Landlord & Tenant

Court of Appeals

(Opinion by Graffeo, J.)

In an action by neighboring tenant's insurer against tenant, tenant's contractor, and landlord for damages caused by a flood, landlord cross-claimed against tenant for contractual indemnification. The Court of Appeals held that landlord was entitled to summary judgment on its cross-claim, rejecting tenant's claim that the General Obligations Law sec. 5-321 rendered the indemnification provision unenforceable.

The lease between landlord and tenant required tenant to obtain general liability insurance naming landlord as additional insured, and also provided that tenant would indemnify landlord from all claims arising out of 'any accident, injury or damage whatsoever (unless caused solely by Landlord's negligence) occurring in, at or upon the Premises ' ' Tenant hired a contractor to renovate the premises. The contractor's subcontractors did work on the sprinkler system, and during the construction, a flood occurred, causing damage to another tenant. That tenant's insurer brought this action against tenant, tenant's contractor, and landlord. All claims were settled except for landlord's cross-claim for indemnification against tenant. The parties stipulated that if the case had been tried by a jury, 90% of liability would have been allocated to landlord. Landlord then moved for summary judgment on its cross-claim. Supreme Court denied landlord's motion, and the Appellate Division initially affirmed, but later granted reargument and reversed. Tenant appealed.

In affirming, the Court of Appeals first concluded that the contractual indemnification provision, by its terms, covered the liability in this case. The court then turned to the language of GOL 5-321, which provides that '[e]very covenant, agreement or understanding in … any lease of real property exempting the lessor from liability for damages ' caused by or resulting from the negligence of the lessor ' shall be deemed to be void as against public policy and wholly unenforceable.' The court relied on Hogeland v. Sibley, Lindsay & Curr, 42 NY2d 153, for the proposition that indemnification clauses like the one in this case do not fall within the statute's prohibition. The court concluded that this case ' involving two sophisticated business entities ' was indistinguishable from Hogeland, and declined tenant's invitation to overrule Hogeland.

COMMENT

In Hogeland v. Sibley, Lindsay & Curr Co., 42 N.Y.2d 153, the Court of Appeals held that GOL 5-321 does not invalidate provisions in commercial leases requiring a tenant to indemnify a landlord for injuries to a third party. The court reasoned that an indemnification provision does not exempt the landlord from liability for its own negligence but rather allocates the risk of liability between landlord and tenant. The Hogeland court held enforceable a contract provision requiring tenant to indemnify landlord for landlord's own negligence, even though 60% of the loss was attributable to landlord's negligence. The court in Great North-ern relied on Hogeland to uphold the indemnification provision, emphasizing Hogeland's rationale that there is little reason to permit sophisticated parties from allocating losses as they see fit.

A broad reading of Great Northern would enforce all lease provisions requiring tenant to indemnify landlord for landlord's own negligence, and would cast doubt on a number of lower court decisions attempting to reconcile Hogeland with GOL 5-321. For instance, in Leone v. Leewood Service Station, 212 A.D.2d 669, the court held invalid a lease's indemnification provision when the landlord was solely responsible for the premises. The Leone court reasoned that the Hogeland rule did not apply when tenant bore no responsibility for the premises. Similarly, in Cuomo v. Storrie St. Realty, 255 A.D.2d 797, the court found a lease provision void under GOL 5-321 because it required the tenant to obtain insurance on the landlord's behalf for liability arising from the landlord's negligent maintenance of the premises. Great Northern's emphasis on the contractual relationship between sophisticated parties undermines these opinions, and suggests that the parties should be entitled to allocate all risks as they see fit.

Great Northern also casts doubt on holdings invalidating agreements that impose on tenants not merely an obligation to insure against landlord's negligence, but also an obligation to make payments beyond insurance proceeds. For example, in Gibson v. Bally Total Fitness Corp., 1 A.D.3d 477, the court held an indemnification provision void under GOL 5-321 because it failed to limit indemnification to the insurance proceeds and shifted the liability to the tenant regardless of the landlord's negligence. Gibson appears inconsistent with language in Great Northern, stating that it is not fatal that the indemnification provision failed to expressly limit indemnification to the insurance proceeds and suggesting that contractual terms would be valid without regard to landlord's negligence.

