Opinion
L & T 900437–17/BX
10-31-2017
LONGWOOD RESIDENCES, L.P., Petitioner v. SIMPSON STREET DEVELOPMENT ASSOCIATION, Respondent–Tenant.
ANN A. ROBERTS, ESQ, By: ISIDORE SCIPIO, ESQ., 885 Second Avenue, New York, NY 10010, 646.374.0100, Attorney for Petitioner JOSEPH A. ALTMAN, ESQ, 951 Bruckner Blvd, 1st Floor, Bronx, NY 10459, 718.328.0422, Attorney for Respondent
ANN A. ROBERTS, ESQ, By: ISIDORE SCIPIO, ESQ., 885 Second Avenue, New York, NY 10010, 646.374.0100, Attorney for Petitioner
JOSEPH A. ALTMAN, ESQ, 951 Bruckner Blvd, 1st Floor, Bronx, NY 10459, 718.328.0422, Attorney for Respondent
Sabrina B. Kraus, J.
BACKGROUND
This summary nonpayment proceeding was commenced by LONGWOOD RESIDENCES, L.P., (Petitioner) against SIMPSON STREET DEVELOPMENT ASSOCIATION (Respondent) seeking to recover possession of 997 East 163rd Street, Store 5, Bronx, NY 10471 (Subject Premises) based on the allegation that Respondent had failed to pay rent due for the Subject Premises.
The primary issue between the parties centers on whether Respondent is obligated to pay real estate taxes alleged to be due pursuant to the parties' lease under the lease.
PROCEDURAL HISTORY
Petitioner issued a written demand for rent dated January 26, 2017, seeking $1500 for December 2016 and January 2017, and a remaining balance of $106.69 for November 2016. Annexed to the demand is a rent ledger showing charges and credits from July 2013 through January 1, 2017.
The petition is dated February 23, 2017. Proof of service was filed March 15, 2017.
Respondent appeared pro se and filed an answer, dated March 20, 2017, asserting a general denial. The proceeding was initially returnable on March 27, 2017.
The parties entered a stipulation adjourning the proceeding to April 25, 2017, for a settlement conference, pursuant to a stipulation which stated "Respondent believes that they are exempt from paying property taxes, which is deemed as rent in the Respondent's lease."
The proceeding was further adjourned to May 30, 2017, and then to June 13, 2017, for Respondent to obtain counsel. Respondent agreed to pay June rent by June 9, 2017.
On June 13, 2017, Respondent appeared by counsel, and the parties' entered into a stipulation amending the petition through June 2017, and adjourning the proceeding to June 28, 2017, for Respondent's counsel to review the lease agreement.
On June 28, 2017, the parties again adjourned the proceeding to August 2, 2017, pursuant to a stipulation which provided that Petitioner would "investigate non-profit, tax-exempt status of Respondent re: City Tax assessment" and for "Petitioner to provide proof of Respondent's Tax Liability as per paragraph I of Article 1 of Lease."
On August 2, 2017, the proceeding was adjourned by the court to September 5, 2017 for a further conference, and Respondent was granted leave to submit an amended answer.
Respondent's counsel filed an amended answer on September 5, 2017. The answer asserted five affirmative defenses, and underscored Respondent's position that it was not liable for payment of any portion of the real estate taxes.
Trial was scheduled for September 28, 2017. On that date, rather tahn proceed with the trial, the parties stipulated that there were no material issues of fact requiring a trial, and that the dispute centered on an interpretation of the governing clause of the lease. The parties stipulated certain documents into evidence, and agreed to submit memoranda on their legal arguments by October 30, 2017. The parties agreed that the court could adjudicate the proceeding on the papers submitted, in accordance with CPLR § 409(b). The proceeding was adjourned to October 30, 2017 for submission of legal memos.
On October 30, 2017, the parties submitted their memoranda , and the court reserved decision.
Respondent's memo is labeled as being in support of a motion to dismiss pursuant to CPLR 3211. There is no such motion, but the court has considered the legal arguments raised therein.
FACTS
Respondent is the tenant of record of the Subject Premises. The parties executed a lease agreement in April 2016 (Exhibit 1). The lease agreement states that Respondent will use the space as a "Social Service Provider/ Community-based Organization".
Article 1(i) of the lease provides:
Tax Contribution: Tenant's cost of Landlord's taxes shall only apply in the event Landlord receives notice of any special assessments or taxes, as a result of leasing the Premises to Tenant, that are in addition to Landlord's tax liability pursuant to a resolution of The City Council of New York approving a tax exemption for Landlord in accordance with Article XI of the Private Housing Finance Law (a "Special Commercial Assessment"). The Tax Contribution shall be 100% of the Special Commercial Assessment and be paid monthly at the time the monthly rent payment is made, at the rate of 1/12 of the total Special Commercial Assessment.
This is the provision at the core of the parties' dispute. Article VI, Section 6.01 also addresses taxes and provides:
Subject to any payment that may be required pursuant to Article 1(i), Tenant shall pay promptly when due all taxes and licenses imposed upon its business operation and its personal property situated in the Premises, including but not limited to all sales taxes, rental income taxes, use taxes, personal and property taxes, assessments, and all other governmental fines and charges.
