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Recent Events
regardless of their ability to pay.
The brief emphasized that individual guarantors are critical to financially backstop commercial leases, offering landlords legal means that can be swifter, simpler and more effective than suing the commercial tenant.
Turkel argued that eliminating personal liability substantially impaired landlords’ contractual bargain with guarantors. Judges Raggi and Cabranes agreed, finding the city’s argument that landlords could still seek unpaid rent by other means was neither practically nor legally persuasive.
The judges ordered Judge Abrams to apply a fivepart test to gauge the Guaranty Law’s proportionality, including whether it was sufficiently limited, such as by being temporary, rather than being unnecessarily broad, such as by being permanent.
The judges also called for Judge Abrams to consider whether the City sufficiently studied the law’s appropriateness based on the City Council’s underlying assumptions, including that owner-guarantors are mostly individuals who would be financially ruined if required to pay rent arrears.
Additionally, Judges Raggi and Cabranes instructed Judge Abrams to weigh whether the law unduly saddled landlords with the pandemic’s financial burdens; if the law was narrowly tailored to those in financial trouble; and whether landlords also had a fair opportunity to receive financial relief.
Rosenberg & Estis, P.C. Wins Major Reversal: Equinox Required To Pay More Than $750,000 In Back Rent, $340,000 Per Month For Rent
Featuring Howard W. Kingsley October 7, 2021
Rosenberg & Estis, P.C. (“R&E”), a premier New York City real estate law firm with an award-winning Litigation Department, on appeal, successfully required Equinox to pay more than $750,000 in back rent and $340,000 monthly going forward for its use and occupancy at Zero Bond Street in Noho. Howard W. Kingsley, a member with the firm, represented the landlord, Bond Immobilien LP.
During the COVID-19 pandemic, the landlord accommodated Equinox’s request to defer the payment of rent on 30,000 square feet of space pursuant to an agreement by which Equinox would not have to pay any rent through the end of August 2020. Starting in September 2020, Equinox was required to pay half of the monthly fixed rent plus additional percentages as the City lifted the capacity restrictions, gradually requiring the tenant to pay 100% of the rent due.
Unfortunately, Equinox reneged by failing to pay the amount due, including the gradual increases, even though the tenant was operating the gym. In August of this year, the landlord filed suit seeking the more than $2.5 million in rent that was deferred and the monthly shortfall. At that time, the landlord also asked Supreme Court to award the landlord interim relief by requiring the tenant to timely pay the full amount of rent due each month because the tenant was using and occupying the space. Supreme Court rejected the landlord’s motion “out of hand” and would not even permit the landlord to argue its position. Accordingly, the landlord moved the Appellate Division, First Department, to require Equinox to pay “rent/use and occupancy in the amount of (a) $150,000 for the month of August 2021, (b) $300,000 for the months of September and October 2021, and (c) $340,500 on the first day of each month thereafter pendente lite until further order of the Court.” On October 5, 2021, the Appellate Division granted such relief
“The Appellate Division sent a very strong message to commercial tenants that they cannot avoid paying rent while using and occupying the leased space and litigating their defenses,” said Howard W. Kingsley. “Equinox, like many other commercial tenants, continues to assert frivolous impossibility of performance, frustration of purpose and other defenses although they have been routinely rejected by the Courts.”
Rosenberg & Estis, P.c. Upholds Property Owner’s Right To Take Over 545 Madison Avenue Following Thor Eviction
Case Confirms Tenant Waiver of Statutory Right to Redeem
Featuring Michael A. Pensabene and Peter B. Kane September 21, 2021
Rosenberg & Estis, P.C. prevailed Wednesday in State Supreme Court in New York County in a case of first impression, successfully arguing that a Manhattan commercial property owner needed only a ground lessee to waive its statutory right to redeem a lease terminated after default. The ruling affirms that a ground lessee’s waiver constitutes a waiver of the leasehold mortgagee’s statutory right to redeem that lease.
Michael A. Pensabene, a member of the firm’s Litigation Department, together with Peter Kane, of counsel, represented the landlord, Joseph E. Marx Company, Inc. (Marx Realty), owner of 545 Madison Avenue, before Justice Andrea Masley. The case was commenced by lender Wells Fargo Bank N.A. seeking a judgment declaring that Wells Fargo had a right to redeem the leasehold interest in the 17-story, 139,540-square-foot office and retail tower at the southeast corner of Madison Avenue and 55th Street, owned by Marx Realty.