Great Northern, like Hogeland, directly addresses only agreements requiring tenant to indemnify landlord against liability to a third party; neither opinion deals with lease provisions that purport to exempt a landlord from liability for its own negligence for damages sustained to its tenant. In A To Z Applique Die Cutting v. 319 McKibbin Street Corp., 232 A.D.2d 512, the court held unenforceable a lease provision that relieved the landlord from liability for water damage to its own tenant's property. The A To Z court reasoned that the landlord cannot circumvent GOL 5-321 by inserting a provision in a lease requiring the tenant to maintain insurance and relieve the landlord of liability. See also Metropolitan Art Associates v. Wexler, 118 A.D.2d 548 (distinguishing Hogeland because Metropolitan Art involved a waiver of rights against each other and not an allocation of risk of liability to third parties).

Landaverde Does Not Apply to Non-Primary Residence Proceedings

Skyview Holdings, LLC v. Cunningham

NYLJ 10/24/06, p. 22, col. 1

AppTerm, First Dept.

(per curiam opinion; concurring opinion by McCooe, J.)

In landlord's summary holdover proceeding based on tenant's failure to use the apartment as her primary residence, landlord appealed from Civil Court's denial of its summary judgment motion and grant of tenant's cross-motion for summary judgment. The Appellate Term reversed, holding that landlord was entitled to summary judgment of possession against tenant, but that questions of fact precludes summary judgment on the succession claim of tenant's daughter.

Tenant apparently vacated the subject apartment in January 2002 and established her primary residence in Florida. Tenant's lease expired on Aug. 31, 2002, and landlord, by certified mail, sent tenant a notice of nonrenewal on May 31, 2002, 92 days before the lease's expiration date. The Rent Stabilization Code requires landlord to serve the notice of nonrenewal in a window period of 'at least 90 and not more than 150 days prior to the expiration of the lease term.' 9 NYCRR 2524.2[c][2]. When landlord brought this holdover proceeding, tenant contended that the notice was inadequate, arguing that when a landlord sends a tenant notice by mail, landlord must provide five days more than a statute or regulation require. Hence, on tenant's argument, landlord's notice was inadequate because tenant was entitled to 95 days' notice, not the 92 days landlord provided. Civil Court agreed and awarded summary judgment to tenant.

In reversing, the Appellate Term acknowledged that a landlord must add five days to the ten-day statutory cure period for service by mail of notices requiring tenant to cure a claimed lease violation (Matter of ATM One, LLC v. Landaverde, 2 NY3d 472.). But the court held that Landaverde did not establish a blanket rule requiring the addition of five days to every notice period when notice is provided by mail. Given the length of the 90/150-day cure period, the court concluded that a tenant would not be disadvantaged by landlord's choice of service by mail, even if the mail were unreasonably delayed. Hence, the court declined to hold that Landaverde's five-day rule should apply to nonprimary residence proceedings. As a result, landlord's notice was sufficient, and, because the record conclusively established that tenant no longer used the apartment as her primary residence, landlord was entitled to a judgment of possession against tenant. The court held, however, that questions of fact remained about whether tenant's daughter had established succession rights.

Justice McCooe concurred in the result. He emphasized that tenant had never established that tenant did not receive landlord's notice 90 days before expiration of the lease term. He argued that without such proof, tenant should not be able to claim the extra five days when notice is provided by mail. Justice McCooe did not, however, join the majority in limiting Landaverde to ten day notices to cure.

