Opinion
63256/09.
Decided August 3, 2009.
Steven B. Sperber of Sperber Denenberg Kahan, P.C., Attorney for Petitioner.
Jeffrey Levine of Belkin Burden Wenig and Goldman, LLP, Attorney for respondent.
Petitioner 121 Varick Street Corporation ("121 Varick Street"), a cooperative corporation, commenced this holdover proceeding after serving a ten-day notice to quit terminating respondent Group IX Inc. d/b/a Dotcom Hotel of NYC's ("Group IX") license to use a portion of a storage room in the basement in the subject building. Petitioner alleges that respondent entered into a sublease with a shareholder of the cooperative, One 2 One on Varick LLC ("One 2 One"), to occupy a portion of the sixth floor. The sublease did not confer the right to use the storage space.
Respondent maintains in its answer, inter alia, that it needs electricity to conduct its business. Respondent contends that at the inception of its lease, One 2 One after consulting with petitioner gave Group IX the right to use and access the basement storage space to house its electrical equipment. Group IX states that it has used the space continuously to house its electrical equipment with One 2 One's knowledge and acquiescence. The use of the storage space is an appurtenance to and/or part of the demised premises that it can continue using while the lease remains in effect.
David Moyal, President of the Board of Directors of 121 Varick and principal of respondent's sub-landlord, One 2 One, testified that the common area, including the basement space, belongs to the cooperative. Respondent took occupancy in 2000 pursuant to a sublease [Petitioner's 1]. There was 200 amps of electricity on the sixth floor. In 2000 or 2001, Group IX began occupying space in the basement. It never paid any compensation for the space. Mr. Moyal authorized service of the ten-day notice to quit, as the cooperative corporation needed the space for the building's electrical requirments.
On cross-examination, Mr. Moyal testified that he had been the President of the Board of Directors for approximately one-and-a-half years. Since 2000, he has also been a 50% silent partner in Group IX.
While the sublease was entered into in 2000, Group IX took occupancy a year earlier. In 2000, Group IX started utilizing the basement by placing a 1,600-amp switch box in the space in order to conduct its business on the sixth floor. Mr. Moyal stated that Group IX did not need more than 900 amps that was being supplied.
The witness testified that 121 Varick Street never gave Group IX a license or authorization to utilize the space, nor did One 2 One give Group IX the right to use the basement space. Rather, respondent "took" the space. Mr. Moyal testified that he had no knowledge as to how Group IX acquired the basement space. One 2 One did not oversee the placement of the switch box and electrical construction that was done by respondent. The sixth-floor space subleased to respondent was supplied with electricity.
In November 2008, the cooperative corporation objected to the use of the space. Petitioner asked Group IX to permit other tenants in the building to use the electricity, as respondent did not need the amount of amps that was being supplied to its switch box. Respondent refused.
On re-direct, Mr. Moyal testified that he knew that Group IX was using the basement space. He did not know precisely when they started using the room. He believed that respondent took the space in 2000.
Petitioner rested. Respondent called Peter Golomb, its secretary, as a witness. Mr. Golomb testified that the premises were utilized as a collocation facility. Electronic equipment, such as servers, was located on the premises. The business required a secure supply of electricity and environment for the electronic equipment housed on the sixth floor.
At the inception of the subtenancy, it was anticipated that the business would utilize a lot of electricity. Mr. Moyal advised Group IX that they would have to make their own arrangements with Con Edison to obtain the electricity and instructed Group IX to install the switch box in the storage room. Mr. Golomb stated that in late 1999, respondent contacted Con Edison and several electricians to get quotes for the electric service. Based on Mr. Moyal's recommendation, respondent hired an electrician, Ofer Geva, who gave them a proposal at a cost of $108,500 to install a 2,000-amp switch box in the service entrance to bring electricity up from the basement to the sixth floor via risers [Defendant's A].
