The Leasing Hotline

Kohl then commenced an action for ejectment for PNC's failure to pay the real estate taxes and for PNC's abandonment of the property. PNC counterclaimed, arguing, inter alia, that Kohl breached the covenant of quiet enjoyment. The trial court found in favor of Kohl on the ejectment claim after determining that PNC had abandoned the property. However, the trial court also determined that Kohl had breached the covenant of quiet enjoyment through “incessant” litigation and did not award Kohl damages. Kohl appealed, and the appellate court reversed the trial court's finding that Kohl had breached the covenant of quiet enjoyment. It held that although Kohl's actions substantially interfered with the bank's possessory interest in the leasehold, Kohl did not pursue litigation in bad faith. It held that the record did not support a claim that Kohl's actions were malicious. It considered that Kohl prevailed on the ejectment portion of the trial and therefore his litigation was not meritless.

SECURITY DEPOSITS

A successor landlord may maintain a civil action under the New York General Obligations Law to recover security deposits from tenants who default on their rent and other financial obligations under the lease if the landlord satisfies a three-prong test. Gerel Corp, et al., v. Prime Eastside Holdings, LLC, Supreme Court of New York, Appellate Division, First Department, 783 N.Y.S. 355, Oct. 19, 2004.

The successor landlord commenced an action against the tenants, seeking, inter alia, a recovery of the tenants' security deposits under General Obligations Law '7-105 after the tenants defaulted and failed to pay rent under three separate leases. The tenants denied the claims and argued that the successor landlord could not maintain an action under General Obligations Law '7-105 to recover the security deposits.

The landlord moved for summary judgment, and the trial court granted the motion. The appellate court affirmed. It held that '7-105 provided the landlord with a civil remedy to recover the security deposits. The appellate court held that in this case, the landlord satisfied a three-prong test that: 1) the landlord was one of the class for whose particular benefit the statute was enacted; 2) the private right of action would promote the legislative purpose; and 3) the creation of the right was consistent with the legislative scheme. The appellate court concluded that it was the intent of the New York State legislature to protect the successor landlord. The appellate court further held that even though ownership of the deposits remains with the tenant, the landlord, as trustee of the deposits, had standing to assert any claims.

QUIET ENJOYMENT

A landlord may not be found to have breached the covenant of quiet enjoyment, even though the landlord may have engaged in more than one litigation to gain possession of the property, where the evidence does not show that the landlord pursued the litigation maliciously or in bad faith. J. Carl Kohl v. PNC Bank National Association , No. 1552 EDA 2003, Superior Court of Pennsylvania, Nov. 5, 2004 (as amended).

In 1979 Kohl entered into a “Ground Lease Agreement” for a 2.3-acre parcel he owned, and he eventually assigned the lease to the Schmidts. In 1990, the Schmidts obtained a loan for $800,000 from PNC Bank, secured by a mortgage on the leasehold interest. In addition, Kohl, the Schmidts and PNC all signed a “Nondisturbance and Attornment Agreement” which further secured PNC's rights. In 1992, the Schmidts defaulted on the loan, and PNC confessed judgment, took possession of the premises, and filed a mortgage foreclosure action against the Schmidts. The Schmidts were also delinquent on property tax payments, and Kohl filed his own complaint against the Schmidts because of their failure to pay real estate taxes. He sought termination of the lease, damages for the unpaid taxes, and possession. Default judgment was entered in favor of Kohl. Later that year, Kohl filed a declaratory judgment action seeking a declaration that PNC had no interest in the leasehold. He argued that the Schmidts' failure to pay the real estate taxes terminated the lease prior to PNC's succession. The trial court disagreed, holding that the lease did not provide for an automatic termination for failure to pay taxes and that the Nondisturbance and Attornment Agreement protected PNC's rights.

Kohl then commenced an action for ejectment for PNC's failure to pay the real estate taxes and for PNC's abandonment of the property. PNC counterclaimed, arguing, inter alia, that Kohl breached the covenant of quiet enjoyment. The trial court found in favor of Kohl on the ejectment claim after determining that PNC had abandoned the property. However, the trial court also determined that Kohl had breached the covenant of quiet enjoyment through “incessant” litigation and did not award Kohl damages. Kohl appealed, and the appellate court reversed the trial court's finding that Kohl had breached the covenant of quiet enjoyment. It held that although Kohl's actions substantially interfered with the bank's possessory interest in the leasehold, Kohl did not pursue litigation in bad faith. It held that the record did not support a claim that Kohl's actions were malicious. It considered that Kohl prevailed on the ejectment portion of the trial and therefore his litigation was not meritless.

SECURITY DEPOSITS

A successor landlord may maintain a civil action under the New York General Obligations Law to recover security deposits from tenants who default on their rent and other financial obligations under the lease if the landlord satisfies a three-prong test. Gerel Corp, et al., v. Prime Eastside Holdings, LLC, Supreme Court of New York, Appellate Division, First Department, 783 N.Y.S. 355, Oct. 19, 2004.

The successor landlord commenced an action against the tenants, seeking, inter alia, a recovery of the tenants' security deposits under General Obligations Law '7-105 after the tenants defaulted and failed to pay rent under three separate leases. The tenants denied the claims and argued that the successor landlord could not maintain an action under General Obligations Law '7-105 to recover the security deposits.

The landlord moved for summary judgment, and the trial court granted the motion. The appellate court affirmed. It held that '7-105 provided the landlord with a civil remedy to recover the security deposits. The appellate court held that in this case, the landlord satisfied a three-prong test that: 1) the landlord was one of the class for whose particular benefit the statute was enacted; 2) the private right of action would promote the legislative purpose; and 3) the creation of the right was consistent with the legislative scheme. The appellate court concluded that it was the intent of the New York State legislature to protect the successor landlord. The appellate court further held that even though ownership of the deposits remains with the tenant, the landlord, as trustee of the deposits, had standing to assert any claims.