COMMENT

In Skyview, the Appellate Term majority held that the Landaverde rule applies only to cases in which adequate notice would give tenants the opportunity to cure a defect in order to avoid the commencement of a summary proceeding. Before the Skyview decision, however, trial courts had extended the application of the Landaverde rule to almost any case involving a short statutory notice period, even if the only action the tenant could take during that period would be to prepare for litigation. Thus, in D & R Realty Corp. v. Blakely, 9 Misc.3d 203, the court applied the Landaverde rule to the service of a three-day notice of termination in order to ensure the tenants receive the full notice period required by statute to prepare for possible litigation or to negotiate to rescind the notice. Similarly, in Wing Lee Realty, Inc. v. Man Yee Yon, 9 Misc.3d 1104(A), the court required the landlord to add five days to service of a ten-day notice to quit to afford the tenant the opportunity to prepare to vacate the premises or to defend his position against his landlord.

By contrast, when the statutory notice period is long, courts have refused to apply the Landaverde rule if no action taken by tenant could obviate landlord's right to possession. For example, in K.S.L.M. Columbus Apartments, Inc. v. Bonnemare, 8 Misc.3d 1026(A), the court held that the Landaverde rule was inapplicable to a ninety-day notice of non-renewal. The court in K.S.L.M, like the court in Skyview, noted the inherent difference between notices of non-renewal, which provide tenants with several months notice to leave the premises, and notices to cure, which provide tenants with only a few days to avoid the commencement of a summary proceeding. Similarly, in 170 East 77^th 1 LLC v. Berenson, 12 Misc.3d 1017, the court found the Landaverde rule to be inapplicable to the service of a 30-day notice of termination. In that case, the tenant had received notice not only through service by mail but also by conspicuous place service, a fact which led the court to determine that an additional five days for service by mail would be unnecessary to provide the tenant with adequate notice.

The concurring justice in Skyview rejected the majority's narrow view of Landaverde, and suggested that the Landaverde rule should apply even to long statutory notice periods when tenants could take no steps to protect their right to possession. But the concurring justice suggested that the Landaverde rule should apply only when tenant can demonstrate that tenant did not, in fact, receive notice during the statutory period ' a burden tenant in Skyview could not meet. Berenson provides support for the proposition that a tenant who has received actual notice during the statutory period should not be entitled to invoke the Landaverde rule.

Option Enforceable Despite Tenant's Failure to Exercise in Writing

Kenyon & Kenyon v. Logany

NYLJ 10/30/06, p. 29, col. 4

AppDiv, First Dept

(memorandum opinion)

In an action by tenant for specific performance of a lease option, landlord appealed from Supreme Court's grant of tenant's summary judgment motion. The Appellate Division affirmed, holding that landlord was obligated to lease the disputed space to tenant, despite tenant's failure to exercise its option in writing.

Tenant occupied much of the non-commercial space in the subject building, and its lease included a provision requiring landlord to provide tenant with written notice if the remainder of the sixth floor of the building became available. The lease also gave tenant an option on that space when it became available. When another tenant, who occupied sixth floor space, notified landlord that it would not renew its lease, landlord failed to provide tenant with notice that the space was available. Tenant nevertheless notified landlord that it was ready to exercise its option on the sixth-floor space, but the notice was oral, despite a lease provision requiring tenant to exercise the option in writing. Ten months after receiving oral notice, landlord contended that tenant's failure to provide written notice precluded tenant from exercising its option. Tenant then brought this action to require landlord to execute a lease for the sixth-floor space that was the subject of the option. Supreme Court awarded summary judgment to tenant, and landlord appealed.

In affirming, the Appellate Division held that landlord had waived its right to insist on written notice that tenant had exercised its option. The court held that even though the lease included a 'nonwaiver' provision, landlord's failure to insist on written notice for ten months, while knowing that tenant was acting in reliance on landlord's apparent acceptance of the oral exercise, constituted a waiver of the right to insist on written notice. The court also held that the option agreement did not entitle landlord to carve out a portion of the sixth floor for its own use, and that, pursuant to the lease, disputes over rent for the expanded sixth floor area were subject to resolution by arbitration.

Indemnification Clause Enforced Despite Statute

Great Northern Insurance Co. v. Interior Construction Corp.

