Real Property Law

Court of Appeals

(Opinion by Rosenblatt, J.)

In an action by an injury victim against a tenant-in-common of the premises on which she was injured, plaintiff-victim appealed from the Appellate Division's affirmance of Supreme Court's grant of summary judgment to tenant-in-common. The Court of Appeals affirmed, holding that a tenant-in-common who has relinquished possession and control of the area in which an injury has occurred cannot be held liable for the injury.

Defendant Rafferty and his sister owned the subject premises as tenants-in-common. The premises consisted of a house occupied by Rafferty and an addition (consisting of separate kitchen, living room, bathrooms and bedrooms) occupied by Rafferty's sister and her family. Sister and brother had agreed in writing that they would reside separately on the premises in areas they identified to each other, and that they would “live free from interference in the personal lives and affairs of [one another].” Rafferty's sister's husband subsequently built a bunk bed in his son's bedroom. Plaintiff-victim, a guest of the son, fell off the bunk bed, allegedly because it was not equipped with an adequate railing. Plaintiff-victim brought this action against Rafferty, alleging that he breached a duty of care. Supreme Court and the Appellate Division held that Rafferty was entitled to summary judgment, and plaintiff-victim appealed.

In affirming, the Court of Appeals acknowledged that a tenant-in-common's right to use the entire jointly owned property generally translates into a duty to maintain the premises safely, and therefore to liability for injuries to third parties caused by defective conditions. In cases where co-tenants agree among themselves that one should have exclusive possession, the situation differs, and the out-of-possession co-tenant is not then liable for injuries over which he had no control. In this case, it was undisputed that Rafferty maintained neither possession nor control of the area in which plaintiff-victim was injured. As a result, Rafferty was entitled to summary judgment.

Expansion and Renovation of Adjacent Properties Treated As Single Project for Tax Exemption Purposes

In re CDL West 45th Street, LLC v. City of New York Department of Finance

NYLJ 6/25/03, p. 18, col. 1

AppDiv, First Dept

(Opinion by Sullivan, J.)

In landowner's article 78 proceeding challenging denial of its application for real estate tax exemption benefits under the Industrial and Commercial Incentive Program (ICIP), landowner appealed from Supreme Court's denial of the petition and dismissal of the proceeding. The Appellate Division reversed and granted the petition, holding that landowner's renovation and expansion of its properties should be treated as a single integrated project qualifying for exemption benefits.

Real Property Tax Law section 489-aaaa provides a tax exemption for modernization, expansion, or improvement of an existing building or structure in certain areas. To qualify, however, the modernization or expansion must be physically and functionally integrated with the existing building, and must not increase the bulk of the existing building

by more than 30%. Landowner's property originally consisted of three separate structures – a 46-story hotel, a three-story conference center, and a three-story office building. Landowner's project involved renovation of the existing hotel and demolition of the three-story office building for construction of a new wing of the hotel. The new wing includes 124 guest rooms, compared with 627 in the original hotel, and is interconnected with the existing hotel. When the three buildings are treated together, they do not increase the original bulk of the buildings by more than 30%; if the new wing is treated in isolation, it does increase the original bulk on the site by more than 30%. When landowner applied for tax benefits available under ICIP, the city denied the benefits, concluding that the new wing should be viewed in isolation, and that the project did not, therefore, qualify for the exemption. Supreme Court agreed, and landowner appealed.

In reversing, the Appellate Division noted that the new wing was integrated for myriad purposes, and that the new sing could not exist as a separate entity because it had no air conditioning facilities, no kitchen, laundry or housekeeping facilities, and no provision for garbage disposal. As a result, the court concluded that the project should be viewed as a whole, thus requiring grant of landowner's application. The court rejected the city's argument that because the new wing was issued a separate certificate of occupancy, it was properly viewed in isolation from the rest of the hotel.

Mortgagor Not Required to Purchase Terrorism Insurance Before Contract Obligations Established

Four Times Square Associates, LLC v. Cigna Investors, Inc.

NYLJ 6/5/03, p. 18, col. 3

AppDiv, First Dept

(memorandum opinion)

In an action by holder of a ground lease to prevent mortgagees from taking actions to hold the mortgage in default and from invading a lockbox account, holder of the ground lease appealed from Supreme Court's denial of a preliminary injunction. The Appellate Division reversed and granted the preliminary injunction, holding that holder of the ground lease would be irreparably harmed if forced to purchase additional terrorism insurance before contract rights and obligations were established.

The ground lease on the parcel is subject to a $430 million non-recourse mortgage. The mortgage agreement requires holder of the ground lease to maintain insurance coverage generally available from domestic carriers at commercially reasonable premiums. The agreement says nothing explicit about terrorism insurance. Before September 11, 2001, the insurance maintained by ground lessee covered acts of terrorism. A proposed renewal policy, however, explicitly excluded terrorism coverage. Cigna, special servicer of the mortgage then declared the mortgage in default, and ordered Bank of New York, as servicer of the mortgage, to transfer funds maintained in a lockbox into a cash management account, and to procure terrorism insurance. At that point, ground lessee purchased a $100 million terrorism policy, and arranged a letter of credit for $3.5 million to secure the premiums for additional terrorism insurance. Ground lessee then brought this action, seeking a preliminary injunction against any action holding it in default under the mortgage, and against invasion of the lockbox account. Supreme Court denied the injunction and ground lessee appealed.

