Restaurant Law Blog

Friday, May 6, 2011

Landlord Disputes can Force Restaurant Closures in New York City

A restaurant/landlord dispute in New York City is forcing the closure of the legendary Oak Room, the New York Times reported.

A Manhattan restaurant attorney can help ensure the survival of your business in many ways, but nothing is more basic than making sure that your lease agreement is not a ticking time bomb. Expansion, leasehold improvements, permitted uses, hours of operation, renewal clauses and rent increases are just a few of the considerations when designing or renewing a lease.

Negligent property maintenance and or negligent security can also be issues that can impact both a New York City restaurant and its landlord. Retaining an attorney is one of the best things you can do to ensure the survival and growth of your restaurant -- to say nothing of the need to protect your livelihood.

An owner of the Oak Room told the Times that lease negotiations with the Plaza Hotel broke down in March after the hotel's owner ordered him to cancel one of his lucrative events or pay more than double the current rent. He said he has given the hotel a 90-day notice of departure and has filed paperwork with the State Department of Labor. Those documents list the restaurant's closing date as July 31.

Meanwhile, the Times reports that the Plaza's owners have sued the restaurant for more than $33 million, claiming numerous violations of the lease, unacceptable activities and significant financial arrears. In court documents, the hotel accuses the restaurant of owing more than $900,000 in back rent.

At issue were the "Day and Night" afternoon parties, which drew hundreds of young revelers and earned the restaurant as much as $180,000 in an afternoon. The parties began in October, reportedly to the consternation of some of the Plaza's year-round tenants.

The current owners opened the doors in the fall of 2008, after $8.5 million in renovations. The economy, and poor reviews of its first chef, resulted in financial challenges. The Plaza reportedly agreed to lower the $125,000 a month rent to $50,000 plus 8 percent of sales, which allowed the restaurant to flourish until another restaurant was permitted to open in the hotel.


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