The Leasing Hotline

The court held that the tenant was a holdover tenant and had violated the terms of the lease by purchasing gasoline from another supplier. The court determined that the lease and the supply purchase agreement were inextricably linked. It further awarded liquidated damages to the prior landlord, finding that the liquidated damages clause in the parties' lease was neither unconscionable nor contrary to public policy. It rejected the tenant's arguments that the actual damages suffered by the landlord were less than the amount stated in the liquidated damages clause and that the actual damages could be easily calculated.

STATUTE OF LIMITATIONS

Where a tenant fails to file for a rent credit in a timely manner, the claim will be barred by the statute of limitations, even if the tenant's claim has merit. Kramer Levin Naftalis & Frankel, LLP, v. Metropolitan 919 3rd Avenue, LLC, 604512, Supreme Court of New York, New York County, Dec. 14, 2004.

In 1983, the tenant and the former owner entered into a lease for commercial space in a building. The lease provided for base rent and a rent escalation clause. The lease also provided for tenant rent credits under certain circumstances, including a refund of taxes to the landlord or a reduction in operating expenses. In 2000, the landlord lost the building in bankruptcy, and a new landlord acquired it from the bankruptcy estate. The tenant commenced an action against the new landlord seeking a rent credit for breach of the lease in the approximate sum of $684,000, claiming that the real estate taxes had decreased between 1994 and 2000, and sought a credit against its base rent. It argued that the new owner had assumed all of the obligations of the prior owner when it purchased the building, including the obligation to reduce the base rent under certain circumstances.

The new landlord argued that no reduction in base rent was permitted under the lease, but nevertheless, that the claim was barred by a 6-year statute of limitations because the claimed overcharges had occurred more than 6 years prior to the commencement of the action. The court held that the tenant would have been entitled to a credit against its base rent under the terms of the lease, and that the new owner was obligated to fulfill that term of the lease. However, the court noted that no credit was ever demanded by the tenant during each year when the prior owner sent the annual tax notices to the tenant and held that the claim asserted by the tenant was time barred under the 6-year statute of limitations.

LIQUIDATED DAMAGES

A landlord may be awarded liquidated damages where the tenant materially breaches the lease, even if the actual damages suffered by the landlord were less than the liquidated damages and could be easily calculated. Koylum, Inc. v. Pesken Realty Corp., 99 CV 3793, U.S. District Court for the Eastern District of New York, Dec. 2, 2004.

The landlord leased a gas station to the tenant, who operated the gas station between June 1996 and October 2002. The lease required the tenant to purchase its gasoline supplies from a specific supplier, except under certain circumstances and conditions. The relationship between the landlord and the supplier was that of husband and wife. In 1998, the tenant began to purchase its gasoline from another supplier. The landlord advised the tenant that it would terminate the lease because the tenant had purchased gasoline from another supplier without the existence of special circumstances or conditions. The parties entered into a stipulation, but the tenant continued to purchase gasoline from other suppliers. Subsequently, the landlord sold the premises, and the new landlord (Mascolo) attempted to make a new agreement with the tenant. The tenant commenced a lawsuit against the prior landlord, claiming that it had been denied its right of first refusal to purchase the gas station.

The court held that the tenant was a holdover tenant and had violated the terms of the lease by purchasing gasoline from another supplier. The court determined that the lease and the supply purchase agreement were inextricably linked. It further awarded liquidated damages to the prior landlord, finding that the liquidated damages clause in the parties' lease was neither unconscionable nor contrary to public policy. It rejected the tenant's arguments that the actual damages suffered by the landlord were less than the amount stated in the liquidated damages clause and that the actual damages could be easily calculated.

STATUTE OF LIMITATIONS

Where a tenant fails to file for a rent credit in a timely manner, the claim will be barred by the statute of limitations, even if the tenant's claim has merit. Kramer Levin Naftalis & Frankel, LLP, v. Metropolitan 919 3rd Avenue, LLC, 604512, Supreme Court of New York, New York County, Dec. 14, 2004.

In 1983, the tenant and the former owner entered into a lease for commercial space in a building. The lease provided for base rent and a rent escalation clause. The lease also provided for tenant rent credits under certain circumstances, including a refund of taxes to the landlord or a reduction in operating expenses. In 2000, the landlord lost the building in bankruptcy, and a new landlord acquired it from the bankruptcy estate. The tenant commenced an action against the new landlord seeking a rent credit for breach of the lease in the approximate sum of $684,000, claiming that the real estate taxes had decreased between 1994 and 2000, and sought a credit against its base rent. It argued that the new owner had assumed all of the obligations of the prior owner when it purchased the building, including the obligation to reduce the base rent under certain circumstances.

The new landlord argued that no reduction in base rent was permitted under the lease, but nevertheless, that the claim was barred by a 6-year statute of limitations because the claimed overcharges had occurred more than 6 years prior to the commencement of the action. The court held that the tenant would have been entitled to a credit against its base rent under the terms of the lease, and that the new owner was obligated to fulfill that term of the lease. However, the court noted that no credit was ever demanded by the tenant during each year when the prior owner sent the annual tax notices to the tenant and held that the claim asserted by the tenant was time barred under the 6-year statute of limitations.