Commercial Tenant Alleges Numerous Violations of Lease by Landlord

This was originally published on the SGR Blog.

Court Adjudicates Legal Sufficiency of Nine Causes of Action

Gotham Real Estate Developers LLC leased the entire second floor of 432 Park Avenue South from 432 Park South Realty Co LLC. The lease commenced July 1, 2015 and expires December 31, 2026.

In or around the spring of 2016, Gotham claimed the premises HVAC stopped working and Park Ave South failed and refused to undertake the necessary repairs or replacements, causing Gotham to replace the unit so as to mitigate its damages and to continue its normal business operations.

On March 18, 2018, Park Ave South received a summons from the New York City Department of Buildings for its “failure to submit acceptable 8th round report of critical examination documenting condition of exterior walls and appurtenances required[.]” On October 26, 2018, Park Ave South filed the required compliance document with the DOB, showing the building’s facade to be “unsafe.” Soon after, Park Ave South hired A. Rodriguez Construction LLC (ARC). In December 2018, ARC began work to fix the building’s century-old terra cotta façade, a project which, photographed documentation showed, entailed extensive scaffolding and netting around the entire building.

On November 4, 2020, Park Ave South commenced a nonpayment action against Gotham, which Gotham answered with denials, and a number of counterclaims and affirmative defenses, all of which Park Ave South moved to dismiss. The Court dismissed all of Gotham’s counterclaims and affirmative defenses, noting that counterclaims were contracted out of the lease.

On May 27, 2021, Gotham commenced an action against Park Ave South and ARC, and asserted nine causes of action: (1) breach of lease against Park Ave South for failure to make building and HVAC repairs; (2) partial constructive eviction against Park Ave South; (3) nuisance against both Park Ave South and ARC; (4) trespass against Park Ave South and ARC; (5) conversion against Park Ave South and ARC; (5) breach of contractual duty to safeguard premises against Park Ave South and ARC; (7) negligence against Park Ave South and ARC; (8) breach of covenant of quiet enjoyment against Park Ave South; and (9) declaratory relief against Park Ave South permitting Gotham to terminate its lease, or, in the alternative, granting a rent abatement and damages.

On July 1, 2021, Park Ave South moved to dismiss Gotham’s complaint.

Dismissal is warranted where documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law. Dismissal is also warranted when the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds. Dismissal is further warranted when, affording the pleadings a liberal construction, taking the allegations of the complaint as true and providing plaintiff the benefit of every possible inference, the complaint fails to assert facts that would make out a cause of action.

Gotham’s first cause of action asserted that Park Ave South failed to maintain the building such that the ongoing facade work was required and for failure to repair or replace the HVAC unit in the premises.

Gotham claimed that Park Ave South breached the lease by not making sufficient ongoing repairs to a more than century-old terra cotta facade covering 16 floors failed. The compliance filing was clear that the building was deemed safe in its previous inspection cycle and that soon after unsafe conditions were reported, Park Ave South retained ARC Contractor to fix the conditions.

The section of the lease titled “Air Conditioning Contract,” provided that Gotham shall “obtain and maintain at [Gotham’s] sole cost and expense an air-conditioning maintenance contract” for the premises’ HVAC. In the event of repair or replacement of the unit, “provided [Gotham] has maintained said service contract in full-force and effect throughout the term of [the lease], then [Park Ave South] shall be responsible for said repair or replacement to the extent not covered by the service contract.”

Gotham claimed that “[Park Ave South] failed and refused to undertake the necessary repairs or replacement” of the premises’ HVAC. As a result, the premises were “at imminent risk of becoming unusable and unfit for safe and productive occupancy, due to impending hot weather,” requiring Gotham to replace the unit at its own expense. Gotham further claimed that: Gotham performed all its obligations under the lease; brought to the attention of Park Ave South the alleged actions and inactions “numerous times by email, telephone, as well as in a formal default notice sent by Gotham in September 2020”; and, “despite due demand,” Park Ave South did not offer any reimbursement.

