Two state laws make the illegality of a tenant’s use of rented premises a matter of considerable concern to property owners of all kinds, including cooperatives. One empowers local prosecutors to bring eviction proceedings against both the illegally-operating tenant and the landowner; the other makes ordinary property owners and cooperatives as liable as the tenant for injuries inflicted on third parties by the illegal business the tenant is running.
While the first law can be expensive to the tune of tens of thousands of dollars, there is no limit on what the other could cost the property owners and cooperatives, but it could readily be in the tens of millions of dollars.
There are ample precedents for expensive awards of damages for certain kinds of businesses tenants run illegally, especially the sale of counterfeit goods.
Stolen Goods or a Drug Den
Although these are just an example of the kinds of illegal activities that can prove expensive to property owners and cooperatives, they are the perfect example for demonstrating the potentially bankrupting expenses they can present to a property owners and cooperatives that do not take them seriously enough. For purposes of seeing how this can play out, let us then use these as an example.
Example: A cooperative has a building on Manhattan’s Eighth Avenue, in the 40s. The front window of the building proudly displays brand name watches, brand name cameras, and brand name electronics, all at prices that are apparently deeply discounted below the prices one would normally expect such items sold at. The cooperative receives word in June that the police have staged a bust and seized the supposedly discounted goods. The cooperative’s connections inform it that the goods were, in fact, counterfeit. However, the cooperative is also aware that the tenant has done very brisk business and is absolutely meticulous about paying every penny of rent due on no later than five days early. From the cooperative’s perspective, the tenant is ideal. A few days later, the tenant appears to be back in business and indeed business is booming. In all of this hullabaloo, the tenant continues to adhere to a perfect pattern of paying rent.