Landlord & Tenant

Yellowstone Injunction Not Available for Failure to Pay Rent

Gabai v. 130 Diamond Street LLC

NYLJ 7/13/11

Supreme Ct., Kings Cty.

(Battaglia, J.)

Residential tenants sought a Yellowstone injunction precluding landlord from bringing proceedings to evict tenants pending the outcome of the tenants' complaint asserting defective conditions in the premises. The court denied the injunction, holding that Yellowstone relief is not available to toll a cure period in a residential lease where the only alleged breach is failure to pay rent.

On Nov. 1, 2010, landlord sent tenants a five-day rent demand notifying them of their default in payment of the October and November rent, and indicating that if tenants did not pay within five days, landlord would commence summary proceedings to recover possession. Tenants contended that they had been withholding rent because of defective conditions in the apartment. On Dec. 10, tenants moved for an order enjoining landlord from tiling any proceedings against tenants seeking eviction. Landlord had not yet brought any proceeding seeking eviction.

The court started by noting judicial language suggesting that Yellowstone injunctions are available only to commercial tenants, but went on to cite instances in which courts had extended Yellowstone relief to residential tenants. The court then indicated, however, that Yellowstone relief is not available in cases where landlord might bring a summary nonpayment or summary holdover proceeding, because the statutes governing those proceedings (RPAPL ' 753(4) and RPAPL ' 751(1), respectively) include their own stay provisions, which obviate the need for Yellowstone injunctions. Only if tenant has some equity or defense that could not be raised in the summary proceeding might Yellowstone relief be available to a residential tenant. Moreover, the court held that in an event, tenants' application in this case was untimely, because the cure period provided in landlord's notice to tenant had already expired before tenant applied for Yellowstone relief.

Construction of Percentage Provision in Lease

380 Yorktown Food Corp. v. Great Atlantic and Pacific Tea Co.

NYLJ 7/26/11

Supreme Ct., Westchester Cty.

(Giacomo, J.)

In an action by commercial subtenant to establish that it was not liable for the rent demanded by tenant, the court, after trial, determined that subtenant was obligated to pay the rent demanded by tenant. In particular, the court held that subtenant's sub-sublease to another supermarket did not relieve subtenant of the obligation to pay the lease's stated percentage of the sub-subtenant's gross sales.

Tenant, A&P, operated three separate supermarkets in Yorktown Heights as a result of its acquisition of two other supermarket chains. In 1992, A&P sublet one of its supermarkets to plaintiff Food Corp. The sublease prohibited A&P from operating store within a designated area, and provided reduced rent if A&P were to violate the covenant. The lease also required subtenant to pay a percentage of the gross sales rent in excess of $7.5 million. At the time of the sublease, A&P held the lease to supermarket premises across the street from the subleased premises. In 1998, the parties modified the sublease to reduce past rent due by subtenant and to change the base for the percentage rent clause to $7 million. By the terms of the modification agreement, both parties represented that there had been no default by either party. Three days after executing the modification agreement, subtenant Food Corp. entered into a sub-sublease agreement with another supermarket. The next year, A&P opened a Food Emporium store on the site across the street from the subleased premises. Subtenant Food Corp. knew of the proposed opening of the Food Emporium at the time of the modification agreement, but the agreement was silent about the effect of the new store. Beginning in 2000, Food Corp paid, and A&P accepted, far less than the rent specified in the modification agreement, and Food Corp. did not pay percentage rent based on the sub-subtenant's annual sales. Then, in 2003, A&P sent Food Corp. a demand letter seeking $547,721.47 in unpaid fixed rent and additional rent. Food Corp. disclaimed liability for that amount.

