Part II: Default Notices and Terms of a Lease

Posted: September 10th, 2010

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By Patrick McCormick

Last month’s blog discussed defective default notices and the need to strictly comply with lease provisions. We continue that theme this month with two cases recently decided by Nassau County District Court Judge Scott A. Fairgrieve. In The Retail Property Trust v. SHNS Corp. d/b/a J&A Gallery, 003192/10, NYLJ 1202464430374, at *1 (Dist., NA, August 4, 2010) Judge Fairgrieve granted a tenant’s motion to dismiss based on a defective default notice that was required by the lease. In this case the parties’ lease required landlord to serve a ten (10) day notice upon the tenant for a default in the payment of taxes. The landlord served a three (3) day notice which, not surprisingly, the court deemed deficient because the lease required a ten (10) day notice.

The more important lesson of this case, other than the need to comply with lease requirements, involved the subsequent ten (10) day notice actually served by landlord and provided in response to the tenant’s motion to dismiss. First, the ten day notice was not filed with the petition filed with the court, which, depending on the contents of the petition, could have served as an independent bases to dismiss. But, Judge Fairgrieve determined that even if the ten day notice was considered, it was nevertheless defective because “it fails to provide a breakdown of monies owed.” The Court noted that the ten day notice included an aggregate sum of monies allegedly due.

Failing to provide a detailed breakdown of monies owed resulted in a finding that the notice was facially defective because it did not inform the tenant of the specific amounts due and the period for which the sums were claimed due. The simple way to avoid this result is to be as detailed and specific as possible when drafting rent demands and default notices and always comply with the lease. Less is certainly not more.

In Thomas Santanastasio v. Florence Denoto a/k/a Florence Dinoto, SP 002949/10, NYLJ 1202464396901, at *1 (Dist., NA, July 29, 2010), Judge Fairgrieve again found predicate documents defective resulting in dismissal of the proceeding. In this case, the tenant was a month-to-month tenant pursuant to an oral lease. On March 16, 2010, tenant signed a confession of judgment agreeing to pay past due rent. The next day, March 17, 2010, landlord and tenant signed a stipulation pursuant to which landlord agreed not to file the confession if certain weekly payments were made. Landlord agreed to give tenant a signed notice of default if the required payments were not made.

The payments were not made and landlord commenced a holdover proceeding. Judge Fairgrieve granted a motion to dismiss finding that the confession of judgment did not comply with the specificity requirements of CPLR 3218(a)(2) because it did not include a full statement of the facts. The factual statement in the confession of judgment merely stated: “[a] debt is justly due to the Plaintiff arising out of the following Oral Lease Agreement for rooms at the subject premises.” The Court ruled that the factual statement was inaccurate because only one room was leased and was deficient because it did not include the dates when payments were “to be made, the amount and the anniversary date.” The Court also noted that Landlord failed to give a default notice to tenant as required by the stipulation.

Finally, the Court held “[a] 30-day notice is required to terminate a month-to-month tenancy outside The City of New York” and the stipulation of settlement in this case did not qualify as a 30-day notice. See RPL 232-b. In this case, a simple 30-day notice would have served as a proper predicate to terminate the month-to-month tenancy. Thereafter, in addition to a judgment of possession, a money judgment could have been obtained at a subsequent holdover proceeding, This process would have simplified the issues presented to the Court and avoided costly motion practice.

In sum, in preparing predicate notices, it is important to be as detailed as possible and be certain to comply with any relevant statute.

Default Notices and Terms of a Lease

By Patrick McCormick

Two recent cases serve to remind us of the importance of carefully drafting default notices and strictly complying with the terms of a lease. In the first case, deficiencies in a default notice resulted in the dismissal of a commercial holdover proceeding. In the second, the failure to strictly comply with the surrender clause of a sublease resulted in a judgment against the subtenant in excess of $1.0 million.

The Supreme Court, Appellate Term, in 240 West 37th LLC v. BOA Fashion, Inc., 2009 NY Slip Op 51823U; 24 Misc. 3d 145A; 899 NYS2d 63 (App. Term, 1st Dep’t) reversed the lower court and granted a tenant’s cross-motion to dismiss the proceeding. While the landlord’s predicate default/cure notice specifically identified the lease provisions allegedly violated, “it conspicuously failed to inform the tenant of the precise defaults alleged.” The Court held that “it is imperative that the cure notice particularize the nature of the default(s) with clarity and factual basis. A mere reference to or recitation of a numbered lease provision, without specifying the nature of the violation(s), is insufficient.”

Here, the lesson to be learned, at least where default/cure notices are concerned, is that more is better. In addition to lease references, specific details about the conduct/circumstances constituting the default should be set forth in the default/cure notice. If specific factual details are not known, caution should be exercised before serving the default/cure notice — under penalty of dismissal.

In the second case, American Express Travel Related Services Company, Inc. v. Stamack Constructions LLC, 2010 NY Slip Op 30407U; 2010 N.Y. Misc. LEXIS 2456, plaintiff/sublandlord commenced an action against the defendant/subtenant for unpaid rent. Subtenant alleged it was not liable for the rent because it surrendered the premises to the managing agent who induced it to surrender the premises. The sublease contained a typical clause incorporating the terms of the overlease within the sublease. The surrender clause in the overlease required any surrender of the premises to be in a writing and signed by the owner. The overlease used the terms “landlord” and “owner” interchangeably and the sublease provided that the term “landlord” in the overlease shall mean “sublandlord.” Subtenant claimed it was induced to break the lease and vacate the premises by the owner’s managing agent. The subtenant did not prepare a writing surrendering the sublease and the sublandlord did not sign such a written surrender. The subtenant’s failure to comply with the lease (and thus sublease) surrender clause requirement of a written surrender notice which is accepted in writing by the sublandlord was fatal to the subtenant’s claim. In fact, the Supreme Court held that even if subtenant could prove it was induced by the managing agent to surrender the premises, such would not provide a vialble defense to the sublandlord’s rent claim — at most there might be a claim against the managing agent or owner, neither of which was a party to the sublandlord’s action. Subtenant’s failure to strictly comply with the applicable surrender clause resulted in a judgment against it in excess of $1.0 million plus legal fees incurred by sublandlord.

A primary reason for entering into written lease agreements is to memorialize the landlord and tenant’s rights, duties and obligations. The lesson here is that ignoring the terms and requirements of a written lease can have severe consequences which can easily be avoided by knowing and complying with the requirements of your lease.

October 26 – CMM Executive Breakfast: Campolo Presents “Winning: Incorporating Jack Welch’s Management Lessons into Your Business”

Posted: August 27th, 1994

Event Date: October 26th, 2016

 

Winning: Incorporating Jack Welch’s Management Lessons into Your Business

Please join us for breakfast, networking, and a look at the management style of Jack Welch, whose get-it-done approach to leadership pivoted GE to worldwide success.  Joe Campolo will share lessons from Welch’s popular business bible, Winning, and how Welch’s honest and be-the-best style of management can be put to work at your organization.  Business owners, executives, and those who are serious about career success can all find a helpful new perspective in Welch’s words. This seminar will focus on the most critical of these lessons.

 

Event Details

Date: Wednesday, October 26, 2016

Location: Courtyard Marriott, 5000 Express Drive South, Ronkonkoma

Agenda: 

8:30 am – 9:00 am: Registration & Breakfast

9:00 am – 9:45 am: Presentation

9:45 – 10:00 am: Q&A and Discussion

 

Registration: The event is FREE but registration is required.

Please RSVP here.

Complimentary breakfast will be served.

 

November 3 – HIA-LI Small Business Task Force – Town Hall Meeting

Posted: October 12th, 1993

HIA-LIPlease join us on us on Thursday, November 3 for a complimentary Small Business Town Hall meeting of HIA-LI.  Area experts from the HIA board of directors, including Joe Campolo, will answer questions from the audience about personnel issues, business development strategies, and finance/cash flow management.  This event is open to HIA members and will take place from 8:00 a.m. to 10:00 a.m. at SimPlay, 180 Commerce Drive in Hauppauge. Register here.

 

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November 9 – Campolo Moderates HIA-LI Panel “Get in the Head of a CEO”

Posted: September 24th, 1992

HIA-LI

On Wednesday, November 9, Joe Campolo will moderate HIA-LI‘s “Get in the Head of a CEO” panel at 8:00 a.m. at Flexible Business Systems, 380 Oser Avenue in Hauppauge.  The event features a panel of CEOs whose companies were honored with Business Achievement Awards from the HIA in 2016.  Panelists will discuss their success stories, defining moments in their careers, and trends in their industries, which range from construction to healthcare to solar power.   Register here.

 

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December 2 – HIA-LI “Women Leading the Way” Panel

Posted: August 8th, 1991

CMM partner Christine Malafi will join an esteemed panel of women business leaders at the HIA-LI Sixth Annual Women’s Leadership Breakfast, “Women Leading the Way: A Discussion with Women CEOs” on Friday, December 2 at 8 a.m. at the Hyatt Regency Long Island, 1717 Motor Parkway in Hauppauge.  Panelists will discuss life and work balance, finding your voice, and the importance of mentoring.  Register here.

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January 18 – CMM Business Breakfast: Campolo Presents “Never Eat Alone: Put Your Network to Work in 2017”

Posted: December 19th, 1990

Event Date: January 18th, 2017

Please note the new venue!

CMM Business Breakfast Series – 2017 Kickoff

Never Eat Alone: Put Your Network to Work in 2017

Ten years ago, Joe Campolo was months away from launching the law firm that would become Campolo, Middleton & McCormick when Keith Ferrazzi’s bestseller Never Eat Alone and Other Secrets to Success, One Relationship at a Time was first published.  Trying to broaden his focus from the very niche tech space he had just left, Campolo knew he needed to build a network – so he bought a copy of Never Eat Alone and used it as a framework to build his network, one relationship at a time.  Join us for breakfast as Campolo revisits the book a decade later, exploring what he learned, what worked, what didn’t, and how his networking has evolved over the years.  Learn how to put your own network to work for you in 2017 with this personal look at powerful networking strategies.

AGENDA:
8:30 a.m. – 9:00 a.m. – Registration and Breakfast
9:00 a.m. – 9:45 a.m. – Presentation
9:45 a.m. – 10:00 a.m. – Q&A and Discussion

REGISTRATION: All events are FREE but registration is required.  Please register here.  Complimentary breakfast will be served.

NEW LOCATION: UPSKY Long Island Hotel, 110 Vanderbilt Motor Pkwy, Hauppauge, NY 11788

Thank you to our sponsors, Sandler Training – HauppaugeInvestors Bank, and Protegrity Advisors.