Landlord & Tenant

No Part Performance Justifying Enforcement of Oral Lease

Aniqa Halal Live Poultry Corp. v. Montague-Lee Limited Partnership
NYLJ 1/4/11
Supreme Ct., Queens Cty.
(Markey, J.)

In tenant's action for specific performance of an alleged oral agreement to extend a lease, tenant sought a preliminary injunction enjoining landlord from terminating the tenancy. The court denied the injunction, holding that tenant had failed to demonstrate the likelihood of ultimate success on the merits.

Tenant leased the premises in 1996 from landlord's predecessor, for 15 years. Landlord purchased the premises in 2006 and continued to collect rent, even after the expiration of the lease in March 2011. Then, on Aug. 22, 2011, landlord served a notice of termination on tenant, electing to terminate what had allegedly become a month-to-month tenancy. Tenant then brought this action for specific performance of an alleged oral lease extension agreement, and sought a preliminary injunction. Tenant alleged that landlord had orally agreed to extend the lease for 10 years at market rent if tenant would make improvements to the building's exterior. Tenant allegedly spent $165,000 repairing the roof and paid for other repairs as well. Landlord, however, alleged that, on March 16, 2011, it had contracted to sell the property to the city's school construction authority, and that all necessary approvals had been obtained by August 2011. Landlord contends that there had never been any oral promise to extend or renew the lease, despite numerous requests by tenant.

In denying tenant's request for a preliminary injunction, the court held that tenant had failed to demonstrate the likelihood of ultimate success on the merits. The court noted that section 5-703(2) of the General Obligations Law bars enforcement of an oral lease for a term longer than one year. The court also rejected tenant's argument that the oral agreement was enforceable pursuant to the part performance doctrine. The court concluded that the repair agreement between tenant and a construction company was insufficient to establish part performance of an oral agreement, because it did not state when the work was to commence or when it would be completed. Tenant provided no fully itemized estimate, or any other reliable proof, that payment was in fact made in the sum of $165,000. The court also noted that tenant had not established balancing of the equities in its favor, because tenant had not established that its occupation complied with a valid certificate of occupancy, and because landlord might lose the benefit of its bargain with the school construction authority if the injunction were granted.

COMMENT

New York's Statute of Frauds requires leases for terms longer than one year to be in a writing which is signed by the party against whom enforcement is sought. NY General Obligations Law ' 5-703(2). The statute, however, authorizes courts to compel specific performance of an oral contract in cases of part performance.
' 5-703(4).

Where claimants invoke the part performance exception to the Statute, courts will only compel enforcement when the performance is “unequivocally referable” to the contract; that is, when the acts are explainable solely by the existence of such a contract, and would otherwise be unintelligible. In Burns v. McCormick, 233 N.Y. 230, the fact that plaintiffs gave up their home and business in order to provide live-in care for an ailing property owner until his death was insufficient to prove the owner's alleged promise to bequeath the property to them, because their conduct might be reasonably explained by other motives, such as providing the care in exchange for their free lodging, or in the mere hope that their affection would be rewarded in some unspecified way. Similarly, in Wilson v. La Van, 22 N.Y. 2d 131, the court held the exception inapplicable because the alleged promisee's conduct, including sole possession of the property for 18 years, making improvements, paying property taxes, and even paying off the owner's mortgage, was consistent with both the alleged agreement to convey title to the promisee and with a landlord-tenant relationship.

By contrast, when the alleged promisee pays large sums of money directly to a property owner, builds a house on the property in question, or makes payments to a contractor for substantial improvements to a building, courts are more likely to find that an oral contract provides the only reasonable explanation for the promisee's conduct. In both Spodek v. Riskin, 150 A.D.2d 358, and Pinkava v. Yurkiw, 64 A.D.3d 690, plaintiffs had assumed sole building management responsibility and had made substantial payments over several years to defendants, allegedly pursuant to oral contracts to convey 50% ownership of apartment buildings. In both cases, documentary evidence, such as unsigned written agreements and defendants' financial statements indicating an agreement with plaintiff ' though insufficient to comply with the Statute ' was “probative ' of whether the plaintiff's actions constitute partial performance.” Spodek, at 360. See also Pinkava, supra, at 69. Similarly, in Roberts v. Fulmer, 301 N.Y. 277, a divided Court of Appeals enforced an oral contract to sell real property, holding that a contract with a home siding company ' at a high cost to be paid over a term of several years ' was too significant and of too long a term to be consistent with a landlord-tenant relationship.

When an alleged promisee is unable to establish that expenditures were unequivocally referable to an oral contract, the promisee may nevertheless succeed on a claim for restitution. Thus, the court in Farash v. Sykes, 59 N.Y. 2d 500, dismissed the plaintiff's claims for enforcement, but allowed a recovery of the costs of the plaintiff landlord's improvements to the property made in reliance on the defendant's unenforceable oral promise to lease.

