would pay a licensed mover to move tenant to a newly refurbished apartment within the building. Owner would pay for moving tenant’s cable as well. Tenant’s rent would be $0 while he was out of his unit. Owner acknowledged that tenant was not in any way relinquishing his rights to the apartment or his rights under Rent Stabilization. A construction manager would be made available to tenant during the relocation. Owner agreed to pay for tenant’s move back to the apartment when the work was done.

In my letter, I strongly encouraged the tenant to bring the letter to an attorney or to his local Legal Aid office. It was essential to me that this tenant be represented. Without a tenant lawyer involved, no agreement to move a Rent Stabilized tenant for major construction is enforceable anyway.

Unfortunately, the tenant still maintained radio silence. I sent a follow up letter, explaining to the tenant that owner was not going to let the building crumble, just because he was being recalcitrant. I again encouraged him to go see Legal Aid, and told him that I would soon have to sue him in Supreme Court.

Thankfully, Legal Aid popped up. They had my letters and my Access Agreement. Nevertheless, they began on a frosty note, noting that the DOB application did not require tenant relocation. I responded with a long email, acknowledging that the tenant had a right to stay, even if would make his life and owner’s very difficult. I implored them, however, to review my draft Access Agreement and the circumstances of this matter carefully. I also asked them what they expected me to do if one morning, during the project, the contractor knocked on tenant’s door and he, for whatever reason, refused to let the contractor’s in. Then we would all be in Supreme Court on an emergency application anyway. This owner was doing everything right. He was trying to fix an ailing building, at great expense. The tenant would be moved to a better apartment in his own building, his rights to his apartment were well preserved, the work would go faster if he was moved. “Please”, I asked nicely (always a good legal strategy), “can you work with your client and with the owner and me to achieve a mutually beneficial solution?”

It took time. More time than we had hoped. But we got it done. Tenant wanted his kitchen sink glazed or replaced while the apartment was empty. He also wanted his shower tile fixed, a paint job, and some special work done on his built-in shelving unit. Legal Aid tinkered with my Access Agreement. The move was tricky because the tenant had decades of stuff in the apartment. These were small prices to pay, however, for peace and for getting this important structural work done.

Although the process took longer than my owner-client would have liked it to, it probably was quicker than court would have been and it was far less expensive and far less painful for all involved than litigation would be.

Respectfully submitted,

[1] Some details changed to protect privacy.

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Itkowitz PLLC Helps Get MBE Subcontractor Paid on Construction Job

November 4, 2018

I tend to only write in these pages about our work in my area of core-competency, New York City landlord and tenant litigation. Here, however, is something a little different. As you may know, Itkowitz PLLC is a New York State Certified Women Owned Business Enterprise. Recently, we did some legal work for a New York State Certified Minority Owned Business Enterprise (an “MBE”), an HVAC Company.

The HVAC company had not been paid hundreds of thousands of dollars for heating and cooling equipment it had installed at a major university, while working as an MBE for a large general contractor. The general contractor had been unresponsive to pleas that the HVAC contractor be paid.  

We wrote a letter to the university Office of Construction Management, which stated in pertinent part:

Absent the cooperation of the general contractor, we will have no choice but to take legal action (including but not limited to the filing of liens). In that such actions will undoubtedly impact the university, we respectfully ask that, if possible, you encourage the general contractor to do the right thing and pay the amounts owed. 

Three days later, our client, the MBE-HVAC company, had a check in hand for the full amount owed. Apparently, the university did not want to do business with a contractor that left its MBE-subs hanging.

Respectfully submitted,


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