Did Open Building Applications and Code Violations Trigger Holdover Rent?
In a commercial-landlord-tenant action, landlord, 677 Euromad LLC, sought $2,280,311.23 in holdover rent from tenant, Levy Gorvy LLC, and from guarantor, Dominique Levy. Euromad alleged that it was entitled to that amount because Gorvy failed properly to surrender possession of the leased premises when its lease expired. Gorvy and Levy moved to dismiss the complaint.
Paragraph 59(k) of the parties’ lease provided that a holdover tenancy, at double rent, will arise if “possession of the Demised Premises is not surrendered to Landlord within one day after the date of the expiration of the term or earlier termination of this Lease.” Paragraph 21 of the lease provided that upon expiration of the lease, “Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and tear excepted and Tenant shall remove all its property.”
Euromed alleged that on the last day of the lease term, tenant “purported to surrender the Premises”; and that Euromad refused to “accept the purported surrender” because “open applications in connection with [Gorvy’s] alterations, as well as certain [Department of Buildings] violations related to the same and/or use of the Demised Premises” remained. The complaint also alleged that Gorvy retained a set of keys to the premises.
Euromad contended that, in those circumstances, Gorvy did not fully surrender possession of the premises (or leave it in good order and condition) as required by the lease. And given that asserted failure to surrender, Euromad claimed Gorvy and Levy, as tenant and guarantor, were liable for at least six months of holdover rent accruing at double the monthly rent during the lease term, totaling $2.28 million.
Gorvy and Levy did not contest the existence of open DOB applications and violations. They argued instead that those applications and violations did not amount to a constructive refusal to surrender possession giving rise to a holdover tenancy. The Court agreed.
Appellate Division precedent established that a need, after a lease expires, to conduct repairs to leased premises, and a resulting delay in reletting the premises, does not give rise to a claim for holdover rent—including when the tenant retains a set of keys to carry out the repairs.
Nor did Euromad identify any authority for the proposition that the post-expiration presence of outstanding alteration applications and open DOB violations constituted a constructive holdover.
Here, the lease did not include language (whether in the surrender or the holdover terms) requiring Gorvy to have closed out any alteration permits or open DOB violations. Nor did Euromad asserta claim for damages resulting from its putative inability to relet the premises or related to any repair/alteration costs it had to incur to address the open permits and violations—only a claim for holdover rent.
Finally, the Euromad manager’s affidavit in opposition to the motion to dismiss argued that Gorvy’s retention of the keys supported the claim that Gorvy retained control and dominion over the premises after the purported surrender (and thereby held over). But retention of a set of keys to conduct necessary repairs was not sufficient to create a holdover tenancy. Although Euromad asserted that it lacked access to the property for reletting purposes due to Gorvy’s retention of the keys, that assertion was found only in his attorney affirmation –not in the manager’s affidavit or the party-verified complaint.
The Court concluded Euromad had not made out a cause of action for holdover rent against Gorvy. Absent a showing that the obligations under the lease included payment of holdover rent, Euromad necessarily lacked cause of action against Levy for that money.