NYLJ 10/20/06, p. 23, col. 4

Court of Appeals

(Opinion by Graffeo, J.)

In an action by neighboring tenant's insurer against tenant, tenant's contractor, and landlord for damages caused by a flood, landlord cross-claimed against tenant for contractual indemnification. The Court of Appeals held that landlord was entitled to summary judgment on its cross-claim, rejecting tenant's claim that the General Obligations Law sec. 5-321 rendered the indemnification provision unenforceable.

The lease between landlord and tenant required tenant to obtain general liability insurance naming landlord as additional insured, and also provided that tenant would indemnify landlord from all claims arising out of 'any accident, injury or damage whatsoever (unless caused solely by Landlord's negligence) occurring in, at or upon the Premises ' ' Tenant hired a contractor to renovate the premises. The contractor's subcontractors did work on the sprinkler system, and during the construction, a flood occurred, causing damage to another tenant. That tenant's insurer brought this action against tenant, tenant's contractor, and landlord. All claims were settled except for landlord's cross-claim for indemnification against tenant. The parties stipulated that if the case had been tried by a jury, 90% of liability would have been allocated to landlord. Landlord then moved for summary judgment on its cross-claim. Supreme Court denied landlord's motion, and the Appellate Division initially affirmed, but later granted reargument and reversed. Tenant appealed.

In affirming, the Court of Appeals first concluded that the contractual indemnification provision, by its terms, covered the liability in this case. The court then turned to the language of GOL 5-321, which provides that '[e]very covenant, agreement or understanding in … any lease of real property exempting the lessor from liability for damages ' caused by or resulting from the negligence of the lessor ' shall be deemed to be void as against public policy and wholly unenforceable.' The court relied on Hogeland v . Sibley, Lindsay & Curr , 42 NY2d 153, for the proposition that indemnification clauses like the one in this case do not fall within the statute's prohibition. The court concluded that this case ' involving two sophisticated business entities ' was indistinguishable from Hogeland, and declined tenant's invitation to overrule Hogeland.

COMMENT

In Hogeland v. Sibley, Lindsay & Curr Co. , 42 N.Y.2d 153, the Court of Appeals held that GOL 5-321 does not invalidate provisions in commercial leases requiring a tenant to indemnify a landlord for injuries to a third party. The court reasoned that an indemnification provision does not exempt the landlord from liability for its own negligence but rather allocates the risk of liability between landlord and tenant. The Hogeland court held enforceable a contract provision requiring tenant to indemnify landlord for landlord's own negligence, even though 60% of the loss was attributable to landlord's negligence. The court in Great North-ern relied on Hogeland to uphold the indemnification provision, emphasizing Hogeland's rationale that there is little reason to permit sophisticated parties from allocating losses as they see fit.

A broad reading of Great Northern would enforce all lease provisions requiring tenant to indemnify landlord for landlord's own negligence, and would cast doubt on a number of lower court decisions attempting to reconcile Hogeland with GOL 5-321. For instance, in Leone v. Leewood Service Station , 212 A.D.2d 669, the court held invalid a lease's indemnification provision when the landlord was solely responsible for the premises. The Leone court reasoned that the Hogeland rule did not apply when tenant bore no responsibility for the premises. Similarly, in Cuomo v. Storrie St. Realty , 255 A.D.2d 797, the court found a lease provision void under GOL 5-321 because it required the tenant to obtain insurance on the landlord's behalf for liability arising from the landlord's negligent maintenance of the premises. Great Northern's emphasis on the contractual relationship between sophisticated parties undermines these opinions, and suggests that the parties should be entitled to allocate all risks as they see fit.