No Part Performance Justifying Enforcement of Oral Lease

Aniqa Halal Live Poultry Corp. v. Montague-Lee Limited Partnership
NYLJ 1/4/11
Supreme Ct., Queens Cty.
(Markey, J.)

In tenant's action for specific performance of an alleged oral agreement to extend a lease, tenant sought a preliminary injunction enjoining landlord from terminating the tenancy. The court denied the injunction, holding that tenant had failed to demonstrate the likelihood of ultimate success on the merits.

Tenant leased the premises in 1996 from landlord's predecessor, for 15 years. Landlord purchased the premises in 2006 and continued to collect rent, even after the expiration of the lease in March 2011. Then, on Aug. 22, 2011, landlord served a notice of termination on tenant, electing to terminate what had allegedly become a month-to-month tenancy. Tenant then brought this action for specific performance of an alleged oral lease extension agreement, and sought a preliminary injunction. Tenant alleged that landlord had orally agreed to extend the lease for 10 years at market rent if tenant would make improvements to the building's exterior. Tenant allegedly spent $165,000 repairing the roof and paid for other repairs as well. Landlord, however, alleged that, on March 16, 2011, it had contracted to sell the property to the city's school construction authority, and that all necessary approvals had been obtained by August 2011. Landlord contends that there had never been any oral promise to extend or renew the lease, despite numerous requests by tenant.

In denying tenant's request for a preliminary injunction, the court held that tenant had failed to demonstrate the likelihood of ultimate success on the merits. The court noted that section 5-703(2) of the General Obligations Law bars enforcement of an oral lease for a term longer than one year. The court also rejected tenant's argument that the oral agreement was enforceable pursuant to the part performance doctrine. The court concluded that the repair agreement between tenant and a construction company was insufficient to establish part performance of an oral agreement, because it did not state when the work was to commence or when it would be completed. Tenant provided no fully itemized estimate, or any other reliable proof, that payment was in fact made in the sum of $165,000. The court also noted that tenant had not established balancing of the equities in its favor, because tenant had not established that its occupation complied with a valid certificate of occupancy, and because landlord might lose the benefit of its bargain with the school construction authority if the injunction were granted.

COMMENT

New York's Statute of Frauds requires leases for terms longer than one year to be in a writing which is signed by the party against whom enforcement is sought. NY General Obligations Law ' 5-703(2). The statute, however, authorizes courts to compel specific performance of an oral contract in cases of part performance.
' 5-703(4).

Where claimants invoke the part performance exception to the Statute, courts will only compel enforcement when the performance is “unequivocally referable” to the contract; that is, when the acts are explainable solely by the existence of such a contract, and would otherwise be unintelligible. In Burns v. McCormick, 233 N.Y. 230, the fact that plaintiffs gave up their home and business in order to provide live-in care for an ailing property owner until his death was insufficient to prove the owner's alleged promise to bequeath the property to them, because their conduct might be reasonably explained by other motives, such as providing the care in exchange for their free lodging, or in the mere hope that their affection would be rewarded in some unspecified way. Similarly, in Wilson v. La Van, 22 N.Y. 2d 131, the court held the exception inapplicable because the alleged promisee's conduct, including sole possession of the property for 18 years, making improvements, paying property taxes, and even paying off the owner's mortgage, was consistent with both the alleged agreement to convey title to the promisee and with a landlord-tenant relationship.

By contrast, when the alleged promisee pays large sums of money directly to a property owner, builds a house on the property in question, or makes payments to a contractor for substantial improvements to a building, courts are more likely to find that an oral contract provides the only reasonable explanation for the promisee's conduct. In both Spodek v. Riskin, 150 A.D.2d 358, and Pinkava v. Yurkiw, 64 A.D.3d 690, plaintiffs had assumed sole building management responsibility and had made substantial payments over several years to defendants, allegedly pursuant to oral contracts to convey 50% ownership of apartment buildings. In both cases, documentary evidence, such as unsigned written agreements and defendants' financial statements indicating an agreement with plaintiff ' though insufficient to comply with the Statute ' was “probative ' of whether the plaintiff's actions constitute partial performance.” Spodek, at 360. See also Pinkava, supra, at 69. Similarly, in Roberts v. Fulmer, 301 N.Y. 277, a divided Court of Appeals enforced an oral contract to sell real property, holding that a contract with a home siding company ' at a high cost to be paid over a term of several years ' was too significant and of too long a term to be consistent with a landlord-tenant relationship.

When an alleged promisee is unable to establish that expenditures were unequivocally referable to an oral contract, the promisee may nevertheless succeed on a claim for restitution. Thus, the court in Farash v. Sykes, 59 N.Y. 2d 500, dismissed the plaintiff's claims for enforcement, but allowed a recovery of the costs of the plaintiff landlord's improvements to the property made in reliance on the defendant's unenforceable oral promise to lease.