Landlord & Tenant

Limiting Tenant Remedies

Bank of America Securities LLC v. Solow Building Co. II, LLC

NYLJ 12/10/07, p. 18, col. 1

AppDiv, First Dept.

(3-2 decision; majority opinion

by Tom, J., dissenting opinion

by McGuire, J.)

In an action by commercial tenant for declaratory relief and for money damages arising out of landlord's failure to timely consent to proposed changes to tenant's leased space, landlord appealed from the Supreme Court's denial of landlord's summary judgment motion. The Appellate Division affirmed, concluding that tenant's allegations of landlord's willful misconduct precluded an award of summary judgment, despite a lease provision precluding damage claims for failure to give timely consent.

Landlord leased space to tenant's predecessor. The leased space encompasses 640,000 square feet on 20 floors at 9 West 57^th Street. The lease requires tenant to obtain landlord's consent before undertaking alterations, and imposes on landlord the obligation not to unreasonably withhold consent, and to approve or disapprove alteration plans within ten business days. The lease also permits landlord to recover actual out-of-pocket expenses reasonably incurred in connection with alterations. Finally, the lease includes the provision at issue in this case: a clause that makes an action for specific performance or declaratory relief, or an arbitration proceeding, the exclusive remedies for landlord's unreasonable failure to give consent to alterations. By the terms of this clause, tenant waives all other claims for landlord's failure to give consent.

When tenant sought consent for alternations, landlord demanded that tenant pay 3% of the cost of alterations as a fee for consent to those alterations. Although no lease provision authorized such a fee, landlord began to demand $6 million for review of previously submitted renovation proposals, and refused to review any further plans. Tenant then brought this action for a judgment declaring that it was not obligated to make the demanded payment. Tenant also sought consequential damages suffered as a result of landlord's failure to respond to more than fourteen alteration proposals, leading to delays in alteration that resulted in lost business income, loss of use of the premises, and other expenses. Landlord moved to dismiss this claim for consequential damages, relying on the lease provision by the terms of which tenant waives claims against the landlord for unreasonably withholding or delaying consent. The Supreme Court denied landlord's motion, and landlord appealed.

In affirming, the Appellate Division majority started by noting that landlord had not even attempted to demonstrate that it acted in good faith and in accordance with the provisions of the lease when landlord made its demand for $6 million. The court then rejected the contention that specific performance afforded tenant with an adequate remedy for landlord's breach, noting that without the prospect of money damages, landlord had no incentive to honor its obligations under the lease. Relegating tenant to specific performance would permit landlord to breach with impunity in order to extract unwarranted concessions from tenant. The court concluded that landlord's attempt to demand payment might reflect an intention to inflict monetary harm, which is tortious as a matter of law, rendering the lease limitation unenforceable as a matter of public policy.

The dissenting justices argued because landlord's refusal to perform its contractual obligation was motivated exclusively by its own economic self-interest rather than specific intent to harm the tenant, landlord's action was not so extortionate that it warranted overriding the contractual limitation provision.

 

Holdover Proceedings

Perdomo v. Morgenthau

NYLJ 12/5/07, p. 26, col. 1

Supreme Ct., N.Y. Cty (Goodman, J.)

Tenant brought an action for a judgment declaring that the District Attorney does not have statutory authority to require approval of settlement agreement in holdover proceedings brought by landlord at the insistence of the D.A.'s office. The court granted tenant a declaration that the D.A. does not have authority to mandate approval of settlement agreements.

Real Property Actions and Proceedings Law section 715 (RPAPL 715) gives the District Attorney's office power to serve upon a landlord notice requiring landlord to make an application for removal from the premises of a person using or occupying the apartment for illegal trade. If the landlord does not bring such a proceeding after being served, the District Attorney's office can bring the proceeding itself. In this case, a search warrant was executed at tenant's apartment, and drugs and weapons were found. Her son pled guilty to possessions of a weapon, and was sentenced to a year in prison. The District Attorney's office then instructed landlord to bring an eviction proceeding based on evidence that the premises was used for the sale of narcotics, and simultaneously instructed landlord that if landlord contemplated settlement that would permit tenant to remain in the premises, the D.A.'s office would have to approve the settlement. Landlord then brought the eviction proceeding, and subsequently offered to settle to allow tenant and her family to stay in the apartment if she agreed to permanently exclude her son from the apartment. Tenant then brought this action for a declaration that the District Attorney would not have to approve the settlement.