This work was performed by Mr. Geva in the latter half of 2000. Mr. Golomb testified that he was present towards the end of the work and communicated with Mr. Moyal while the electric service was being installed. In fact, Mr. Moyal — who was a 50% partner in Group IX — was on site to make sure that the work got done and would give them progress updates of the installation.
Mr. Moyal, who had retained half of the sixth floor, requested that he receive additional electricity. As a result, Group IX installed a submeter for electricity being consumed by Mr. Moyal without a markup. From mid-2001 through the current time, bills were sent to Mr. Moyal for the electricity that he utilized. Some bills remain unpaid.
Mr. Golomb testified that Group IX receives approximately 600 amps to 800 amps of electricity. It would be impossible to operate the business without the electricity from the basement. Mr. Golomb stated that prior to receipt of the notice terminating use of the basement space, Group IX was never advised that it did not have the right to use the basement space.
Mr. Golomb testified in cross-examination that Group IX took occupancy in late 2000 or early 2001, at which time business was commenced. He acknowledged that there was electricity on the sixth floor and that they could have utilized it. He agreed that the "demised premises" were 500 square feet on the east side of the sixth floor and were rented from One 2 One, David Moyal's company.
The premises were located in a cooperative and were subject to the overlease with the cooperative. Further, Mr. Golomb acknowledged that the cooperative owned the room in the basement. The sublease said nothing about use of the basement and, under paragraph 28, the instrument could not be changed orally. Pursuant to paragraph 38(h), electricity was not included. The tenant had to make its own provisions for electricity. Mr. Golomb stated that Group IX requested permission in writing from the cooperative to use the basement room. Written consent was received. However, the writing could not be produced.
Respondent rested. Petitioner re-called David Moyal. He testified that in 2000, he was not "involved" with the building's Board. He was a shareholder on the third and sixth floors. He was a silent partner in Group IX and had no dealings with the day-to-day operations of the business. Mr. Moyal denied that he was the "de facto construction manager" of the electricity project. Mr. Moyal acknowledged that he knew Ofer Geva and that he had done work for him in the past. At Group IX's request for a recommendation, he referred them to Mr. Geva. Mr. Moyal denied speaking with respondent regarding the status of the work.
Mr. Moyal maintained that Group IX controls the power to the building. The switch box is designed for 2,000 amps, of which 1,400 goes to Group IX, representing more than 58% of the power in the building. He insisted that respondent never received written or oral permission to bring the power from the basement.
On cross-examination, Mr. Moyal could not say whether there had been oral permission. He understood that respondent's business required electricity and was aware of the discussions Group IX had with Con Edison to bring in the power.
Discussion
An appurtenance is a right or privilege that is not specified in the lease which is "essential or reasonably necessary to the full beneficial use and enjoyment of the property conveyed or leased." (Dolan, Rasch's Landlord and Tenant-Summary Proceeding Section 7:5, at pp. 304-305). An appurtenance may not be revoked until termination of the lease ( Id. Section 7:5). On the other hand, an appurtenance does not exist where the use is neither essential nor reasonably necessary to the full use and enjoyment of the premises ( see Prospect Owners Corp v. Sandmeyer , 62 AD3d 601 [1st Dept 2009] (use of roof by tenant was primarily for recreation and storage for which there were alternative premises)).
Courts have recognized the existence of an appurtenance where there has been a pre-existing use of the property at the time the parties entered into the lease. In Greenblatt v. Zimmerman, 132 AD 283 (1st Dept 1909), the landlord was running a restaurant and utilized the cellar for the storage of coal. The tenant obtained the lease from the landlord. Although the cellar was not part of the lease, the tenant continued the practice of storing coal in the cellar. The court found that the tenant's use of the cellar was an appurtenance as it was necessary to the restaurant business.
More recently, in Riccardo's Lounge Inc. v. Maggio, 9 Misc 3d 1112(A) (Sup.Ct. Nassau Co. 2005), the tenant utilized the basement for storage of pipes and a grease trap from the inception of the lease in 1998, which use had existed since the 1920s. The court found that the basement was an appurtenance as legal operation of the business was dependent on the use of the pipes and grease trap.
