Category Archives: Real Estate

Big Money Is at Stake When Commercial Leases Expire

Copyright by, and republished with permission of, Habitat Magazine.

The rise of online shopping and the accompanying decline of brick-and-mortar retail stores is a trend that’s threatening a lot of people. Among them are co-op and condo boards who have commercial space in their buildings.

Boards have responded to rising vacancies in commercial spaces in a variety of ways – by signing 99-year leases with investor groups, by lowering rents, by welcoming once-shunned tenants such as restaurants, gyms or bars. Regardless of how they deal with the changing retail climate, though, boards need to realize that big money is at stake when a commercial lease runs out.

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The Business Judgment Rule Is Both Shield and Sword

Copyright by, and republished with permission of, Habitat Magazine.

Many members of co-op and condo boards sleep well at night because of the Business Judgment Rule. It shields boards from second-guessing and legal challenges – provided they act in good faith and in the lawful and legitimate furtherance of a corporate purpose. But boards need to remember that the protections of the Business Judgment Rule have limits. This shield can be turned into a sword.

Two recent decisions by a New York appellate court illustrate the yin-and-yang nature of the Business Judgment Rule. In the first case, Gail Koff demolished an interior wall without authorization while combining two apartments in the Washington Irving Condominium in Harlem. When the condo board found out about the renovation, it required Koff to hire a civil engineer to assess the impact of removing the wall, and it assessed a fine of $1,500. But it did not require Koff to reinstall the wall. Rebecca Barber and Craig Hartbought Koff’s apartment in 2004. Continue reading

A LEGAL “MINEFIELD”: OPTIONS TO RENEW IN LEASES

Commercial leases often include options to renew or extend the term of the lease.  The option clauses also often contain time-sensitive or notice-specific provisions for the exercise of the option.  Needless to say, options to renew are a fertile source of litigation.

Our examination starts with the seminal case of J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc., decided by our Court of Appeals in 1977; followed by J.N.A. progeny and decisions on other variations of option to renew disputes.

J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc., 42 N.Y.2d 392, 397 N.Y.S.2d 958 (Court of Appeals, June 16, 1977)

The Court of Appeals summarized the prior proceedings:

  1. N. A. Realty Corp., the owner of a building in Howard Beach, commenced this proceeding to recover possession of the premises claiming that the lease has expired. The lease grants the tenant, Cross Bay Chelsea, Inc., an option to renew and although the notice was sent, through negligence or inadvertence, it was not sent within the time prescribed in the lease. The landlord seeks to enforce the letter of the agreement. The tenant asks for equity to relieve it from a forfeiture.

The Civil Court, after a trial, held that the tenant was entitled to equitable relief. The Appellate Term affirmed, without opinion, but the Appellate Division, after granting leave, reversed and granted the petition[.]

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