Opinion
SP1701/04.
Decided November 3, 2004.
Berkman, Henoch, Peterson Peddy, P.C., (Attorney's for Petitioner).
John T. Miller, Esq., (Attorney for Respondent).
This is a summary eviction proceeding alleging non-payment of rent. The Petitioner-landlord, Syosset Properties, LLC ("Syosset") and the Respondent-tenant Concord Delivery Service, Inc ("Concord") entered into a commercial lease agreement for certain premises consisting of a building containing two contiguous units of equal size known as Nos. 121 and 123 Eileen Way, Syosset, NY, together with the surrounding lot used as front and rear parking areas and a side driveway connecting the two, amounting in all to approximately one acre. The lease was for a four year term commencing September 1, 2000 and ending August 31, 2004. Rent was payable in the amount of $8,750.00 per month. After the trial but before decision, the lease expired by its terms and Concord vacated the premises.
Petitioner Syosset claims unpaid rent and additional rent in the amount of $137,000.00 and late fees in the amount of $70,460.00 for a total of $207,460.00 plus legal fees of $9,555.00.
Respondent Concord admits that it was late in paying rent on several occasions (but not on others), that on several occasions it held back a certain percentage of the rent and, further, it paid no rent after the commencement of this proceeding. Respondent Concord justifies what would otherwise be clear violations of the terms of the lease by way of it's counterclaim for an abatement of rent. Respondent Concord's claim for abatement is based on the undisputed fact that, from the outset of the lease term, Petitioner Syosset's prior tenant Horan Contracting, Inc. ("Horan"), continued on in possession of a large portion of the demised premise from a time prior to the commencement of Concord's lease until sometime in November, 2003.
Petitioner's reply to Respondent's counterclaim for abatement is that, although Horan was once Petitioner's tenant, somehow, sometime thereafter, Horan became Respondent Concord's tenant.
Findings of the Court
Horan was never a tenant of Respondent Concord. Petitioner Syosset's principle Gary Gelman's testimony that Respondent Concord agreed to accept Horan as it's own tenant, thus relieving Syosset from it's duty to provide Concord with possession of all of the property it leased to Concord, was patently unworthy of belief. The only proof that Petitioner could conjure up at trial to indicate that Concord had accepted Horan from Syosset as a tenant was a letter on Concord's stationary that urged Horan to pay rent. That letter however, as it turned out, was penned by no other than Gary Gelman himself (with perhaps some assistance from Gelman's attorney). Gelman's testimony that he was merely attempting to assist Concord with Syosset's former and then Concord's new recalcitrant tenant was, at best a poorly veiled attempt at disingenuousness.
Further, Gelman conceded that Syosset had received and accepted from Horan monthly rent payments of $3,000.00 for several months after it had leased the entire premises to Concord and that at no time did it ever pay or credit to Concord amounts it received from Horan.
Because the outcome of both Petitioner's claims and Respondent's counterclaims hinge on this court's determination of whether the Respondent Concord is entitled to an abatement of rent and, if so, how much. The court will address this keystone issue first.
Tenant's Counter-Claim for Abatement
The Lease in question called for an abatement if possession was not tendered at the outset of the lease term. The abatement clause, numbered paragraph 24 of the lease, reads, in pertinent part, as follows:
24. If owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of any tenant, undertenant or occupants . . ., or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated . . . until after the Owner shall have given Tenant notice that the premises are substantially ready for Tenant's occupancy. . . . The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law.
The abatement clause, however, is silent as to any amounts or percentages, or indeed as to the standard of computation to be applied.
At trial the Respondent suggested that the abatement amount should be determined as a function of Respondent's profits lost because of it's inability to use the space occupied by Horan. That theory was summarily rejected by the court during the course of the trial as unduly speculative.
Alternatively, Respondent proposed that the court should use the fair market value of the space occupied by Horan. Respondent Concord produced a commercial real estate appraiser who testified that he had visited the premises and that, based upon his experience appraising, selling and leasing commercial realty in the area, the market value of the occupied portion of the property was within a certain value range. Under cross examination, however, the expert admittedly could not give an exact figure as to the rental value of the property for the given time period nor could he exactly determine the exact square footage, both indoors and outdoors that Horan was utilizing. It was also clear at trial that Horan's usage varied daily as its large construction vehicles and equipment came and went.