Petitioner sent Respondent a letter dated January 2017 (Exhibit 5) alleging that Respondent owed additional sums for real estate taxes, pursuant to Article 1(i) of the lease. The letter further provided:
I am writing to notify you that you will see an increase to the charge on your rent bill for commercial real estate tax beginning with your February 1, 2017 bill. As of this date, we will begin billing you monthly for 1/12 of the annual commercial tax for the billing period from July 1, 2016, through June 30, 2017.
The portion of the annual real estate taxes allocable to your unit is $2,494.97, which we already paid in full. It will be added to your monthly bill over the next twelve months beginning on February 1, 2017. The new monthly charge to your bill will be $207.91
Petitioner's rent ledger , dated September 27, 2017, was admitted into evidence as Exhibit 2, and shows a total due through October 2017, of $5051.19. This sum includes a charge for October rent. The monthly rent under the lease is $1545.00. Essentially, Respondent has been paying the monthly rent due, pending the resolution of the dispute on the Real Estate Taxes.
The ledger states it pertains to Store 11, but the Subject Premises is identified as Store 5 in petition and notice of petition.
The ledger shows that Petitioner began billing Respondent $207.91 per month in February 2017, for a charge that is based on property taxes. Said charge is assessed in every subsequent month, through October 2017, for a total of $1663.28.
The closest the ledger shows to a recent zero balance is in October 2016, when there was a balance of $106.69, which balance had been carried forward from at least, February of 2016. As of March 2017, other than the disputed property tax charges, all arrears had been paid, including the lingering charge of $106.69.
Additionally, Petitioner started charging Respondent $1545 per month in July 2017, the prior monthly charges were for $1500.00 per month. However the ledger reflects that Respondent continued to pay $1500 per month. Thus the total arrears of $5051.19, as shown on Exhibit 2 break down as follows:
| Monthly rent due through October 2017 | $3180 |
| Real Property Taxes | $1871.19 |
Although the only lease submitted into evidence has a commencement date of July 1, 2016, the ledger shows charges and payments from July 1, 2013. Prior to February 2017, there were no charges assessed for Real Estate Taxes.
Petitioner submitted a chart showing how it calculated Real Estate Taxes Due (Exhibit 4). The chart alleges a building wide Real Estate Tax Charge for 2016–2017 of $9,323.51. Said charge is pro-rated by Petitioner among four commercial tenants in the building, based on the square footage of each demised premises. Pursuant to said formula, Petitioner asserts that Respondent should bare 27% of the tax liability for the 2016–2017 year for a total of $2,494.97, which Petitioner proceeded to bill at a rate of $207.91 per month, as discussed above.
Petitioner further submitted a two page quarterly statement from the New York City Department of Finance (Exhibit 3) which shows a bill for $99,764.01 for taxes due as of January 1, 2017. $89,550.50 is listed on a column which references "Housing–Shelter Rent. The remaining charge of $9,323.51 is listed as a "Debit Adjustment" and is the sum used by Petitioner to assert the contested charges in this proceeding.
DISCUSSION
"(A) tenant's obligation to pay taxes on leased property rests solely upon the terms of the lease and additional liability will not be imposed upon such a tenant unless clearly within the provisions of the lease [ Broad Properties, Inc. v. Wheels, Inc. , 43 AD2d 276, 279, aff'd , 35 NY2d 821, (1974) ]."
The lease provision relied upon by Petitioner specifically limits Respondent's liability to "special assessments" or taxes assessed "as a result of leasing the Premises to Tenant". The provision further specifies that Respondent would be responsible for 100% of any such assessment.
Real Property Tax Law § 102(15) defines "special assessment" as "... a charge imposed upon benefited real property in proportion to the benefit received by such property to defray the cost, including operation and maintenance, of a special district improvement or service or of a special improvement or service ...".
Real Property Tax Law § 102 (20) defines "Tax" as "... a charge imposed upon real property by or on behalf of a county, city, town, village or school district for municipal or school district purposes, but does not include a special ad valorem levy or a special assessment."
This distinction has been noted by courts in interpreting tax liability under commercial leases ( Allstate Management Corporation v. Grand Union Company 142 AD2d 344 ).
Additionally, to the extent the provision is ambiguous, the ambiguity must be construed against the landlord ( 151 West Associates v. Printsiples Fabric Corp. 61 NY2d 732 ).
This holding is premised upon the assumption that Petitioner drafted the lease.
Based on the foregoing, it is clear to the court that the real estate tax charges sought herein are not based on any special assessment, but rather are premised on the annual bill received by Petitioner for the commercial spaces in the building. The clause relied upon by Petitioner does not support any such liability.
CONCLUSION
Based on the foregoing, that portion of the petition based on Petitioner's claim for the real estate tax charges, as detailed on the ledger submitted herein, is dismissed with prejudice. The evidence shows $3180 due through October 2017. As noted above, those charges were never in dispute, as it was the real estate taxes that were essentially the focus of this litigation. In the event that said sum remains unpaid within 10 days of the date of this decision, Petitioner may submit a request for a judgment based on an affidavit of default.
This constitutes the decision and order of this court.