In granting tenant the requested relief, the court relied on the language of RPAPL 715. Because the statute expressly confers several powers on the District Attorney ' including the power to require a landlord to bring an eviction proceeding, and the power to commence a proceeding if the landlord does not do so ' the court reasoned that if the statute had been intended to confer on the D.A. the power to insist on approval of any settlement, the statute would have expressly included such language. Hence, the court granted tenant the requested relief, and held that landlord and tenant could settle the proceeding without approval from the D.A.'s office.

 

Out-of-Possession Owner Not Liable for Personal Injuries

Grippo v. City of New York

NYLJ 11/19/07, p. 33, col. 3

AppDiv, Second Dept

(memorandum opinion)

In a personal-injury action brought against subtenant, tenant and landlord, tort plaintiff appealed from Supreme Court's dismissal of the action against tenant and landlord. The Appellate Division affirmed, holding that an out-of-possession property owner is not liable for personal injuries when the owner has retained neither control over the premises nor a contractual obligation to maintain or repair the premises.

Owner of the premises had leased the premises to tenant, retaining no contract obligation to maintain or repair the premises. Tenant, in turn, sublet the premises, also retaining no control and no obligation to maintain or repair. When plaintiff was injured, plaintiff joined both tenant and landlord as defendants. The Appellate Division held that plaintiff had failed to raise an issue of fact about whether tenant or landlord had retained sufficient control to impose liability. As a result, the court held that the Supreme Court had properly dismissed the complaint with respect to both landlord and tenant.

Limiting Tenant Remedies

Bank of America Securities LLC v. Solow Building Co. II, LLC

NYLJ 12/10/07, p. 18, col. 1

AppDiv, First Dept.

(3-2 decision; majority opinion

by Tom, J., dissenting opinion

by McGuire, J.)

In an action by commercial tenant for declaratory relief and for money damages arising out of landlord's failure to timely consent to proposed changes to tenant's leased space, landlord appealed from the Supreme Court's denial of landlord's summary judgment motion. The Appellate Division affirmed, concluding that tenant's allegations of landlord's willful misconduct precluded an award of summary judgment, despite a lease provision precluding damage claims for failure to give timely consent.

Landlord leased space to tenant's predecessor. The leased space encompasses 640,000 square feet on 20 floors at 9 West 57^th Street. The lease requires tenant to obtain landlord's consent before undertaking alterations, and imposes on landlord the obligation not to unreasonably withhold consent, and to approve or disapprove alteration plans within ten business days. The lease also permits landlord to recover actual out-of-pocket expenses reasonably incurred in connection with alterations. Finally, the lease includes the provision at issue in this case: a clause that makes an action for specific performance or declaratory relief, or an arbitration proceeding, the exclusive remedies for landlord's unreasonable failure to give consent to alterations. By the terms of this clause, tenant waives all other claims for landlord's failure to give consent.

When tenant sought consent for alternations, landlord demanded that tenant pay 3% of the cost of alterations as a fee for consent to those alterations. Although no lease provision authorized such a fee, landlord began to demand $6 million for review of previously submitted renovation proposals, and refused to review any further plans. Tenant then brought this action for a judgment declaring that it was not obligated to make the demanded payment. Tenant also sought consequential damages suffered as a result of landlord's failure to respond to more than fourteen alteration proposals, leading to delays in alteration that resulted in lost business income, loss of use of the premises, and other expenses. Landlord moved to dismiss this claim for consequential damages, relying on the lease provision by the terms of which tenant waives claims against the landlord for unreasonably withholding or delaying consent. The Supreme Court denied landlord's motion, and landlord appealed.

