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Restaurants and retail are notoriously difficult landscapes to stay afloat in, and it’s ordinarily never jarring to learn when a commercial landlord seeks to evict a tenant for breach of its lease. But the story splits in a recent legal battle in New York City involving a landlord declaring an acclaimed bagel shop in default under its lease on account of it achieving too much success. Some may allege it’s a “schmear” campaign, propelled by other jealous retailers.

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Business is booming for the West Village’s Apollo Bagels (“Apollo”), which boasts heavy turnout every Friday through Sunday with scores of patrons “kneading” to try its hit breakfast bites. The shop is in such high demand that its lines regularly spill out of the storefront onto city streets, which is where the issue arises.

The Landlord, 201-207 West 11th Associates LLC, issued to Apollo a 30-day notice and demand for Apollo to re-direct its line in an “unobtrusive” fashion, claiming that its crowd of hungry customers results in an ongoing breach of its lease by failing to keep the sidewalks outside the leased premises unencumbered, unobstructed, and for use solely as ingress and egress to the premises, which Landlord claims also constitutes a nuisance and operating a business outside of the leased premises. The default notice provided that if Apollo fails to adequately correct the issue to satisfaction of Landlord within such 30-day period, Landlord intends to issue to Tenant a second notice that terminates the lease.

In response, Apollo took quick action and filed suit in New York County’s Supreme Court (“Court”), which is the first tier of courts in New York, seeking injunctive relief and summary judgment to nullify the Landlord’s demands and prevent Landlord’s ability to terminate the lease or seek eviction.

The Landlord’s notice provides that its demand is in response to complaints from other nearby businesses (including other tenants of Landlord) that Apollo’s lines are disrupting its business operations, and also blocking entryways to such storefronts in violation of the law. Although the notice cites relevant provisions of the lease agreement that a trier of fact could find Apollo in breach of, Apollo argues that it employed all reasonable steps to alleviate concerns, including hiring a full-time employee to manage the line and minimize interference with other businesses. Further, Apollo claims that it cannot structure the line on an alternative street as suggested by Landlord because doing so would impede upon another proprietor’s outdoor dining area and it is also impracticable with other pedestrian traffic due to the size of the sidewalk.

The Court issued a temporary order halting eviction, and a hearing on the merits is scheduled for January 9, 2025. It will be interesting to watch how the scenario plays out, especially given that Apollo appears to be premium tenant by driving foot traffic to other establishments operating in the Landlord’s space, and seemingly is otherwise in good standing under its lease (such as timely paying rent). Apparently, that type of dough is not enough to satisfy the Landlord.

Experiencing unique challenges in your commercial lease arrangements? Contact Michael Best &amp; Friedrich LLP for assistance.

References

<cite>73 Greenwich AB LLC v. 201-207 W. 11th Assocs. LLC, No. 160786/2024 (N.Y. Sup. Ct. N.Y. Cnty. filed Nov. 18, 2024).</cite>

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<cite><a href="https://www.nytimes.com/2024/11/30/nyregion/apollo-bagels-nyc.html" target="_blank" rel="noopener">https://www.nytimes.com/2024/11/30/nyregion/apollo-bagels-nyc.html</a>.</cite>

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Close-up of a wooden judge’s gavel resting on a sounding block in a courtroom setting.

Hole-y Moley – Can My Landlord Really (de)Fault Me for My Success?

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