On July 11, 2019, Marx Realty notified then-tenant Thor Equities, the Manhattan real estate development, leasing and management firm, that it owed $554,583 in unpaid rent on top of $1.6 million in back property taxes for a lease of the entire property. Marx obtained a September 12, 2019 civil court judgement against Thor, awarding Marx possession of the tower. Local authorities successfully evicted Thor on October 15, 2019.
Well Fargo’s standing in the case dates to 2014, when Wells took over Thor’s $30 million CMBS loan, first issued by Barclays in 2014, which Thor secured with its ground lease for 545 Madison Avenue. In the recently decided case, Wells argued that, as a lender under Section 763 of New York State Real Property Actions and Proceedings Law, the bank had the statutory right to redeem Thor’s lease for up to a year following Thor’s October 15, 2019 eviction.
Wells sought the court’s declaration that it had a right to redeem the lease, despite not noticing Marx of its intention to exercise that right. Marx counterargued that Wells was not entitled to exercise a right to redeem the lease pursuant to RPAPL Section 763 because Thor waived both its right under its lease and that of its lender. The case turned on the language of RPAPL Section 763. In relevant part, it prescribes that a lessee’s judgment creditor has up to a year to notice intent to redeem a lease following an eviction warrant “unless by the terms of the lease the lessee shall have waived his (emphasis added) right to redeem.”
Wells maintained that “his” referred to the lender. Wells, in turn, construed the statute to mean the creditor’s one-year right of redemption remained intact because
lender had not waived its right. The court held that, regardless of the male pronoun “his,” RPAPL Section 763 “unambiguously prohibits” a lender or mortgagee of a leasehold from exercising redemption rights if the tenant waives its right to redeem under the Lease.
Additionally, the court found that Wells could not selectively interpret the statute’s wording, and courts are obligated to effectuate a legislature’s intent with a law and to seek to construe the whole of a statute. Since evicting Thor in late 2019, Marx publicly announced and completed $24 million in renovations at 545 Madison Avenue, including a new lobby, the creation of 20,000 square feet of prebuilt office suites on the building’s third and 14th floors and 5,000 square feet of amenities.
“This case of first impression confirms that what has long been practiced when drafting leases is proper in that a waiver of the statutory right of redemption from a tenant alone is sufficient to protect a landlord,” Pensabene said. “This important decision reinforces the rights of landlords and, in this case, preserves the sweat equity and ingenuity that Marx put into the property, which has transformed the building to create highly attractive, contemporary office spaces.”
Rosenberg & Estis Obtains Contempt Finding Against Corporate Tenant That Failed To Pay Use And Occupancy
Court Vacates Yellowstone Injunction, Dismisses Tenant Complaint,
Featuring Warren A. Estis, Norman Flitt and Alex M. Estis August 6, 2021
Rosenberg & Estis, P.C., has secured a major victory over a corporate tenant that defaulted in the payment of rent, commencing a lawsuit, in conjunction with a motion for a Yellowstone injunction, after receiving a notice of default from the landlord.
Warren A. Estis and Norman Flitt, members, and Alex M. Estis, associate, with Rosenberg & Estis, represented 1001 Sixth Associates, ABS Partners Real Estate, LLC in the case. The court granted Rosenberg & Estis’ contempt motion against the tenant and its motion for a money judgment for arrearages.
To avoid lease termination, Corporate Suites 12, LLC, sought and obtained a Yellowstone injunction that was conditioned on the tenant posting a bond to secure the tenant’s substantial arrearages. Separately, Rosenberg & Estis independently secured an order requiring the tenant to continue to pay monthly use and occupancy during the pendency of the injunction.
The Court issued the Yellowstone injunction based on representations by the corporate tenant’s principal and its attorney that the tenant was ready, willing and able to meet its monetary obligations, and that the principal would go so far as to guaranty compliance. The Court relied on these representations in issuing the injunction. The tenant first failed to post the required undertaking by the deadline imposed by the Court, which resulted in the landlord’s service of a notice of termination of lease. The tenant then failed to pay use and occupancy, which resulted in Rosenberg & Estis filing a contempt motion against the tenant seeking, in addition to the contempt finding, a money judgment for the arrearages and a dismissal of the tenant’s complaint. The Court granted both requests.