Great Northern also casts doubt on holdings invalidating agreements that impose on tenants not merely an obligation to insure against landlord's negligence, but also an obligation to make payments beyond insurance proceeds. For example, in Gibson v. Bally Total Fitness Corp., 1 A.D.3d 477, the court held an indemnification provision void under GOL 5-321 because it failed to limit indemnification to the insurance proceeds and shifted the liability to the tenant regardless of the landlord's negligence. Gibson appears inconsistent with language in Great Northern, stating that it is not fatal that the indemnification provision failed to expressly limit indemnification to the insurance proceeds and suggesting that contractual terms would be valid without regard to landlord's negligence.

Great Northern, like Hogeland, directly addresses only agreements requiring tenant to indemnify landlord against liability to a third party; neither opinion deals with lease provisions that purport to exempt a landlord from liability for its own negligence for damages sustained to its tenant. In A To Z Applique Die Cutting v. 319 McKibbin Street Corp., 232 A.D.2d 512, the court held unenforceable a lease provision that relieved the landlord from liability for water damage to its own tenant's property. The A To Z court reasoned that the landlord cannot circumvent GOL 5-321 by inserting a provision in a lease requiring the tenant to maintain insurance and relieve the landlord of liability. See also Metropolitan Art Associates v. Wexler , 118 A.D.2d 548 (distinguishing Hogeland because Metropolitan Art involved a waiver of rights against each other and not an allocation of risk of liability to third parties).

Landaverde Does Not Apply to Non-Primary Residence Proceedings

Skyview Holdings, LLC v. Cunningham

NYLJ 10/24/06, p. 22, col. 1

AppTerm, First Dept.

(per curiam opinion; concurring opinion by McCooe, J.)

In landlord's summary holdover proceeding based on tenant's failure to use the apartment as her primary residence, landlord appealed from Civil Court's denial of its summary judgment motion and grant of tenant's cross-motion for summary judgment. The Appellate Term reversed, holding that landlord was entitled to summary judgment of possession against tenant, but that questions of fact precludes summary judgment on the succession claim of tenant's daughter.

Tenant apparently vacated the subject apartment in January 2002 and established her primary residence in Florida. Tenant's lease expired on Aug. 31, 2002, and landlord, by certified mail, sent tenant a notice of nonrenewal on May 31, 2002, 92 days before the lease's expiration date. The Rent Stabilization Code requires landlord to serve the notice of nonrenewal in a window period of 'at least 90 and not more than 150 days prior to the expiration of the lease term.' 9 NYCRR 2524.2[c][2]. When landlord brought this holdover proceeding, tenant contended that the notice was inadequate, arguing that when a landlord sends a tenant notice by mail, landlord must provide five days more than a statute or regulation require. Hence, on tenant's argument, landlord's notice was inadequate because tenant was entitled to 95 days' notice, not the 92 days landlord provided. Civil Court agreed and awarded summary judgment to tenant.

In reversing, the Appellate Term acknowledged that a landlord must add five days to the ten-day statutory cure period for service by mail of notices requiring tenant to cure a claimed lease violation ( Matter of ATM One, LLC v. Landaverde , 2 NY3d 472.). But the court held that Landaverde did not establish a blanket rule requiring the addition of five days to every notice period when notice is provided by mail. Given the length of the 90/150-day cure period, the court concluded that a tenant would not be disadvantaged by landlord's choice of service by mail, even if the mail were unreasonably delayed. Hence, the court declined to hold that Landaverde's five-day rule should apply to nonprimary residence proceedings. As a result, landlord's notice was sufficient, and, because the record conclusively established that tenant no longer used the apartment as her primary residence, landlord was entitled to a judgment of possession against tenant. The court held, however, that questions of fact remained about whether tenant's daughter had established succession rights.

Justice McCooe concurred in the result. He emphasized that tenant had never established that tenant did not receive landlord's notice 90 days before expiration of the lease term. He argued that without such proof, tenant should not be able to claim the extra five days when notice is provided by mail. Justice McCooe did not, however, join the majority in limiting Landaverde to ten day notices to cure.