Park Ave South claimed never to have received written notice of any alleged default and therefore could not have breached the lease which provides that “[Park Ave South], shall not be in default under this [l]ease in any respect unless [Gotham] shall have given [Park Ave South] written notice of the breach… and within thirty (30) days after notice, [Park Ave South] has not cured… or… commenced diligently to prosecute the cure to completion.”

Affording Gotham every possible favorable inference, there was a cognizable claim of breach regarding the HVAC repair and replacement. Consequently, Gotham’s first cause of action was subject to dismissal as to building repairs but not as to the repair and replacement of the premises’ HVAC.

The second cause of action asserted that, due to the scaffolding around the premises and the “outrageous conduct of [Park Ave South, ARC] or their agents,” Gotham and its employees were “forced… to quit and abandon material portions of the premises and to significantly restrict access by its employees to other areas which overlook the sidewalk shed” to the extent that Gotham was partially constructively evicted.

To be an eviction, constructive or actual, there must be a wrongful act by the landlord which deprives the tenant of the beneficial enjoyment or actual possession of the demised premises. Ordinarily, a principal is not liable for the acts of independent contractors in that, unlike the master-servant relationship, principals cannot control the manner in which the independent contractor’s work is performed.

Gotham argued that the actions of ARC’s workers were wrongful and as such, Park Ave South and ARC were liable for their behavior. However, here Park Ave South’s action (putting up scaffolding around its building to rehabilitate its façade) was required by law and done for public safety, and the alleged offending actions of ARC’s workers (bottling urine, standing around idly, sleeping) were outside the scope of employment and not in the pursuance of the interests of either ARC or Park Ave South. Gotham’s second cause of action was subject to dismissal.

Gotham’s third cause of action asserted that the “intentional, outlandish, disruptive, embarrassing and destructive conduct” of Park Ave South and ARC, including “sometimes shouting, using profanity” and “urinating into improvised receptacles… materially interfere[d] with [Gotham’s] use of the premises, its business operations and materially impact[ed] [Gotham’s] ability to earn profits it would otherwise realize.”

The elements of a private nuisance claim are: (1) an interference substantial in nature; (2) intentional in origin; (3) unreasonable in character; (4) with a person’s property right to use and enjoy land; (5) caused by another’s conduct in acting or failure to act.

Nuisance imports a continuous invasion of rights—a pattern of continuity or recurrence of objectionable conduct.

Park Ave South argued that the provision of the lease, providing in part that “[o]wner shall make all repairs and improvements necessary to keep in reasonably good repair and condition the building (including all exterior walls, the building shell…),” implied that Gotham agreed to the building’s exterior repairs and therefore “[was] barred from complaining.” Park Ave South also asserted that it could not be liable for alleged acts of its independent contractors.

However, Gotham emphasized that the nuisance arose not from the legally mandated sidewalk shed but from the “lewd, graphic and offensive conduct” of ARC’s agents—which Gotham “repeatedly notified [Park Ave South] about and demanded an end to” and Park Ave South failed to stop.

Affording Gotham every possible favorable inference, however, the Court found that there still was not a cognizable claim for private nuisance against Park Ave South and ARC. Allegations of workers sometimes shouting, using profanity, regularly sleeping, and even relieving themselves into containers in full view did not rise to the level of a pattern of continuity or recurrence of objectionable conduct to sustain a private nuisance claim. In any event, Park Ave South could not be held liable for the acts of its independent contractors. There was nothing in the record to show that ARC was notified of Gotham’s complaints.

Gotham’s third cause of action was subject to dismissal.

Gotham’s fourth cause of action asserted: (a) that a “certain individual employed by or with express or implicit permission” of Park Ave South and ARC trespassed upon the premises on or about the morning of June 14, 2019; and (b) the alleged partial constructive eviction constituted trespass.

Both arguments failed because there was no partial constructive eviction and there was no trespass; and any vicarious liability claims arising from the June 14, 2019, incident failed under the doctrine of respondeat superior, as the claimed acts were not part of any construction worker’s job and would not have served the interests of either Park Ave South or ARC.

Gotham’s fourth cause of action was subject to dismissal.

Gotham’s fifth cause of action asserted that Park Ave South, ARC, or persons under their supervision and control, tortiously converted Gotham’s personal property.

