Landlord & Tenant

Specific Merger Clause Bars Guarantor's Fraud Defense

Barnaba Realty Group, LLC v. Solomon

NYLJ 10/10/14, p. 28, col. 4

AppDiv, Second Dept.

(memorandum opinion)

On motion by landlord to recover on a personal guaranty of a lease, landlord appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified to grant the motion with respect to one of two guarantors, holding that the specific merger clause in the lease barred guarantor's fraud defense.

Landlord leased the subject property to Avalon Farms, LLC. Solomon and Wander were Avalon's principals. Solomon executed a guarantee of Avalon's lease obligations. A signature page also included Wander's signature, but there was no indication that the signature page incorporated Solomon's guarantee. Subsequently, Avalon defaulted on the lease, and the matter was settled when Avalon consented to have a judgment entered against it in the amount of $39,000. Landlord then moved to recover on the guarantees, and Supreme Court denied landlord's summary judgment motions.

In modifying to grant the motion with respect to Solomon, the Appellate Division concluded that Solomon failed to raise a triable issue of fact on her challenge to the validity of the lease on the ground of fraud. The court first questioned whether she had the right to raise a fraud-in-the-inducement challenge in light of the settlement agreement between landlord and Avalon, but the court concluded that a specific merger clause in the lease nevertheless barred the fraud claim. The lease provided that landlord made no representations, warranties, or promises other than those expressly set forth in the lease, and also provided that Avalon had thoroughly reviewed the facts, circumstances, and physical condition of the building. This clause, in the court's view, was sufficiently specific to bar Solomon's defense, entitling landlord to summary judgment with respect to Solomon. The court however, held that landlord had not met its burden of establishing a prima facie case against Wander because of the absence of evidence that Wanda's signature was affixed to a guaranty of the lease.

Rent Controlled Apartment Not Subject to Decontrole

Matter of Ram I, LLC

NYLJ 10/9/14, p. 18, col. 1

AppDiv, First Dept.

(Opinion by Sweeny, J.)

In landlord's article 78 proceeding challenging DHCR's determination that a rent controlled apartment was not subject to luxury decontrol, DHCR appealed from Supreme Court's grant of the petition. The Appellate Division reversed and denied the petition, holding that when landlord has obtained J-51 benefits with respect to a rent-controlled apartment, the apartment is not eligible for luxury decontrol even after the J-51 benefits expire.

Landlord owns the shares allocated to a rent-controlled apartment in which tenant has lived since 1958. In 1994, landlord obtained J-51 tax benefits valued at about $8,000. Those benefits expired in the tax year 2004/5. In 2008, landlord petitioned for luxury deregulation. It is undisputed that the thresholds for household income and apartment rent have been exceeded. DHCR's rent administrator ordered deregulation, but tenant filed a petition for administrative review, and the commission revoked the rent administrator's order and denied landlord's petition. Landlord then brought this article 78 proceeding, and Supreme Court granted the petition. DHCR appealed.

In reversing, the Appellate Division conceded that if the subject apartment had been rent-stabilized, rather than rent-controlled, the apartment would have become eligible for luxury decontrol once the J-51 benefits expired. But the court relied on statutory differences to conclude that once a rent-controlled apartment obtains J-51 benefits, it loses all eligibility for luxury decontrol. In particular, the court noted that the Rent Stabilization law includes an express provision indicating that once J-51 benefits expire, the dwelling unit continues to be subject to rent stabilization “as if [J-51 benefits] had never applied thereto,” while the Rent Control Law includes no comparable provision.

'

Specific Merger Clause Bars Guarantor's Fraud Defense

Barnaba Realty Group, LLC v. Solomon

NYLJ 10/10/14, p. 28, col. 4

AppDiv, Second Dept.

(memorandum opinion)

On motion by landlord to recover on a personal guaranty of a lease, landlord appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified to grant the motion with respect to one of two guarantors, holding that the specific merger clause in the lease barred guarantor's fraud defense.

Landlord leased the subject property to Avalon Farms, LLC. Solomon and Wander were Avalon's principals. Solomon executed a guarantee of Avalon's lease obligations. A signature page also included Wander's signature, but there was no indication that the signature page incorporated Solomon's guarantee. Subsequently, Avalon defaulted on the lease, and the matter was settled when Avalon consented to have a judgment entered against it in the amount of $39,000. Landlord then moved to recover on the guarantees, and Supreme Court denied landlord's summary judgment motions.

In modifying to grant the motion with respect to Solomon, the Appellate Division concluded that Solomon failed to raise a triable issue of fact on her challenge to the validity of the lease on the ground of fraud. The court first questioned whether she had the right to raise a fraud-in-the-inducement challenge in light of the settlement agreement between landlord and Avalon, but the court concluded that a specific merger clause in the lease nevertheless barred the fraud claim. The lease provided that landlord made no representations, warranties, or promises other than those expressly set forth in the lease, and also provided that Avalon had thoroughly reviewed the facts, circumstances, and physical condition of the building. This clause, in the court's view, was sufficiently specific to bar Solomon's defense, entitling landlord to summary judgment with respect to Solomon. The court however, held that landlord had not met its burden of establishing a prima facie case against Wander because of the absence of evidence that Wanda's signature was affixed to a guaranty of the lease.

Rent Controlled Apartment Not Subject to Decontrole

Matter of Ram I, LLC

NYLJ 10/9/14, p. 18, col. 1

AppDiv, First Dept.

(Opinion by Sweeny, J.)

In landlord's article 78 proceeding challenging DHCR's determination that a rent controlled apartment was not subject to luxury decontrol, DHCR appealed from Supreme Court's grant of the petition. The Appellate Division reversed and denied the petition, holding that when landlord has obtained J-51 benefits with respect to a rent-controlled apartment, the apartment is not eligible for luxury decontrol even after the J-51 benefits expire.

Landlord owns the shares allocated to a rent-controlled apartment in which tenant has lived since 1958. In 1994, landlord obtained J-51 tax benefits valued at about $8,000. Those benefits expired in the tax year 2004/5. In 2008, landlord petitioned for luxury deregulation. It is undisputed that the thresholds for household income and apartment rent have been exceeded. DHCR's rent administrator ordered deregulation, but tenant filed a petition for administrative review, and the commission revoked the rent administrator's order and denied landlord's petition. Landlord then brought this article 78 proceeding, and Supreme Court granted the petition. DHCR appealed.

In reversing, the Appellate Division conceded that if the subject apartment had been rent-stabilized, rather than rent-controlled, the apartment would have become eligible for luxury decontrol once the J-51 benefits expired. But the court relied on statutory differences to conclude that once a rent-controlled apartment obtains J-51 benefits, it loses all eligibility for luxury decontrol. In particular, the court noted that the Rent Stabilization law includes an express provision indicating that once J-51 benefits expire, the dwelling unit continues to be subject to rent stabilization “as if [J-51 benefits] had never applied thereto,” while the Rent Control Law includes no comparable provision.

'