Case Notes

On April 5, 2018, the defendant landlord sent the tenant a five-day notice to cure, demanding that the tenant provide proof of insurance for the previous six years, that it obtain updated insurance to comply with the landlord's requests and that it include the new landlord as an additional insured on the policies. The tenant responded by seeking a declaration from the court that its emailed copy of the insurance policy to the landlord in March of 2018 complied with the requirements of the lease. The tenant moved at the same time for a Yellowstone injunction, named for the decision in First National Stores Inc. v. Yellowstone Shopping Center, 21 N.Y.2d 630 (1968), which would have temporarily enjoined the landlord from evicting the tenant while giving the tenant a chance to cure any breach that the court might find. The tenant claimed that the landlord was not really concerned with the insurance issues it complained of but was simply trying to push the tenant out of the property 14 years before the contracted-for lease termination date.

The landlord countered that the tenant had not delivered the insurance policies to it as required, and that the emailed certificate of insurance showed a one-month gap in coverage from the date of the landlord's January 11 letter advising that it was the new owner and the February 12 commencement date of the commercial liability policy.

The court, siding with the landlord, noted that a tenant default may be curable if the tenant shows good faith and is willing to cure, but that, in the case of an insurance issue, “a default may be incurable.” See, Kim v. Idylwood NY. LLC, 66 AD3d 528 (1st Dept. 2009). “Here,” the court concluded, “plaintiff neither asserts nor demonstrates that the policy it furnished covered defendant from the time it became owner of the premises. Consequently, the gap in coverage renders the default incurable.” This being so, the motion for a temporary restraining order in accordance with the Yellowstone doctrine was denied.

Uncertain Method for Determining Future Rent Dooms Renewal Rights

A Florida appeals court has upheld a trial court's dismissal of a commercial tenants' suit seeking a declaration that they properly exercised their option to renew, after agreeing that the parties' lease renewal clause was too vague to be enforceable. Jahangiri v. 1830 North Bayshore, LLC, 2018 Fla. App. LEXIS 11068 (Fla. App., Third Dist. 8/8/18).

The parties entered into a five-year lease with two options to extend available to the tenants, who were running a deli and market on the premises. The tenants timely paid their rent and were otherwise in compliance with the terms of the contract. When the lessees notified the landlord by mail and by electronic communications that they intended to exercise the first of two renewal options, the landlord replied that it would not be renewing the lease. The tenants then brought suit to obtain a declaration that they were entitled to renew the lease and also to secure an injunction prohibiting the landlord from evicting the lessee. The landlord countered by moving for summary judgment, asserting that the renewal provision of the lease was unenforceable because it lacked a key element: a discernable way for settling the amount of rent to be paid.

The lease renewal clause in question stated as follows: “Tenant shall have the option to take a renewal lease of the demised premises for the further term of three (3) years from and after the expiration of the term herein granted at a monthly rental to be arbitrated, negotiated and determined among the parties to this lease at said time.”

The trial court granted the landlord's motion for summary judgment, agreeing that the lease term extension clause was too vague as to rent amount, and therefore legally unenforceable.

On appeal, the court turned to the case of Edgewater Enters., Inc. v. Holler, 426 So. 2D 980 (Fla. 5th DCA 1982), in which that court stated: “[T]he amount of rental is an essential element of a lease, if not the basis for a lease, and an agreement to make a lease, or to renew or extend a lease, that fails to specify either the amount of the rental or a definite procedure to be followed to establish the amount of the rental, is too indefinite to be legally binding and enforceable.” The question for this court, therefore, was whether the lease's instruction that rent be determined according to the “then prevailing market rate for comparable commercial office properties,” constituted a definite enough procedure to be followed in establishing the amount of rent. The answer was no, said the court, because “there are too many open questions about 'prevailing market rate[s]' and 'comparable” properties for us to conclude that there was a meeting of the minds on rent. (The parties can't even agree on the criteria for calculating market rent.) Like the right of first refusal … the method for determining rent has to be sufficiently definite that the amount could be fixed with certainty without resorting to further negotiations or litigation to resolve open questions in the methodology.” Because the method for calculating rent in the lease was so vague, the court, citing the language of Belitz v. Riebe, 495 So. 2D 775, 777 (Fla. 5th DCA 1986), was loathe here to “write a contract where none exists.” It therefore upheld the lower court's summary dismissal of the tenant's complaint.