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First Department Awards Landlord Summary Judgment Based on Clear and Unambiguous Lease Provisions Regarding Common Area Restrooms and Hallway Construction

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  • Posted on: Jun 18 2021

Care should be taken when drafting contracts so that the intention of the parties is set forth in a clear and unambiguous way.  When contracts are clearly drafted, all parties should be aware of their rights, remedies and obligations thereunder.  Further, the existence of clear and unambiguous contracts could streamline litigation if a dispute arises.

The law is clear that “[w]hen the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving practical interpretation to the language employed and the parties’ reasonable expectations.”  Patsis v. Nicolia, 120 A.D.3d 1326, 1327 (2nd Dep’t 2014) (citation omitted).  The Court of Appeals stated that “[w]e have long adhered to the sound rule in the construction of contracts, that where the language is clear, unequivocal and unambiguous, the contract is to be interpreted by its own language” because “when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms”.  R/S Associates v. New York Job Development Authority, 98 N.Y.2d 29, 32 (2002) (citations and internal quotation marks omitted).

Indeed, when a contract is “clear and unambiguous on its face,” “extrinsic and parole evidence is not admissible to create an ambiguity.”  W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 163 (1990) (citations and internal quotation marks omitted).  Whether a contract “is ambiguous is a question of law to be resolved by the courts.”  B&A Realty Management, LLC v. Gloria, 192 A.D.3d 851, 853 (2nd Dep’t 2021) (citation omitted).  “A lease, like any other contract, is to be interpreted in light of the purposes sought to be attained by the parties.”  112 West 34th Street Assoc. v. 112-1400 Trade Properties LLC, 95 A.D.3d 529, 531 (1st Dep’t 2012) (citation and internal quotation marks omitted).

On June 10, 2021, the Appellate Division, First Department, decided Noor Staffing Group, LLC v. 622 Third Avenue, LLC, a case that addresses the principals of contract construction discussed herein.  The facts of Noor, some of which were obtained from a review of the e-filed documents in supreme court, are summarized herein.  Plaintiff, as tenant, and defendant, as landlord, entered into a commercial lease for 20,000 square feet of space on the seventh floor of landlord’s building.  Pursuant to the lease, landlord was to build-out the space for tenant.  Landlord also intended to renovate common areas on the seventh floor, including the hallways and restrooms.  Section 2.04 of the lease set forth a “target date” for “substantial completion” of the “Landlord’s Work.” If the target date was not met, and tenant was not in default under the lease, among other things, landlord was obligated to credit tenant’s account $2,778.00 for each day of delay.  

Further, Section 15.03 of the Lease provides that:

Landlord shall have the right at any time without thereby creating an actual or constructive eviction or incurring any liability to Tenant therefor, to change the arrangement or location of such of the following as are not contained within the Demised Premises: … corridors, … toilets, and other like public service portions of the Building. All parts … of all walls, windows, and doors bounding the Demised Premises (including exterior Building walls, exterior core walls corridor walls, exterior doors and entrances, all space in or adjacent to the Demised Premises used for shafts, stacks, stairways, chutes, pipes, conduits, fan rooms heating, air cooling, plumbing and other mechanical facilities, service closets and other Building facilities are not part of the Demised Premises and Landlord shall have the use thereof, as well as access thereto through the Demised Premises for the purposes of operation, maintenance, alteration and repair.  (End parentheses omitted in original.)

In addition, Section 21.03 of the lease provides that:

Landlord reserves the right to temporarily interrupt, curtail or suspend the services required to be furnished by Landlord under this Lease when the necessity therefor arises by reason of alterations … or for any other cause beyond the reasonable control of Landlord. Landlord shall use due diligence to complete all required repairs or other necessary work as quickly as possible so that Tenant’s inconvenience resulting therefrom may be for as short a period of time as circumstances will reasonably permit ….  Tenant shall not be entitled to nor shall Tenant make claim for any diminution or abatement of minimum rent or additional rent or other compensation, nor shall this Lease or any of the other obligations of Tenant be affected or reduced by reason of such interruption, curtailment, suspension, work or inconvenience.

More than two months after Tenant moved into its space, landlord had not completed work on the common area restrooms and hallways.  Tenant was advised by landlord that the restrooms on other floors were available for use by tenant’s employees and guests during the common area renovations to the seventh floor.  Tenant commenced action against landlord for breach of contract.  In its first cause of action, tenant alleged that landlord failed to timely deliver the premises and, accordingly, was entitled to the liquidated damages set forth in Section 2.04 of the lease.  By its second cause of action tenant sought monetary damages due to the failure of landlord to complete the common area renovations by the time tenant moved into the premises.  Among other things, tenant alleged that because the seventh-floor restrooms were not complete — forcing employees to take elevators to other floors to use a restroom — the “productivity and morale of employees” were “significantly impacted”.

Landlord moved for summary judgment dismissing the second cause of action based on the plain language of the lease.  Supreme court denied the motion, finding, inter alia, that “on the present record, the Court is not persuaded that Sections 15.03 and 23.01 even apply to the circumstances described in the Complaint” and “[a]t a minimum, material questions of fact exist as to whether Landlord’s Work, as defined in the Lease, includes the restrooms and the common walkways….”  

Relying on Section 15.03 of the lease, the First Department unanimously reversed, finding that “[t]his provision of the lease precludes [tenant]’s recovery related to [landlord]’s construction work on the shared restrooms and corridors.  Thus, the First Department held:

“A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” (Excel Graphics Tech. v CFG/AGSCB 75 Ninth Ave., 1 AD3d 65, 69 [1st Dept 2003], lv dismissed 2 NY3d 794 [2004]). First, it is clear from the terms of the lease that the restrooms and corridors were contained neither in the premises nor in the scope of work undertaken by the landlord pursuant to the terms of the lease. Moreover, the lease gave the landlord the right to change the arrangement or location of the restrooms and corridors without liability to the tenant. Dismissal is warranted when the documentary evidence –here, the lease –contradicts plaintiff’s pleading and conclusively establishes a defense to the asserted claim as a matter of law (id.).

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