Petitioner Syosset contends in it's post trial memorandum that if Respondent Concord is entitled to an abatement it should be limited to thirty (30%) per cent of the rent based upon a rough estimate of the floor space in 123 Eileen Way that Horan occupied during the period at issue. Respondent Concord opposed any such limitation suggesting that any such limitation would not necessarily equate to the financial loss suffered by Concord. The court also notes that Petitioner Syosset's suggestion does not take into account the outdoor acreage also used by Horan.
This court did, however, hear from both parties and it was undisputed that Horan had been paying and that Syosset had been accepting, both before and after the commencement of the leasehold at issue, the amount of $3,000.00 per month for the space it occupied. Taking this $3,000.00 per month figure as the amount that a willing landlord and a willing tenant agreed upon, this court finds that $3,000.00 is the fair market value of the portion of the premises Petitioner Syosset failed to provide to Respondent Concord. Further, although Horan did finally vacate a short time before the end of the lease term, for all practical purposes Syosset could not and did not make any meaningful use of that space in the limited time remaining to it. Therefore the abatement should extend the entire length of the lease: $3,000.00/month x 48 months = $144,000.00. The court awards judgment in the amount of $144,000.00 to the Respondent on it's counter-claim for abatement.
Landlord's Claim for Unpaid Rent
Petitioner Syosset claims unpaid rent and additional rent in the amount of $137,000.00, Respondent Concord does not dispute Syosset's allegation that it did not make those payments but, rather, it argues that the amounts it did not pay must be offset by any abatements due according to the determination of this court. Therefore the court awards Petitioner judgment in the amount of $137,000.00 to Petitioner on its claim for rent and additional rent.
Rent v. Abatement
It is well established that a tenant who is over-charged may treat the amount of the overcharge as a rent credit and withhold future rent from the landlord. 3410 Kingsbridge Partners v. Atkinson, 265 AD2d 204 (1st Dept. 1999). In that case the amount of the rent, as abated was less than the amount of the refund. See also St. James LLC v. Leisenring, NYLJ December 30, 1998 (Civ.K.).
In the case of Olton v. Hunter, NYLJ July 10, 2002 (Civ.NY), affirmed App.Term, 1st Dept. (slip opinion May 12, 2004), the tenant had won an overcharge award in the year 1999. The tenant deducted the overcharge from the rent in the lease and stopped paying, whereupon a non-payment eviction proceeding was commenced against the tenant, but was dismissed because no money was owed. The court held that the tenant was paid up through January 2003.
In the case at bar the Tenant appears to have overpaid rent in the amount of $7,000.00 and must be granted a credit accordingly.
Late Fees Petitioner Syosset claims it is entitled to late fees for every month that Respondent Concord did not make a timely payment. The parties argued at trial as well as in their post-trial briefs as to whether it is the date that a tenant places a rent check in the mailbox or the date that the landlord actually receives the check that should determine whether a payment is "late." While a very interesting and novel topic indeed, because the court has already determined that the Respondent Concord was entitled to a $3,000.00 per month abatement from the very first month of the lease forward and was ultimately due a credit for over payment in the amount of $7,000.00, the "mailbox" issue is rendered moot.
Furthermore, reasoning from the decision in the Olton case, if rent for the first month is overpaid, the overpayment is carried forward as a credit toward payment of the next and future months. If the overpayment is carried forward, then, again reasoning from the decision in the Olton case, a future payment cannot be "late," since it has already been paid. Therefore, this court holds, that none of Respondent Syosset's payments were late and, thus, the Petitioner Syosset's claims for late fees are all dismissed.
Legal Fee's
For the reason's discussed above, Petitioner Syosset's claims for legal fees are all dismissed.
Respondent's Counterclaims
This court has found that the Respondent is entitled to an abatement of $144,000.00 and that the Petitioner Syosset was not entitled to any late fees. Subtracting from that abatement amount the sum of the rent and additional rent otherwise payable but admittedly not paid by Respondent Concord, $137,000.00, this Court calculates that the Respondent Concord overpaid Petitioner Syosset $7,000.00. Respondent is awarded the amount of $7,000.00 as and for it's counterclaim for over payment of rent.
As for Respondent Concord's counterclaim for legal fees, whereas Petitioner's claim for legal fees was based upon a lease clause that allowed for such to the landlord, Respondent was cited no such basis for its claim and the court has found none on its own. Respondent's counterclaim for legal fees is therefore denied.
This constitutes the Decision and Order of this Court.
So Ordered.