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Accomplishments of Interest

Benenson v. New York Oriental Rug Trade Center, Inc.

(Sup. Ct. N.Y. Cty. 4/15/94)

Plaintiff represented by Itkowitz PLLC

Stecher, J.

In or about May of 1993, petitioners Benenson and Tisch, owners of premises 601 West 54th Street in the Borough of Manhattan, brought a summary, non-payment proceeding (RPAPL 711.2) in Civil Court, New York County, against the New York Oriental Rug Trade Center, Inc., tenant of the entire 5th, 6th, 7th and 8th floors in that building. Also named as respondents/occupants were numerous individuals and business purporting to be subtenants of the tenant Trade Center. While that summary proceeding was pending in the Civil Court, there was also pending in this Court a petition to confirm an award made in an arbitration among the Trade Center and various of the subtenants of the Trade Center who are also respondents/occupants in the summary proceeding.

By order of this Court, the summary proceeding was stayed conditioned upon certain payments being made by the tenant to the landlord which are more fully discussed later in this opinion. Thereafter, on application of the petitioners-landlords, the summary proceeding was removed to this Court for joint trial with certain of the issues raised in the petition to confirm the award of arbitrators. The issues in the arbitration proceeding have been disposed of by separate order of this Court. We turn our attention now to the summary proceeding.

The controversy arises out of a modification of the lease reducing the rent. The lease, as originally signed the 26th day of August 1985, provided for fixed rentals beginning at the annual rate of $985,500 per annum and increasing over the term of the lease to $1,319,500 per annum. (The lease also provided for "additional rent" as is customarily understood in the real estate industry.) In their agreement dated May 18, 1992, effective February 1, 1992, the rent for the balance of the term was reduced to $918,500 per annum. It was the allocation of this reduction among the various subtenants which gave rise to the controversy between many subtenants and the Trade Center which in turn led to the non-payment of subtenants' rentals to the tenant and consequently of the tenant's rental to the landlord. The larger and more substantial subtenants appeared to have been in control of the Trade Center and allocated to themselves a greater per square foot reduction of rent than they allocated to the occupants of smaller spaces. Litigation was commenced between these subtenants and the Trade Center which resulted in an agreement to arbitrate; an award was made, and this Court has since confirmed the award.

The non-payment petition alleges that the base rent for April and May of 1993 amounting to $76,541.67 for each of those two months, plus additional rent called for by the lease in the sum of $51,480.17 totaling $204,563.51, remains unpaid. At trial, the landlord/petitioner was permitted to amend the petition to seek rent to the date of trial. The tenant in its answer denied the material allegations of the petition.

The tenant Trade Center interposed a single affirmative defense which turned out to be the only real issue to be tried: that the "three days' notice in writing requiring, in the alternative, the payment of the rent, or the possession of the premises" (RPAPL 711.2) "was not served in accordance with the requirements of the Lease." (Verified answer to the petition.) Article 27.01 of the lease provides as follows:

Except as otherwise provided in this Lease, any bills, statements, notices, demands, requests or other communications given or required to be given under this Lease shall be effective only if rendered or given in writing, sent by registered or certified mail (return receipt requested optional), addressed (a) to Tenant at Tenant's address set forth in this Lease care of Global Rug Corporation, attention Behnam Hakimian, with a copy to Wofsey Certilman, Haft Lebow & Balin, 71 South Central Avenue, Valley Stream, New York, 11580, attention: David Z. Hammon, Esq. (Emphasis supplied.)

The three-day notice was served on the tenant as required by statute and a copy was indeed mailed by certified mail to the Wofsey Certilman firm at the address given in the lease. The problem, however, was that five or six years earlier the law firm had moved to East Meadow, New York and timely notice thereof was given by the attorneys for the tenant Trade Center to the attorneys for the landlord. There is neither allegation nor proof that the copy of the three-day notice was not ultimately delivered by the post office to the tenants' attorneys but the tenants did argue with considerable justification that it was unlikely that five or six years after removal a mailed notice would have been forwarded by the Post Office Department. In any event, I do not consider this to be a defense of any substance for the reasons hereafter stated.

