Under recently enacted Local Law 107, commercial landlords are now at risk of facing penalties of up to $10,000 per violation for knowingly leasing their premises to unlicensed retail stores that sell cannabis or tobacco products. Landlords will need to act swiftly to minimize the potential for severe penalties and initiate eviction proceedings promptly if necessary.
Understanding the Provisions of Local Law 107
- Leasing Restrictions: At the core of Local Law 107 are stringent regulations that prohibit landlords from knowingly leasing their commercial properties to unlicensed sellers engaged in the illicit distribution, sale, or offering of cannabis, tobacco products, electronic cigarettes, or regular cigarettes. This provision emphasizes landlords’ responsibility in supporting legal and licensed business activities.
- Defining Illicit Products: The law classifies illicit products as the unlicensed sale of cannabis, tobacco products, electronic cigarettes, and regular cigarettes.
- Defense Against Violations: Landlords have an affirmative defense when initiating eviction proceedings against unlicensed sellers. This empowers landlords to take proactive measures to ensure that their leased properties comply with legal requirements.
Enforcement Process
- Initial Warning: When an unlicensed cannabis or tobacco product seller is found operating within a leased commercial space for the first time, the relevant city agency issues a warning to the landlord. This warning serves as both an alert and an opportunity for landlords to promptly address the issue.
- Appeals: Landlords who receive a warning notice can contest the decision within 15 days of receiving it.
- Civil Penalties: In cases where unlicensed sellers persist in operating within the same commercial property, landlords become liable for civil penalties. The law specifies penalty amounts based on the number of violations.
Two-Strike Penalty System
- First Violation: The initial violation incurs a civil penalty of $5,000. This initial penalty not only carries a financial consequence, but also underscores the importance of adhering to the law.
- Repeat Violations: Subsequent violations result in a penalty of $10,000 each. This escalating penalty structure emphasizes the urgency for landlords to prevent recurring violations within their leased spaces.
Summary and Steps for Action
In response to this new law, BBG suggests that property owners should promptly consult us regarding lease riders. These riders place the responsibility on tenants to:
- represent legal usage;
- base the lease on such legal usage;
- possess the right to terminate for illegal usage; and
- indemnify the owner for any penalties, expenses, fees, and costs incurred due to breaches.
Additionally, if you have a tenant in potential violation of these regulations, contact us to potentially commence an eviction proceeding.
Contact Us
For further information about this new law and considerations to ensure compliance and mitigate the risk of penalties, feel free to reach out to your BBG attorney or email us at info@bbgllp.com.