In affirming, the Appellate Division majority started by noting that landlord had not even attempted to demonstrate that it acted in good faith and in accordance with the provisions of the lease when landlord made its demand for $6 million. The court then rejected the contention that specific performance afforded tenant with an adequate remedy for landlord's breach, noting that without the prospect of money damages, landlord had no incentive to honor its obligations under the lease. Relegating tenant to specific performance would permit landlord to breach with impunity in order to extract unwarranted concessions from tenant. The court concluded that landlord's attempt to demand payment might reflect an intention to inflict monetary harm, which is tortious as a matter of law, rendering the lease limitation unenforceable as a matter of public policy.

The dissenting justices argued because landlord's refusal to perform its contractual obligation was motivated exclusively by its own economic self-interest rather than specific intent to harm the tenant, landlord's action was not so extortionate that it warranted overriding the contractual limitation provision.

 

Holdover Proceedings

Perdomo v. Morgenthau

NYLJ 12/5/07, p. 26, col. 1

Supreme Ct., N.Y. Cty (Goodman, J.)

Tenant brought an action for a judgment declaring that the District Attorney does not have statutory authority to require approval of settlement agreement in holdover proceedings brought by landlord at the insistence of the D.A.'s office. The court granted tenant a declaration that the D.A. does not have authority to mandate approval of settlement agreements.

Real Property Actions and Proceedings Law section 715 (RPAPL 715) gives the District Attorney's office power to serve upon a landlord notice requiring landlord to make an application for removal from the premises of a person using or occupying the apartment for illegal trade. If the landlord does not bring such a proceeding after being served, the District Attorney's office can bring the proceeding itself. In this case, a search warrant was executed at tenant's apartment, and drugs and weapons were found. Her son pled guilty to possessions of a weapon, and was sentenced to a year in prison. The District Attorney's office then instructed landlord to bring an eviction proceeding based on evidence that the premises was used for the sale of narcotics, and simultaneously instructed landlord that if landlord contemplated settlement that would permit tenant to remain in the premises, the D.A.'s office would have to approve the settlement. Landlord then brought the eviction proceeding, and subsequently offered to settle to allow tenant and her family to stay in the apartment if she agreed to permanently exclude her son from the apartment. Tenant then brought this action for a declaration that the District Attorney would not have to approve the settlement.

In granting tenant the requested relief, the court relied on the language of RPAPL 715. Because the statute expressly confers several powers on the District Attorney ' including the power to require a landlord to bring an eviction proceeding, and the power to commence a proceeding if the landlord does not do so ' the court reasoned that if the statute had been intended to confer on the D.A. the power to insist on approval of any settlement, the statute would have expressly included such language. Hence, the court granted tenant the requested relief, and held that landlord and tenant could settle the proceeding without approval from the D.A.'s office.

 

Out-of-Possession Owner Not Liable for Personal Injuries

Grippo v. City of New York

NYLJ 11/19/07, p. 33, col. 3

AppDiv, Second Dept

(memorandum opinion)

In a personal-injury action brought against subtenant, tenant and landlord, tort plaintiff appealed from Supreme Court's dismissal of the action against tenant and landlord. The Appellate Division affirmed, holding that an out-of-possession property owner is not liable for personal injuries when the owner has retained neither control over the premises nor a contractual obligation to maintain or repair the premises.

Owner of the premises had leased the premises to tenant, retaining no contract obligation to maintain or repair the premises. Tenant, in turn, sublet the premises, also retaining no control and no obligation to maintain or repair. When plaintiff was injured, plaintiff joined both tenant and landlord as defendants. The Appellate Division held that plaintiff had failed to raise an issue of fact about whether tenant or landlord had retained sufficient control to impose liability. As a result, the court held that the Supreme Court had properly dismissed the complaint with respect to both landlord and tenant.