Similarly, the court in Blenheim LLC v. Il Posto LLC , 14 Misc 3d 735 , 742 (Civ.Ct. NY Co. 2006), found that the tenant's use of equipment in a vault with the consent of the predecessor landlord was "reasonably necessary to the full enjoyment of the business," creating an appurtenance.
Here, there was no pre-existing use of the storage basement facility, as the switch box was placed in the basement at the commencement of the tenancy. In this situation, courts have recognized implied appurtenant rights based on the parties' intent at the inception of the tenancy. In Second on Second Café, Inc. v. Hing Sing Trading, Inc., 2009 WL 2151134 (1st Dept 2009), the court affirmed the issuance of a mandatory preliminary injunction requiring the landlord to permit the tenant to install a new exterior roof exhaust and ducts. The court reasoned that since the lease permitted the tenant to cook fast food, which required venting, there was an implied right to affix the exhaust system to portions of the building outside the demised premises.
In reaching this conclusion, the Appellate Division cited with approval the court's holding in Gans v. Hughes, 14 NYS 931 (Civ.Ct. Kings Co. 1891), where the tenant leased the ground floor and part of a cellar to use as a bakery. With the landlord's consent, the tenant at his own expense connected the water pipes from a portion of the cellar that was not leased by the tenant. Some years later, the landlord disconnected the water supply to the bakery. The right to use the water connection was not part of the demised premises. However, the court held as follows:
When premises are leased for an expressed purpose, everything necessary to the use and enjoyment of the demised premises for such expressed purpose must be implied where it is not expressed in the lease. (Citations omitted). It follows, therefore, that when plaintiff leased the premises in question "to be used as a bakery" he acquired also such accompaniments and appurtenances as usually belong to and were necessary to enable him to carry on the bakery business. ( Id., at p. 931).
Here, the sublease entered into by Group IX provides that the premises are to be utilized as a "carrier collocation facility and general administration offices." Paragraph 38(b) of the lease rider states, "Electricity is not included as part of this Lease. Tenant shall make its own arrangements for the provision of electrical services to the premises."
In fact, at the inception of the tenancy, Group IX arranged to have the electrical switch box placed in the basement. Mr. Moyal's testimony that he did not give Group IX the right to use the basement space for the electrical equipment is not credible. Mr. Moyal is a silent partner in Group IX. Clearly, at the inception of the relationship — which has since become acrimonious — he had an incentive to facilitate respondent's needs so as to get a return on his investment. He recommended the electrician who performed the work. Mr. Moyal and his company, One 2 One, benefitted from the installation, as a portion of the electricity from the switch box is diverted to his portion of the sixth floor space.
Furthermore, I reject Mr. Moyal's testimony that petitioner never gave Group IX a license or authorization to utilize the basement space. Mr. Moyal is the current president of the Board of Directors. While there is no evidence of Mr. Moyal's relationship with the cooperative in 2000, the cooperative is deemed to have assented to the placement of the switch box in the basement storage space (Second on Second Café, Inc. v. Hing Sing Trading, Inc., 2009 WL 2151134 [1st Dept 2009] at p. 8). It permitted the tenant to place the switch box in the basement storage area, allowed the electrician to do the work necessary to affix the switch box to its wall and take the electricity to the sixth floor through risers in the building.
Without electricity, Group IX cannot conduct its business. Accordingly, the switch box in the basement outside the demised premises is an implied appurtenance. Finally, while it may be possible for respondent to receive electricity by some alternative method, such as wiring directly from the street, respondent incurred a substantial cost in placing the switch box in the basement and would incur an additional expense in moving the box from the basement. Under the circumstances, it would be unreasonable to expect Group IX to make a different arrangement for the delivery of electricity to its premises ( Greenblatt v. Zimmerman, Blenheim LLC v. Il Posto LLC, supra).
For these reasons, the petition is dismissed with prejudice.
The foregoing constitutes the decision and order of the court.