The Story Of A Property Owner That Successfully Terminated A Ground Lease

Abstract

The Story Of A Property Owner That Successfully Terminated A Ground Lease When a property owner and a developer enter into a long-term ground lease, the tenant and its lenders will insist that the property owner cannot easily terminate the ground lease for default. The lease said that upon any termination of the lease, the property owner had to offer the tenant's lender a new lease to replace the terminated lease. Apparently the lender didn't take the property owner up on that offer, so the lease terminated through the nonpayment proceeding and the lender couldn't claim a replacement lease. As a Hail Mary measure to rescue its collateral, the lender tried to rely on a bizarre New York law that allows a tenant and its lender to bring a terminated lease back to life by paying everything that was due under the lease. If the tenant doesn't redeem its lease within that time, then the tenant's lender has the right to do it - but in most cases only on the day after the tenant's redemption deadline expires, and only until 2:00 PM on that day. First, any lease should require the property owner to notify any lender of any nonpayment or other proceeding that seeks to terminate the lease. Second, if the lease gives the lender rights to cure the tenant's defaults, the lender should exercise those rights and not let the property owner start down any road toward lease enforcement.