Opinion
SP 5723/07.
Decided March 19, 2008.
Richard Creditor, LLC, New York, Attorneys for Respondent.
Farrell Fritz, P.C., New York, Attorneys for Petitioner.
The respondent moves for an order dismissing the holdover petition. The petitioner opposes this motion and the respondent has filed a reply.
The parties entered into a written lease agreement dated February 1, 2006 whereby the respondent leased a portion of a commercial premises in New Hyde Park from the petitioner. The fifteen year lease was to end at midnight on January 31, 2021. The respondent defaulted in the payment of rent and additional rent. On September 25, 2007 the petitioner served a Notice of Default upon the respondent. When the base rent and additional rent was not brought up to date the petitioner served the respondent on October 12, 2007 with a Notice of Termination by certified mail. The notice stated that the lease was terminated as of October 17, 2007 and demanded the respondent surrender possession of the premises on or before that date. When the respondent remained in possession the petitioner commenced this holdover proceeding.
Upon a review of the papers before it the Court finds that the petition must be dismissed.
Neither the Notice of Default nor the Notice of Termination sets forth the section of the lease under which the action is being taken thereby giving no information to the tenant as to the manner in which the lease is being terminated. Petitioner maintains in its opposition that the Notice of Termination was served pursuant to § 25.01 of the lease. Respondent's counsel posits that said section would appear to be the only section that refers to termination.
Section 25.01 of the lease states:
Tenant shall be deemed in default of the obligation to be performed by it pursuant to the provisions of this Lease if Tenant shall fail to make payment of the Base Rent, or of any item of Additional Rent, or of any other payment reserved herein within the time provided in the Lease for payment of same to be made, and said failure (other than the failure to pay Base Rent) continues for a period of five (5) days after written notice thereof is given by Landlord, or if Tenant shall fail to fulfill any of the covenants of this Lease (other than the covenants for the payments reserved herein) and said failure shall continue for a period of ten (10) days after written notice thereof is given by Landlord specifying such failure. . . . .
The petitioner argues that the lease contains a conditional limitation whereby the respondent's failure to pay the base rent and additional rent was a default under the lease. Petitioner's counsel contends while § 25.01 of the lease contains the exclusionary phrases "other than failure to pay Base Rent" and "other than the covenants for the payments reserved herein", such language was included to distinguish non-monetary defaults for which notice and cure provisions apply. Therefore, counsel posits since nonpayment of rent was a conditional limitation in the lease the respondent's failure to pay the rent provided a basis for the termination of the lease at the petitioner's option.
Respondent points out that § 25.01 excludes failure to pay base rent of the covenants for the payments reserved herein as means or grounds for which the petitioner could serve a five day written notice and thereafter another five day notice of intention to end the term of the lease. Counsel argues that the conditional limitation referred to does not apply to the failure to pay base rent.
It is well settled that a Court should seek to strictly construe the document against a draftsman to avoid the gross hardship of forfeiture of lease ( Jones v. Gianferante, 305 NY 135, 138; Brause v. 2968 Third Avenue, Inc., 41 Misc 2d 348 [Civ Court, Bronx County 1963, aff'd 43 Misc 2d 691 [App Term 1st Dept 1964]). Additionally, a notice of termination of a lease must be clear, unambiguous, and unequivocal if it is to function as the catalyst which terminates a leasehold ( Kirschenbaum v. M-T-S Franchise Corp. 77 Misc 2d 1012, 1014 (Civ Ct New York County 1974).
In a commercial lease matter a Landlord may exercise a contractual right to terminate a lease upon the nonpayment of rent provided this option is clearly and unambiguously set forth in the lease. Such a right of termination is called a conditional limitation. SeeFinkelstein and Ferrara, Landlord and Tenant Practice in New York, § 10:120, at 10-53 (West's NY Prac Series, vol F, 2002), wherein the following is written:
When a lease is prematurely terminated due to a rent or other lease-related default, this is known as "exercising the conditional limitation." A conditional limitation calls for the premature termination of a lease upon the occurrence or nonoccurrence of a certain event. To exercise the conditional limitation, the landlord must have expressly reserved this right in the parties agreement.
In NY Jur2d Landlord Tenant, § 835, provides that termination of leases for nonpayment of rent is enforceable provided same is in the lease. Said Section provides:
Although the nonpayment of rent does not operate as a forfeiture of the term or confer upon the lessor any right of re-entry in the absence of a provision in the lease allowing such or of a statute so declaring, such a provision in leases for a term of years for forfeiture or right to re-enter for nonpayment of rent are valid and enforceable.