Section 27.01 of the lease, set forth above, only requires that statements which are to be given by the landlord to the tenant "under this Lease" are also to be given to the attorney. The three-day notice was not required to be given by the terms of the lease; it was required by the terms of the lease; it was required by the terms of the statute (RPAPL 711.2). To underscore this distinction, Article 17.02 of the lease provides that "Tenant hereby waives the service of any notice of intention to re-enter or to institute legal proceedings to that end which may otherwise be required to be given under any present or future law." In short, service of the three-day notice on the tenant and upon its attorney had been waived; and the service of a three-day notice on the tenant without service on the tenant's attorney did not violate the terms of the lease or of any statute.

In a case having almost identical issues to those resolved here (Four Star Co. v. Alex Furs, 153 Misc 2d 447, 448) the Appellate Term of the Supreme Court, First Department said:

Contrary to Civil Court's construction of paragraph 27, we construe that provision as applicable principally to notices or statements given pursuant to or under the lease itself, as opposed to statutory notices. While we agree that commercial entities represented by counsel are free to adopt notice requirements at variance with RPAPL 71l, their intent to do so should be expressly stated in the lease (see 96-18 43rd Ave. Corp. v. IBT Indust., NYLJ May 28, 1991, at 32, col 4 [App term, 2d Dept]). Since paragraph 27 makes no specific reference to rent demands or to RPAPL 711, we decline to hold that this printed provision in the standard form lease manifests the parties' agreement that they have adopted a notice requirement different from the otherwise controlling statutory procedure. Moreover, it is additionally noted that under paragraph 17 of the lease, no written notice of default need be served where there has been a default in the payment of rent. In consequence, "[p]aragraph 27 should not be construed as supplying the written notice requirement for a tenant's default in paying rent, when that type of default was specifically exempted from the written notice requirements of [p]aragraph 17 (Duell v. Lack & Assocs., NYLJ, Apr. 30, 1992 at 25, cols 5-6 [Civ Ct, NY County); but cf., Chasmel Props. v. Gottlieb, NYLJ, Apr. 30, 1992, at 25, col 4 [Civ Ct, NY County]).

Accordingly, the separate defense is found to be insufficient as a defense and has not been established. We turn then to the calculation of sums owing to the landlord by the tenant New York Oriental Rug Trade Center, Inc.

I find that the basic rent for the 11 months from April 1, 1993 through February 28, 1994 at the rate of $76,541.67 amounted to $841,958.37; that the operating escalation called for by the lease was at the rate of $3,593.75 a month for that period amounting in all to $39,531.25; that the real estate tax escalation to which the landlord was entitled in accordance with the terms of the lease was at the rate of $12,980.32 for the months of April, May, June and July of 1993 totaling $51,521.28; and that real estate tax escalation was $15,623.41 for each subsequent month through February 28, 1994 totaling $109,363.87, plus an additional sum of $2,643.09, making in all $163,928.22 for the real estate tax escalation. Accordingly, the entire rental to which the landlord was entitled for those 11 months, that is, for basic rent, operating escalation and real estate tax escalation, totaled $1,045,417.84.

A condition of my stay of proceedings in the Civil Court required that the tenant New York Oriental Rug Trade Center Inc. make certain periodic payments to the attorney for the landlords which order has been substantially complied with, reducing the unpaid rental and additional rentals to $258,578.23.

Accordingly, there is due and owing from the New York Oriental Rug Trade Center Inc. to Charles B. Benenson, Laurence Tisch and Preston R. Tisch the sum of $258,578.23 with interest as follows: On $93,115.74 from April 10, 1993 at the rate of 8% per annum (the rate called for by the lease); interest on $93,115.74 from May 10, 1993 at 8% per annum; and interest on $72,346.75 from October 10, 1993, a reasonable intermediate date, at the rate of 8% per annum; and petitioners Charles B. Benenson, Lawrence A. Tisch and Preston R. Tisch shall have execution therefor. A judgment of possession of the demised premises, that is the 5th, 6th, 7th and 8th floors of 603 West 54th Street shall be awarded to the petitioners/landlord and a warrant of eviction shall issue with a 60-day stay of eviction calculated from service of a copy of the judgment. The stay is conditioned upon the tenant paying use and occupancy to the landlord's attorney at the rate of rent and additional rent called for by the lease; and the warrant of eviction will be nullified provided that the tenant New York Oriental Rug Trade Center Inc. shall make payment of the entire amount of the judgment and interest thereon to be entered herein.

The matter is remanded to the clerk of the Civil Court of the City of New York, County of New York, for the entry of judgment and the warrant in accordance with the practices of that Court. This memorandum is the decision and order of the Supreme Court. All exhibits shall be obtained from the Clerk of Part 51 of the Supreme Court.