After trial, the court rejected Food Corp's argument that A&P's opening of the Food Emporium store constituted a breach of the modification agreement and resulted in reduced rent for Food Corp. The court relied on the provision in the modification agreement specifying that there was no default by either party under the sublease, and held that the no-default provision constituted a waiver of any default by A&P in opening the Food Emporium store. The court then held that A&P's failure to collect the full rent from 2000-2004 did not constitute a waiver of its right to collect under the modification agreement because the sublease itself provided that any payment accepted would be without prejudice to sublandlord's right to obtain the balance due. Finally, the court rejected Food Corp's argument that the percentage rent clause obligated Food Corp. to pay only a percentage of the rent it collected from its sub-subtenant, rather than a percentage of the sub-subtenant's gross sales. The court emphasized that the sublease agreement only permitted occupation of a supermarket on the premises, and held that the percentage rent was based on that supermarket's “sales,” not on the revenue received by the subtenant.

Landlord Must Make Feasible Modification Toward ADA Compliance

W.C. Brooks Shopping Centers, LLC v. DCHWWC Restaurant, Inc.

NYLJ 7/29/11, p. 29, col. 4

AppTerm, 9th and 10th Districts

(memorandum opinion)

In landlord's summary holdover proceeding, landlord appealed from City Court's award of judgment to tenant. The Appellate Term reversed and remanded, holding that even if it was financially unfeasible to comply with all ADA mandates, tenant was required to make whatever modifications are readily achievable.

After landlord entered into a consent decree requiring landlord to cure ADA violations in the common areas of its shopping center and in the premises occupied by commercial tenants, landlord's investigation revealed violations at tenant's restaurant. Landlord notified tenant of its noncompliance, and then served a notice of termination before ultimately bringing this summary holdover proceeding. After jury trial, City Court awarded judgment to tenant, concluding that the cost of achieving ADA compliance would exceed $500,000, an amount the court concluded was totally disproportionate to the income of tenant's business. Landlord appealed.

In reversing and ordering a new trial, the Appellate Term held that an analysis of the financial feasibility of ADA compliance was not an all-or-nothing proposition. The court held that where full compliance is economically unfeasible, the party responsible for compliance must undertake whatever modifications are “readily achievable.” Here, because City Court did not make findings of fact as to what modifications are economically feasible, the court remanded for a new trial.

Guarantor Liable for Rent, But Not Security Deposit

413 West 14 Associates v. Santorelli

NYLJ 8/10/11

Supreme Ct., N.Y. Cty.

(Gische, J.)

In commercial landlord's action to recover damages from tenant and guarantors, landlord sought partial summary judgment. The court granted summary judgment to landlord, holding that tenants and guarantors were liable until the end of the month in which tenant vacated, but that they were not required to replenish the security deposit required by the lease.

In 2005, tenant entered into a commercial lease for a five-year period beginning March 1, 2006. Santorelli and Harris agreed to serve as guarantors. The lease required tenant to deposit four months' rent as security, and required tenant to replenish security, as additional rent, if landowner were required to use security sums to cure tenant's default. The lease also provided that if tenant provided landlord with 90 days' notice of vacatur, guarantors would be liable for payment of defaults only through the date tenant delivers the keys to the owner. On June 17, 2009, tenant sent a notice to vacate. Landlord sent tenant notice that it was applying the security deposit to rent arrears, and sought replenishment of the security deposit. Tenant vacated on Oct. 6. Landlord then brought this action against tenant and guarantors, seeking to recover $44,747.53 in unpaid rent, plus replenishment of the security deposit. Tenant and guarantors contended that they were not obligated to pay rent for the full month of October, because tenant had vacated on Oct. 6. Tenant and guarantors also contested landlord's claim for replenishment of the security deposit.

In awarding partial summary judgment to landlord, the court emphasized that the lease required payment of rent on the first of each month, and held that because tenant remained in possession on the sixth, tenant had defaulted on the Oct. 1 payment. The court also held, however, that the security was designed only to secure tenant's obligations. Because those obligations would be satisfied with payment of the October rent, tenant would have no more obligations to secure. As a result, landlord was not entitled to replenishment of the security deposit.

