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Chamber Street Holdings, LLC v. RAM Equities, LLC

(Supreme Court, NY County, 7/13/2009)

We represented: Chambers Street Holdings, LLC

Justice Marylin G. Diamond, J.S.C.

DECISION and ORDER

Upon the foregoing papers, it is ordered that: The plaintiff has been the owner of a building located on Chambers Street in Manhattan since 2004. By a written lease agreement dated January 14, 2003, the plaintiff's predecessor-in-interest, 270 Broadway Commercial Associates, LLC, leased the seventh floor premises of the building to the defendant, Ram Equities, LLC, for a five-year term commencing on January 14, 2003 and expiring on January 31, 2008, with an option for the tenant to renew the lease for an additional five-year term. The lease provided that the base rent payable for the first five-year term was $96,000.00 per year, or $8,000 per month. In the event the defendant exercised its option to renew, the base rent for the second 5-year term was $108,000 per year, or $9,000 a month. Under the terms of the lease, the defendant could elect to exercise its option to renew by delivering to the landlord, at least one year prior to the expiration date, written notice of its intent to do so. Thus, in this case, the defendant was required to give the landlord written notice of its intention to renew by January 31, 2007.

It was not, however, until June 20, 2007 that the defendant sent the plaintiff written notice of its intention to renew the lease for an additional five years. The plaintiff nevertheless did not demand that the defendant vacate the premises at the end of the lease term. Rather, the defendant remained in possession of the premises. According to the plaintiff, due to a billing error by the plaintiff's managing agent, the defendant initially paid rent in the amount of $8,000 per month for the months of February, March and April, 2008 instead of the higher renewal rate of $9000 per month. On April 16, 2008, the plaintiff notified the defendant of this error and billed it for the additional $3,000 rent due. The defendant paid the $3,000 on April 30, 2008 and also paid $9,000 as the new rent for the month of May, 2008.

On May 28, 2008, the defendant abandoned the premises. After the premises remained vacant for approximately one week, the plaintiff changed the locks. The plaintiff claims that it thereafter attempted to re-let the premises, but was unable to do so until August 1, 2008, when it reached an agreement with another tenant in the building. Although that tenant took over the premises on August 1, 2008, it only agreed to pay a base rent of $837.50 per month for the first two months of its occupancy, with the full monthly rent of $9,000 due starting October 1, 2008.

In this action, the plaintiff is seeking rent from the defendant in the amount of $9,000 per month for June and July, 2008 and $8,162.50 per month for August and September, 2008. The plaintiff also seeks to recover a leasing commission it paid in the amount of $24,851.00, operating expenses of $1,052.58 and attorney's fees in the amount of $4,276.00. In total, the plaintiff seeks damages in the amount of $64,710.49. The plaintiff now moves for summary judgment for this amount. The defendant cross-moves for summary judgment dismissing the complaint or, in the alternative, for leave to amend its answer.

Discussion

In support of its motion for summary judgment, the plaintiff argues that it is entitled to the damages it suffered as the result of the defendant's breach of the lease by abandoning the premises. These damages include unpaid rent for the months of June, July, August and September, 2008 and the expenses it incurred in connection with the re-Ietting of the premises to a new tenant. The plaintiff maintains that the defendant's exercise of its option to extend the lease for a five-year term was clearly binding on it despite the fact that the renewal notice was mailed only eight months prior to the expiration of the lease term rather than the one year required under the lease. The plaintiff argues that since the lease was properly renewed, the defendant is bound by its terms and cannot unilaterally surrender the lease without the plaintiff's consent.

The court agrees with the plaintiff that the lease was properly renewed, that the defendant was bound by its terms and that the defendant surrendered the lease by prematurely abandoning the premises. Although, as the defendant points out, the plaintiff never responded to its untimely notice of renewal, there is nevertheless nothing in the lease which requires that the landlord do so in order to effectuate the renewal. Indeed, the defendant's letter exercising its option to renew contained all of the necessary and essential terms to constitute a valid amendment of the lease term which, as such, was fully binding upon the defendant. See Calkins Corporate Park LLC v Eye Physicians And Surgeons of Western New York, P.L.L.C., 56 AD3d 1122, 1123 (4th Dept. 2008). The fact that the defendant did not comply with the one-year notice provision in the original lease is of no significance since that notice provision was clearly inserted for the benefit of the plaintiff and could therefore be waived. ld.

The defendant, however, argues that as a predicate to commencing this action for monetary damages, the plaintiff was required to first serve it with a notice of default. This argument is without merit since the plaintiff is not seeking to evict the defendant and/or terminate the lease on the ground of a default. Although the lease contains a provision that the defendant is not deemed to be in default unless it abandoned the premises for thirty days, it is disingenuous for the defendant to suggest that it was entitled to notice giving it the opportunity to cure since it has otherwise admitted that it voluntarily surrendered the premises with the intent to terminate the lease and, in fact, so advised the plaintiff. For the same reason, there is no merit to the defendant's argument that it was "actually evicted" from the premises because the plaintiff changed the locks to the premises one week after it abandoned the premises. The fact that a landlord changes the locks after a tenant voluntarily abandons the premises hardly constitutes an unlawful eviction and the defendant has not cited any authority to the contrary.

The defendant also argues that there was a surrender by operation of law which precludes the plaintiff from seeking any rent which would have otherwise accrued after it abandoned the premises. A surrender and acceptance can be either by express agreement between the parties or, as alleged herein by the defendant, by operation of law. It is well settled that a surrender and acceptance by operation of law occurs where "parties to a lease both do some act so inconsistent with the landlord-tenant relationship that it indicates their intent to deem the lease terminated." Riverside Research Inst. v. KGMA, Inc., 68 NY2d 689, 691-92 (1986). See also Bay Plaza Estates v. New York University, 257 AD2d 472, 473 (1st Dept. 1999). The defendant argues that, by its conduct, the plaintiff indicated its intent to consider the lease terminated. This conduct includes never contacting the defendant after it abandoned the premises, never demanding any further rent, changing the locks and attempting to relet the premises.

The problem with the defendant's argument is that the lease contains a provision which expressly states that no act done by the landlord shall be deemed an acceptance of surrender and that all agreements to accept a surrender must be in writing. Since there was no such written agreement, the plaintiff's conduct cannot be deemed to constitute an acceptance of defendant's surrender by operation of law. See Hudson Towers Housing Co. v. VIP Yacht Cruises, 63 AD3d 413 (2009). The defendant's reliance on two old cases is misplaced. See Goldsmith v. Schroeder, 93 App Div. 206 (1st Dept. 1904); Agress Construction Co. v. Jurgens, 128 Misc. 12 (App Term 2nd Dept. 1926). These cases hold that a lease requirement that a surrender be in writing, while enforceable, can be waived by the landlord or its agent. Here, however, the lease expressly provides that no provision of the lease shall be deemed to have been waived unless such waiver is in writing signed by the landlord.

Accordingly, the plaintiff's motion for summary judgment is hereby granted and the defendant's cross-motion is denied. The plaintiff shall have judgment against the defendant in the amount of (1) $54,434.49 [representing rental arrears, operating expenses, labor and a leasing commission, minus an $8,000 credit for a security deposit held by plaintiff], plus interest from August 15,2008, as calculated by the Clerk, (2) attorney's fees in the amount of $4,000 and (3) costs and disbursements, as taxed by the Clerk.

The Clerk Shall Enter Judgment Herein.