Two appellate courts recently rendered decisions discussing landlord/tenant issues. The decisions, while breaking no new ground, do point out what can happen when parties fail to properly memorialize their landlord/tenant relationship and when a landlord fails to act to correct defective conditions in commercial premises.
The first case is Joylaine Realty Co., LLC v. Samuel1 in which the Appellate Division affirmed the dismissal of landlord’s complaint holding that repeated flooding of the commercial premises combined with the landlord’s failure to take any action to correct the condition suspended tenant’s obligation to pay rent. The Appellate Division decision is short on facts and analysis but does clearly hold “the repeated flooding of the subject premises substantially and materially deprived the defendant of the beneficial use and enjoyment of the premises, and the plaintiff failed to take any steps to correct the condition.” Without engaging in substantive analysis of the facts or applicable law, the Appellate Division simply relied upon well settled law that “[A] commercial tenant may be relieved of its obligation to pay the full amount of rent due where it has been actually or constructively evicted from either the whole or part of the leasehold”2 and “A constructive eviction occurs where ‘the landlord’s wrongful acts substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises.”3 Thus, finding that a constructive eviction occurred, the Court confirmed that the tenant’s obligation to pay rent was suspended.
The next appellate decision comes from the Fourth Department in Peak Development, LLC v. Construction Exchange4 and involved a claim related to common area maintenance. In Peak, the landlord sued to collect from tenant additional rent consisting of common area maintenance charges for snow removal, janitorial services and lavatory maintenance. The Fourth Department reversed summary judgment granted in favor of tenant. The tenant’s lease extension expired in October 1997 and a new lease was not executed. Thus, tenant remained in possession of the demised premises as a holdover month-to-month tenant. The express terms of the lease provided for CAM charges and that such charges were to be “pro-rated on a monthly basis according to the amount of space occupied by [defendants] to the total building space.” Plaintiff purchased the property in 2003. The month-to-month tenancy continued until April 1, 2006 when a “letter lease” became effective. The specific terms contained in the “letter lease” were not discussed by the Court. Defendant/tenant in moving for summary judgment relied on the lease, the lease extension and an affidavit from defendant’s executive vice president that CAM charges under the lease and lease extension were not paid between September 1987 and October 1997 and argued that plaintiff waived the right to collect such charges because plaintiff’s predecessor did not collect the CAM under the lease and lease extension. The Court found that the “issue of whether waiver has occurred is generally one of fact [citation omitted] and, here, defendants failed to establish as a matter of law that plaintiff’s predecessor waived his entitlement to CAM charges.”
As part of its decision, the Appellate Division cited to the well settled law that “a successor-in-interest to real property takes the premises subject to the conditions as to the tenancy, including any waiver of rights, that [its] predecessor in title has established if the successor-in-interest has notice of the existence of the leasehold and of the waiver”[Citations omitted]. The Court also found that the plaintiff in this case “had notice of the leasehold with defendants and, in any event, possession of the premises constitutes constructive notice to purchaser of the rights of the possessor” [citation omitted].
The practical impact of this decision and the facts presented is significant. If, in fact, there was a waiver of the right to collect CAM, the tenant now must locate the seller of the premises (the sale occurred about 8 years before the lower court decision) and, even if located, hope that seller or someone on behalf of the seller if the seller was a business entity, even remembers the terms of the lease and lease extension and whether there was any thought given to the right to collect CAM charges and whether such right was affirmatively waived.