Yellowstone Injunction Not Available for Failure to Pay Rent

Gabai v. 130 Diamond Street LLC

NYLJ 7/13/11

Supreme Ct., Kings Cty.

(Battaglia, J.)

Residential tenants sought a Yellowstone injunction precluding landlord from bringing proceedings to evict tenants pending the outcome of the tenants' complaint asserting defective conditions in the premises. The court denied the injunction, holding that Yellowstone relief is not available to toll a cure period in a residential lease where the only alleged breach is failure to pay rent.

On Nov. 1, 2010, landlord sent tenants a five-day rent demand notifying them of their default in payment of the October and November rent, and indicating that if tenants did not pay within five days, landlord would commence summary proceedings to recover possession. Tenants contended that they had been withholding rent because of defective conditions in the apartment. On Dec. 10, tenants moved for an order enjoining landlord from tiling any proceedings against tenants seeking eviction. Landlord had not yet brought any proceeding seeking eviction.

The court started by noting judicial language suggesting that Yellowstone injunctions are available only to commercial tenants, but went on to cite instances in which courts had extended Yellowstone relief to residential tenants. The court then indicated, however, that Yellowstone relief is not available in cases where landlord might bring a summary nonpayment or summary holdover proceeding, because the statutes governing those proceedings (RPAPL ' 753(4) and RPAPL ' 751(1), respectively) include their own stay provisions, which obviate the need for Yellowstone injunctions. Only if tenant has some equity or defense that could not be raised in the summary proceeding might Yellowstone relief be available to a residential tenant. Moreover, the court held that in an event, tenants' application in this case was untimely, because the cure period provided in landlord's notice to tenant had already expired before tenant applied for Yellowstone relief.

Construction of Percentage Provision in Lease

380 Yorktown Food Corp. v. Great Atlantic and Pacific Tea Co.

NYLJ 7/26/11

Supreme Ct., Westchester Cty.

(Giacomo, J.)

In an action by commercial subtenant to establish that it was not liable for the rent demanded by tenant, the court, after trial, determined that subtenant was obligated to pay the rent demanded by tenant. In particular, the court held that subtenant's sub-sublease to another supermarket did not relieve subtenant of the obligation to pay the lease's stated percentage of the sub-subtenant's gross sales.

Tenant, A&P, operated three separate supermarkets in Yorktown Heights as a result of its acquisition of two other supermarket chains. In 1992, A&P sublet one of its supermarkets to plaintiff Food Corp. The sublease prohibited A&P from operating store within a designated area, and provided reduced rent if A&P were to violate the covenant. The lease also required subtenant to pay a percentage of the gross sales rent in excess of $7.5 million. At the time of the sublease, A&P held the lease to supermarket premises across the street from the subleased premises. In 1998, the parties modified the sublease to reduce past rent due by subtenant and to change the base for the percentage rent clause to $7 million. By the terms of the modification agreement, both parties represented that there had been no default by either party. Three days after executing the modification agreement, subtenant Food Corp. entered into a sub-sublease agreement with another supermarket. The next year, A&P opened a Food Emporium store on the site across the street from the subleased premises. Subtenant Food Corp. knew of the proposed opening of the Food Emporium at the time of the modification agreement, but the agreement was silent about the effect of the new store. Beginning in 2000, Food Corp paid, and A&P accepted, far less than the rent specified in the modification agreement, and Food Corp. did not pay percentage rent based on the sub-subtenant's annual sales. Then, in 2003, A&P sent Food Corp. a demand letter seeking $547,721.47 in unpaid fixed rent and additional rent. Food Corp. disclaimed liability for that amount.

After trial, the court rejected Food Corp's argument that A&P's opening of the Food Emporium store constituted a breach of the modification agreement and resulted in reduced rent for Food Corp. The court relied on the provision in the modification agreement specifying that there was no default by either party under the sublease, and held that the no-default provision constituted a waiver of any default by A&P in opening the Food Emporium store. The court then held that A&P's failure to collect the full rent from 2000-2004 did not constitute a waiver of its right to collect under the modification agreement because the sublease itself provided that any payment accepted would be without prejudice to sublandlord's right to obtain the balance due. Finally, the court rejected Food Corp's argument that the percentage rent clause obligated Food Corp. to pay only a percentage of the rent it collected from its sub-subtenant, rather than a percentage of the sub-subtenant's gross sales. The court emphasized that the sublease agreement only permitted occupation of a supermarket on the premises, and held that the percentage rent was based on that supermarket's “sales,” not on the revenue received by the subtenant.

Landlord Must Make Feasible Modification Toward ADA Compliance

W.C. Brooks Shopping Centers, LLC v. DCHWWC Restaurant, Inc.

NYLJ 7/29/11, p. 29, col. 4

AppTerm, 9th and 10th Districts

(memorandum opinion)

In landlord's summary holdover proceeding, landlord appealed from City Court's award of judgment to tenant. The Appellate Term reversed and remanded, holding that even if it was financially unfeasible to comply with all ADA mandates, tenant was required to make whatever modifications are readily achievable.

After landlord entered into a consent decree requiring landlord to cure ADA violations in the common areas of its shopping center and in the premises occupied by commercial tenants, landlord's investigation revealed violations at tenant's restaurant. Landlord notified tenant of its noncompliance, and then served a notice of termination before ultimately bringing this summary holdover proceeding. After jury trial, City Court awarded judgment to tenant, concluding that the cost of achieving ADA compliance would exceed $500,000, an amount the court concluded was totally disproportionate to the income of tenant's business. Landlord appealed.

In reversing and ordering a new trial, the Appellate Term held that an analysis of the financial feasibility of ADA compliance was not an all-or-nothing proposition. The court held that where full compliance is economically unfeasible, the party responsible for compliance must undertake whatever modifications are “readily achievable.” Here, because City Court did not make findings of fact as to what modifications are economically feasible, the court remanded for a new trial.

Guarantor Liable for Rent, But Not Security Deposit

413 West 14 Associates v. Santorelli

NYLJ 8/10/11

Supreme Ct., N.Y. Cty.

(Gische, J.)

In commercial landlord's action to recover damages from tenant and guarantors, landlord sought partial summary judgment. The court granted summary judgment to landlord, holding that tenants and guarantors were liable until the end of the month in which tenant vacated, but that they were not required to replenish the security deposit required by the lease.

In 2005, tenant entered into a commercial lease for a five-year period beginning March 1, 2006. Santorelli and Harris agreed to serve as guarantors. The lease required tenant to deposit four months' rent as security, and required tenant to replenish security, as additional rent, if landowner were required to use security sums to cure tenant's default. The lease also provided that if tenant provided landlord with 90 days' notice of vacatur, guarantors would be liable for payment of defaults only through the date tenant delivers the keys to the owner. On June 17, 2009, tenant sent a notice to vacate. Landlord sent tenant notice that it was applying the security deposit to rent arrears, and sought replenishment of the security deposit. Tenant vacated on Oct. 6. Landlord then brought this action against tenant and guarantors, seeking to recover $44,747.53 in unpaid rent, plus replenishment of the security deposit. Tenant and guarantors contended that they were not obligated to pay rent for the full month of October, because tenant had vacated on Oct. 6. Tenant and guarantors also contested landlord's claim for replenishment of the security deposit.

In awarding partial summary judgment to landlord, the court emphasized that the lease required payment of rent on the first of each month, and held that because tenant remained in possession on the sixth, tenant had defaulted on the Oct. 1 payment. The court also held, however, that the security was designed only to secure tenant's obligations. Because those obligations would be satisfied with payment of the October rent, tenant would have no more obligations to secure. As a result, landlord was not entitled to replenishment of the security deposit.