In Bennies Buddies, Inc. v. Lazarian Society, 40 AD3d, 836 NYS2d 735 (3rd Dept 2007), the Court upheld a commercial lease clause which provided in clear terms that the lease would terminate upon nonpayment of rent without notice being given:
When a lease is unambiguous, we look only to the language in the agreement to determine its meaning and the effect of a default by the tenant ( see Vermont Teddy Bear Co. v 538 Madison Realty Co. , 1 NY3d 470 , 475, 775 NYS2d 765, 807 NE2d 876 Greenfield v Philles Records, 98 NY2d 562, 569, 750 NYS2d 565, 780 NE2d 166). Contrary to plaintiff's contentions, the lease documents here clearly and unambiguously define what constitutes a default and provide that a default in payment will terminate the lease without any notice having to be given. In paragraph 30 (a), the rider expressly provides that the failure to pay rent for 15 days is a default and breach of the lease. It further states that "notwithstanding anything in this Lease to the contrary, no notice of any such default shall be required to be given by the Landlord." Most significantly, the last sentence of paragraph 31, which discusses giving notice of termination, states that "it is expressly acknowledged that Landlord shall not be required to provide any such notice of termination if the default is in the payment of rent." Plaintiff now concedes that it failed to pay the March 2005 rent within the 15-day grace period and that such failure constituted a default in the payment of rent. Pursuant to the express terms of the rider, such default effectuated immediate termination of the lease without defendant having to give notice. As the purchase option was confined to the term of the lease, Supreme Court correctly concluded that the termination of the lease also terminated the option.
As discussed above the lease involved herein is ambiguous and absent a clear written right to terminate upon nonpayment, this Court will enforce the universal rule in New York that lease forfeitures are not favored. SeeDolan, Rasch's Landlord Tenant-Summary Proceedings, § 23:9, at 175 [4th ed 1998], wherein the following is stated:
Conditions are not favored by the courts, because they tend to destroy estates. If a provision is so phrased as to make it doubtful whether it is a covenant or a condition, the courts will as a general rule construe it as a covenant, so as to avoid a forfeiture of the estate.
The above principals of law are also discussed in Gouveneur Gardens Housing Corporation v. Lee, 2 Misc 3d 525 (NY Civ Ct 2003), wherein the Court explained the difference between breach of a condition as contrasted to breach of a conditional limitation:
A breach of a condition does not automatically terminate an agreement. ( Beach v Nixon, 9 NY 35, 36-37; 2 Rasch, Landlord and Tenant-Including Summary Proceedings § 23:12, at 177 [Dolan ed., 4th ed.1998].) After the breach, the landlord has the right of forfeiture and must elect to terminate the agreement through a plenary action to recover real property. ( South St. Seaport Ltd. Partnership v Jade Sea Rest., 151 Misc 2d 725, 726 [Civ Ct, NY County 1991].) In contrast, upon the occurrence of a conditional limitation, the agreement automatically expires; no other act is necessary to end it. (Id. at 727.) To create a conditional limitation rather than a condition, the agreement must state clearly that it will expire upon the happening of some objective event. ( See Fowler Ct. Tenants v Young, 119 Misc 2d 492, 495 [Civ Ct, NY County 1983] [finding that lease contained conditional limitations that provided for lease expiration]; 2 Rasch , supra, § 23:31, at 196.)
The Notice of Default stated that the respondent had defaulted in the payment of base rent and additional rent but it did not itemize what part of the amount due was base rent and what represented additional rent. Section 25.01 states that the tenant is in default if it failed to pay the base rent or any other rent or any other payment. However, in order to be able to terminate the lease, the failure has to be other than the failure to pay base rent and must continue for a period of five days after written notice. After strictly construing the provision of the lease which deals with defaults the Court finds that the petitioner may not terminate the lease as it did for the nonpayment of base rent.
The Court finds that the notice of default, dated September 24, 2007, is defective because same only demands the amount of rent due ($17,378.04) and not the period from which same is owed. A legally valid rent demand must state the amount owed and period of time that covers the default period. Failure to comply with the foregoing will result in the Court declaring that the demand for rent is defective.
Landlord and Tenant Practice in New York, supra § 14:323, states:
Other than the alternative of payment or possession, the governing statute does not specify the content of the written rent demand. Notwithstanding this apparent latitude, the landlord or its agent should clearly inform the tenant of the particular time period for which the rent is claimed to be in default and the approximate good faith amount alleged to be due.
In addition, the courts in 10 Midwood LLC v. Hyacinth, 2003 WL 2100496 (NY Sup App Term) and Kalimian v. Collezioni Fifth Ave., Inc., NYLJ, 11/13/98, p. 28, col. 3 (App Term, 1st Dept) held that a valid rent demand should provide the amount owed and the time period involved.
Accordingly, the respondent's motion is granted and the petition is dismissed. In light of the dismissal the Court need not reach the merits of the respondent's other contention.
So Ordered: