This was originally published on the SGR blog.
Fieldstone Capital (landlord) filled a summary (non-payment) proceeding against Ryan & Conlon (tenant). And Ryan & Conlon asserted that it did not owe rent because the firm had been partially evicted, actually or constructively, from its 7th floor office as a result of common area renovation work done by Fieldstone.
Paragraph 4 of the governing commercial lease agreement authorized Fieldstone to make “repairs, alterations, additions or improvements” in or to any portion of the building or demised premises, with “no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business” arising from these acts. The provision also provided that Ryan & Conlon was not entitled to “any set off or reduction of rent” due to landlord’s failure to comply with any covenant of the lease, and that tenant’s “sole remedy” at law was an action for breach of contract.
Paragraph 20 similarly provided that landlord was permitted to make changes to “corridors … toilets or other public parts of the building” without the same “constituting an eviction and without incurring liability to tenant” for “inconveniences, annoyance or injury to business.”
Civil Court entered judgment, after a non-jury trial, which dismissed the petition; directed Fieldstone to credit Ryan & Conlon’s account with an 80% abatement of rent and additional rent and other charges from June 23, 2016 through January 15, 2017; granted Ryan & Conlon’s claim for attorneys’ fees as the prevailing party; and set the matter down for a hearing to determine reasonable attorneys’ fees.
The appeals court reversed, reinstated the petition; entered a final judgment in favor of Fieldstone awarding it possession and rent arrears in the principal sum of $58,491.17; and granted Fieldstone’s claim for attorneys’ fees.
The appeals court held that, giving proper effect to the clear terms of the commercial lease, an arm’s length agreement entered into by sophisticated parties, Ryan & Conlon’s claim, of a partial actual or constructive eviction as a result of Fieldstone’s renovation work outside of the 7th floor law offices, should have been rejected. To be an eviction, constructive or actual, there must be a wrongful act by the landlord. Fieldstone’s renovation work was not wrongful because it was authorized by the lease. Alterations to leased premises, made with the consent of the tenant, do not amount to an eviction, no matter how extensive or the degree of interference with the tenant’s occupancy.
Aside from the lease’s exculpatory provisions, Ryan & Conlon failed to establish that Fieldstone’s acts amounted to a partial actual or constructive eviction. Ryan & Conlon did not abandon the demised premises, or a portion thereof, due to the renovation work which occurred in the common hallways, corridors and hallway bathrooms on the seventh floor where law firm’s office was located, so as to constitute a partial constructive eviction. Nor did Ryan & Conlon establish that Fieldstone physically excluded or expelled the firm from the premises, or a portion thereof, for purposes of partial actual eviction.
Accordingly, upon review of the facts, the appeals court reversed the determination of Civil Court and granted Fieldstone’s nonpayment petition. And, as the prevailing party, Fieldstone was entitled to recover reasonable attorneys’ fees.