COMMENT

In Skyview, the Appellate Term majority held that the Landaverde rule applies only to cases in which adequate notice would give tenants the opportunity to cure a defect in order to avoid the commencement of a summary proceeding. Before the Skyview decision, however, trial courts had extended the application of the Landaverde rule to almost any case involving a short statutory notice period, even if the only action the tenant could take during that period would be to prepare for litigation. Thus, in D & R Realty Corp. v. Blakely , 9 Misc.3d 203, the court applied the Landaverde rule to the service of a three-day notice of termination in order to ensure the tenants receive the full notice period required by statute to prepare for possible litigation or to negotiate to rescind the notice. Similarly, in Wing Lee Realty, Inc. v. Man Yee Yon , 9 Misc.3d 1104(A), the court required the landlord to add five days to service of a ten-day notice to quit to afford the tenant the opportunity to prepare to vacate the premises or to defend his position against his landlord.

By contrast, when the statutory notice period is long, courts have refused to apply the Landaverde rule if no action taken by tenant could obviate landlord's right to possession. For example, in K.S.L.M. Columbus Apartments, Inc. v. Bonnemare , 8 Misc.3d 1026(A), the court held that the Landaverde rule was inapplicable to a ninety-day notice of non-renewal. The court in K.S.L.M, like the court in Skyview, noted the inherent difference between notices of non-renewal, which provide tenants with several months notice to leave the premises, and notices to cure, which provide tenants with only a few days to avoid the commencement of a summary proceeding. Similarly, in 170 East 77 th 1 LLC v. Berenson , 12 Misc.3d 1017, the court found the Landaverde rule to be inapplicable to the service of a 30-day notice of termination. In that case, the tenant had received notice not only through service by mail but also by conspicuous place service, a fact which led the court to determine that an additional five days for service by mail would be unnecessary to provide the tenant with adequate notice.

The concurring justice in Skyview rejected the majority's narrow view of Landaverde, and suggested that the Landaverde rule should apply even to long statutory notice periods when tenants could take no steps to protect their right to possession. But the concurring justice suggested that the Landaverde rule should apply only when tenant can demonstrate that tenant did not, in fact, receive notice during the statutory period ' a burden tenant in Skyview could not meet. Berenson provides support for the proposition that a tenant who has received actual notice during the statutory period should not be entitled to invoke the Landaverde rule.

Option Enforceable Despite Tenant's Failure to Exercise in Writing

Kenyon & Kenyon v. Logany

NYLJ 10/30/06, p. 29, col. 4

AppDiv, First Dept

(memorandum opinion)

In an action by tenant for specific performance of a lease option, landlord appealed from Supreme Court's grant of tenant's summary judgment motion. The Appellate Division affirmed, holding that landlord was obligated to lease the disputed space to tenant, despite tenant's failure to exercise its option in writing.

Tenant occupied much of the non-commercial space in the subject building, and its lease included a provision requiring landlord to provide tenant with written notice if the remainder of the sixth floor of the building became available. The lease also gave tenant an option on that space when it became available. When another tenant, who occupied sixth floor space, notified landlord that it would not renew its lease, landlord failed to provide tenant with notice that the space was available. Tenant nevertheless notified landlord that it was ready to exercise its option on the sixth-floor space, but the notice was oral, despite a lease provision requiring tenant to exercise the option in writing. Ten months after receiving oral notice, landlord contended that tenant's failure to provide written notice precluded tenant from exercising its option. Tenant then brought this action to require landlord to execute a lease for the sixth-floor space that was the subject of the option. Supreme Court awarded summary judgment to tenant, and landlord appealed.

In affirming, the Appellate Division held that landlord had waived its right to insist on written notice that tenant had exercised its option. The court held that even though the lease included a 'nonwaiver' provision, landlord's failure to insist on written notice for ten months, while knowing that tenant was acting in reliance on landlord's apparent acceptance of the oral exercise, constituted a waiver of the right to insist on written notice. The court also held that the option agreement did not entitle landlord to carve out a portion of the sixth floor for its own use, and that, pursuant to the lease, disputes over rent for the expanded sixth floor area were subject to resolution by arbitration.