In reversing, the Appellate Division held that ground lessee had established a prima facie case of success on the merits even though fact questions remained about whether terrorism coverage was generally available. The court also found irreparable injury from the threat to ground lessee's good will and creditworthiness that would result from a finding of default. In addition, the court concluded that the equities demand that ground lessee not be required to purchase terrorism insurance before a final determination on contract rights. The court did, however, direct an increase in the letter of credit to cover the increased estimated cost of additional terrorism insurance.

Questions of Fact About Compliance with Mortgage Contingency Clause Preclude Summary Judgment

Sibinga v. Ingenito

NYLJ 6/30/03, p. 30, col. 6

AppDiv, Second Dept

(memorandum opinion)

In an action by home purchaser for return of a down payment, seller appealed from Supreme Court's grant of purchaser's summary judgment motion. The Appellate Division reversed, holding that questions of fact remained about whether purchaser had complied with the mortgage contingency clause in the sale contract, and about whether seller was estopped from asserting that purchaser had breached.

The sale contract included a mortgage contingency clause that provided that within 7 days of receipt of a fully-executed contract, purchaser would apply for a $700,000, 30-year mortgage from a “lending institution, mortgage broker or licensed mortgage banker.” If purchaser did not obtain a mortgage commitment by June 30, 2001, either party would become entitled to cancel the sale contract. When purchaser returned the sale contract to seller, together with a $130,000 down payment, purchaser's lawyer included a letter outlining purchaser's plan to obtain a $350,000 first mortgage from a lending institution and a $350,000 second mortgage from purchaser's employer. Subsequent correspondence from purchaser referred to the same financing plan. Purchaser alleges that neither seller nor seller's counsel objected to or even responded to the plan. Ultimately, purchaser obtained the $350,000 commitment from a lender, conditioned on purchaser's employer's commitment of the remaining $350,000. On August 10, 2001, purchaser's employer denied purchaser's application. Purchaser sought return of the down payment, and Supreme Court held that purchaser was entitled to recover the down payment.

In reversing, the Appellate Division held first that there were issues of fact about whether purchaser's applications failed to comply with the requirements of the mortgage contingency clause. The court then held that questions of fact also remained about whether seller should be estopped from contending that purchaser's alleged breach entitled seller to retain the down payment.

Out-of-Possession Tenant-in-Common Not Liable for Injuries

Butler v. Rafferty

NYLJ 6/11/03, p. 19, col. 3

Court of Appeals

(Opinion by Rosenblatt, J.)

In an action by an injury victim against a tenant-in-common of the premises on which she was injured, plaintiff-victim appealed from the Appellate Division's affirmance of Supreme Court's grant of summary judgment to tenant-in-common. The Court of Appeals affirmed, holding that a tenant-in-common who has relinquished possession and control of the area in which an injury has occurred cannot be held liable for the injury.

Defendant Rafferty and his sister owned the subject premises as tenants-in-common. The premises consisted of a house occupied by Rafferty and an addition (consisting of separate kitchen, living room, bathrooms and bedrooms) occupied by Rafferty's sister and her family. Sister and brother had agreed in writing that they would reside separately on the premises in areas they identified to each other, and that they would “live free from interference in the personal lives and affairs of [one another].” Rafferty's sister's husband subsequently built a bunk bed in his son's bedroom. Plaintiff-victim, a guest of the son, fell off the bunk bed, allegedly because it was not equipped with an adequate railing. Plaintiff-victim brought this action against Rafferty, alleging that he breached a duty of care. Supreme Court and the Appellate Division held that Rafferty was entitled to summary judgment, and plaintiff-victim appealed.

In affirming, the Court of Appeals acknowledged that a tenant-in-common's right to use the entire jointly owned property generally translates into a duty to maintain the premises safely, and therefore to liability for injuries to third parties caused by defective conditions. In cases where co-tenants agree among themselves that one should have exclusive possession, the situation differs, and the out-of-possession co-tenant is not then liable for injuries over which he had no control. In this case, it was undisputed that Rafferty maintained neither possession nor control of the area in which plaintiff-victim was injured. As a result, Rafferty was entitled to summary judgment.

Expansion and Renovation of Adjacent Properties Treated As Single Project for Tax Exemption Purposes

In re CDL West 45th Street, LLC v. City of New York Department of Finance

NYLJ 6/25/03, p. 18, col. 1

AppDiv, First Dept

(Opinion by Sullivan, J.)

In landowner's article 78 proceeding challenging denial of its application for real estate tax exemption benefits under the Industrial and Commercial Incentive Program (ICIP), landowner appealed from Supreme Court's denial of the petition and dismissal of the proceeding. The Appellate Division reversed and granted the petition, holding that landowner's renovation and expansion of its properties should be treated as a single integrated project qualifying for exemption benefits.