However, the lease provision titled “Damages or Loss,” stated that “neither [Park Ave South] nor any agents or employees of [Park Ave South] shall be liable to [Gotham] or any other occupant of the [d]emised [p]remises, for any damage to, or loss (by theft or otherwise) of, any property of [Gotham].”

Gotham argued that the provision was irrelevant when faced with the doctrine of respondeat superior and that “it was reasonable for [Park Ave South] to anticipate that unruly and unprofessional workers stationed just outside the [p]remises’ windows might enter the [p]remises and convert [Gotham’s] property.”

Yet, the foreseeability described by Gotham as likely was exactly why Park Ave South contracted out of any liability for theft on behalf of itself, its agents, and its employees in the lease.

Gotham’s fifth cause of action was subject to dismissal.

Gotham’s sixth cause of action asserted that Park Ave South and ARC breached their contractual duty to safeguard the premises.

Specifically, Gotham argued that: (a) it was a third-party beneficiary of Park Ave South’s contract with ARC;  (b) persons who were employed by them were permitted expressly or “by [Park Ave South and ARC’s] willful refusal to take required security measures” converted Gotham’s property; and (c) “[Park Ave South] failed to keep the windows in good repair and secured,” in violation of  the provision of the lease in which the Park Ave South promised to maintain and repair the exterior of the building, including the windows.

Park Ave South responded by citing the provision of lease titled “Security System,” – which provided that “[Gotham] may install, maintain and repair its own security system and security devices at the [d]emised [p]remises inasmuch as [Gotham] is solely responsible for the installation of the security system and security devices at the [d]emised [p]remises.”

Here, Gotham was merely an incidental beneficiary of any agreement between ARC and Park Ave South and absent express contractual language had no breach claim against ARC. Even affording Gotham every possible favorable inference, there was nothing in the complaint to show the claimed conversion was the consequence of Park Ave South’s actions.

Gotham was only an incidental third-party beneficiary and was solely responsible for installing a security system on the premises. Gotham’s sixth cause of action was subject to dismissal.

Gotham claimed in its seventh cause of action that both Park Ave South and ARC were negligent in their duties to: (a) protect the premises during the repair work; (b) complete the work in a timely manner; and (c) safeguard the premises.

Affording Gotham every possible favorable inference, Gotham nevertheless failed to show Park Ave South and ARC had the duties claimed to have been negligently breached. Gotham’s seventh cause of action was subject to dismissal.

Gotham claimed in the eighth cause of action that “improper, unreasonable, negligent and intentional actions of [Park Ave South and ARC] have and continue to violate [Gotham’s] right to the quiet enjoyment of the [p]remises.”

However, Park Ave South noted that the prior action had already determined that Gotham had not paid rent since April 2020. They pointed to the provision of the lease titled “Quiet Enjoyment,” which provided: “[Park Ave South] covenants and agrees with [Gotham] that upon [Gotham] paying the rent and additional rent and observing and performing all the terms, covenants and condition, on [Gotham’s] part to be observed and performed, [Gotham] may peaceably and quietly enjoy the premises hereby demised.”

Expressio unius est exclusio alterius. Here, Park Ave South’s agreement entitling Gotham to quiet enjoyment if rent was paid implied that Gotham was not entitled to quiet enjoyment upon a failure to pay their rent. Gotham did not fulfill its obligations to pay rent. So Gotham did not meet a condition of the covenant quiet enjoyment.

Gotham’s eighth cause of action was subject to dismissal.

Finally, in the ninth cause of action, Gotham claimed that it had no remedy at law, and was entitled to a declaration permitting it to terminate its lease, or, at the least, to rent abatement and damages. However, withholding of rent while in possession of demised premises was a violation of a fundamental covenant of the lease, regardless of any breach by Park Ave South.

There was no justiciable controversy requiring a declaration from the Court, and there was nothing in the lease, which Gotham had violated, to permit its termination. Gotham’s ninth cause of action ass subject to dismissal.

Park Ave South’s motion was denied as to Gotham’s first cause of action and granted as to the second, third, fourth, fifth, sixth, seventh, eighth, and ninth causes of action.

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