Real Property Tax Law section 489-aaaa provides a tax exemption for modernization, expansion, or improvement of an existing building or structure in certain areas. To qualify, however, the modernization or expansion must be physically and functionally integrated with the existing building, and must not increase the bulk of the existing building

by more than 30%. Landowner's property originally consisted of three separate structures – a 46-story hotel, a three-story conference center, and a three-story office building. Landowner's project involved renovation of the existing hotel and demolition of the three-story office building for construction of a new wing of the hotel. The new wing includes 124 guest rooms, compared with 627 in the original hotel, and is interconnected with the existing hotel. When the three buildings are treated together, they do not increase the original bulk of the buildings by more than 30%; if the new wing is treated in isolation, it does increase the original bulk on the site by more than 30%. When landowner applied for tax benefits available under ICIP, the city denied the benefits, concluding that the new wing should be viewed in isolation, and that the project did not, therefore, qualify for the exemption. Supreme Court agreed, and landowner appealed.

In reversing, the Appellate Division noted that the new wing was integrated for myriad purposes, and that the new sing could not exist as a separate entity because it had no air conditioning facilities, no kitchen, laundry or housekeeping facilities, and no provision for garbage disposal. As a result, the court concluded that the project should be viewed as a whole, thus requiring grant of landowner's application. The court rejected the city's argument that because the new wing was issued a separate certificate of occupancy, it was properly viewed in isolation from the rest of the hotel.

Mortgagor Not Required to Purchase Terrorism Insurance Before Contract Obligations Established

Four Times Square Associates, LLC v. Cigna Investors, Inc.

NYLJ 6/5/03, p. 18, col. 3

AppDiv, First Dept

(memorandum opinion)

In an action by holder of a ground lease to prevent mortgagees from taking actions to hold the mortgage in default and from invading a lockbox account, holder of the ground lease appealed from Supreme Court's denial of a preliminary injunction. The Appellate Division reversed and granted the preliminary injunction, holding that holder of the ground lease would be irreparably harmed if forced to purchase additional terrorism insurance before contract rights and obligations were established.

The ground lease on the parcel is subject to a $430 million non-recourse mortgage. The mortgage agreement requires holder of the ground lease to maintain insurance coverage generally available from domestic carriers at commercially reasonable premiums. The agreement says nothing explicit about terrorism insurance. Before September 11, 2001, the insurance maintained by ground lessee covered acts of terrorism. A proposed renewal policy, however, explicitly excluded terrorism coverage. Cigna, special servicer of the mortgage then declared the mortgage in default, and ordered Bank of New York, as servicer of the mortgage, to transfer funds maintained in a lockbox into a cash management account, and to procure terrorism insurance. At that point, ground lessee purchased a $100 million terrorism policy, and arranged a letter of credit for $3.5 million to secure the premiums for additional terrorism insurance. Ground lessee then brought this action, seeking a preliminary injunction against any action holding it in default under the mortgage, and against invasion of the lockbox account. Supreme Court denied the injunction and ground lessee appealed.

In reversing, the Appellate Division held that ground lessee had established a prima facie case of success on the merits even though fact questions remained about whether terrorism coverage was generally available. The court also found irreparable injury from the threat to ground lessee's good will and creditworthiness that would result from a finding of default. In addition, the court concluded that the equities demand that ground lessee not be required to purchase terrorism insurance before a final determination on contract rights. The court did, however, direct an increase in the letter of credit to cover the increased estimated cost of additional terrorism insurance.

Questions of Fact About Compliance with Mortgage Contingency Clause Preclude Summary Judgment

Sibinga v. Ingenito

NYLJ 6/30/03, p. 30, col. 6

AppDiv, Second Dept

(memorandum opinion)

In an action by home purchaser for return of a down payment, seller appealed from Supreme Court's grant of purchaser's summary judgment motion. The Appellate Division reversed, holding that questions of fact remained about whether purchaser had complied with the mortgage contingency clause in the sale contract, and about whether seller was estopped from asserting that purchaser had breached.

The sale contract included a mortgage contingency clause that provided that within 7 days of receipt of a fully-executed contract, purchaser would apply for a $700,000, 30-year mortgage from a “lending institution, mortgage broker or licensed mortgage banker.” If purchaser did not obtain a mortgage commitment by June 30, 2001, either party would become entitled to cancel the sale contract. When purchaser returned the sale contract to seller, together with a $130,000 down payment, purchaser's lawyer included a letter outlining purchaser's plan to obtain a $350,000 first mortgage from a lending institution and a $350,000 second mortgage from purchaser's employer. Subsequent correspondence from purchaser referred to the same financing plan. Purchaser alleges that neither seller nor seller's counsel objected to or even responded to the plan. Ultimately, purchaser obtained the $350,000 commitment from a lender, conditioned on purchaser's employer's commitment of the remaining $350,000. On August 10, 2001, purchaser's employer denied purchaser's application. Purchaser sought return of the down payment, and Supreme Court held that purchaser was entitled to recover the down payment.

In reversing, the Appellate Division held first that there were issues of fact about whether purchaser's applications failed to comply with the requirements of the mortgage contingency clause. The court then held that questions of fact also remained about whether seller should be estopped from contending that purchaser's alleged breach entitled seller to retain the down payment.