The Court’s (Joel M. Cohen, Justice) decision, rendered on August 5, 2021, in “Corporate Suites 12, LLC v. 1001 Sixth Associates, ABS Partners Real Estate, LLC,” NY County Clerk’s Index No. 657315/2020, confirmed the Court’s reliance on the tenant’s representations as to its ability to comply with the conditions on which the Yellowstone motion was granted, including continuing to pay ongoing use and occupancy.
The Court also noted that the tenant simply violated the order without first moving to modify its requirements. This obvious disregard for the Court’s authority was yet another basis for the finding of civil contempt as against the corporate tenant. The Court also vacated the Yellowstone injunction, dismissed the tenant’s complaint and directed payment of the arrearages and ordered the settlement of an order, in which Rosenberg & Estis intends to provide for the immediate issuance of a judgment of ejectment, thereby recovering possession.
“Justice Cohen recognized the importance of being truthful in representing the facts to a court, which is especially important when the representations are related to the tenant’s willingness and ability to cure the alleged lease violations, which is one of the essential elements to prove for a Yellowstone injunction to issue,” said Warren A. Estis. “The Court also rejected the tenant’s purported ‘hardship’ claims based on the COVID-19 pandemic, and it was all around a good day for the landlord.”
Rosenberg & Estis Secures Decisive Victory In Rent Dispute With The Gap And Old Navy
Defeats COVID-Related Defenses, Recovers $24 Million
Featuring Warren A. Estis, Norman Flitt and Alex M. Estis August 5, 2021
Rosenberg & Estis, P.C. has successfully obtained summary judgment against The Gap Inc. and Old Navy LLC in an action commenced by The Gap and Old Navy seeking, among other things, to terminate their long-term leases at their flagship stores in the heart of Times Square and avoid payment of millions of dollars of both past-due and current rent to their landlord, 4445 Broadway Leasing Co., LLC.
The case was pending before Justice Debra A. James in Supreme Court, New York County (Index No. 652549/2020). Judge James rejected all of the tenants’ defenses and dismissed their complaint in its entirety.
Warren A. Estis and Norman Flitt, members, and Alex M. Estis, associate, with Rosenberg & Estis, represented 44-45 Broadway Leasing Co., LLC in the case.
Throughout the case, which was commenced in June 2020, when the tenants filed their summons and complaint and moved contemporaneously for a Yellowstone injunction, the Rosenberg & Estis team has successfully advanced the Landlord’s interests.
First, when the tenants moved for a Yellowstone injunction, Rosenberg & Estis succeeded in conditioning that injunction on the tenants posting a bond in excess of $5.8 million to cover then-existing arrears of rent. The Court also directed that the tenants deposit ongoing use and occupancy, at rates equivalent to 90% of the rental rates reserved under the respective leases, into court each month during the pendency of the case. Rosenberg & Estis appealed that determination and successfully obtained an order from the Appellate Division, First Department that ordered those payments to be paid directly to Landlord. Rosenberg & Estis then prevailed on a motion to release the funds that had previously been deposited for use and occupancy, plus accrued interest, to Landlord.
Landlord also moved for summary judgment to dismiss the tenants’ causes of action, which the tenants asserted in reliance on COVID-19-related defenses, such as impossibility, frustration of purpose, failure of consideration and whether the COVID-19 pandemic qualified as a “casualty” under the Leases. The tenants made these claims in the hopes of avoiding their substantial rent obligations during the pandemic and went so far as to argue that their leases had terminated in March 2020 as a result of the closure orders.
All of the tenants’ claims and defenses were rejected by the Court, resulting in the dismissal of the complaint and an order directing the immediate release to Landlord of the bond of approximately $5.8 million that the tenants had posted previously to secure
arrearages, and any other funds deposited by the tenants for use and occupancy. The tenants were also held liable for the Landlord’s attorneys’ fees and the remaining 10% of the rent that had previously been discounted when the Yellowstone motion was issued. As a result, the Landlord was entitled to apply for the release of approximately $24 million remaining on deposit in Court, plus accrued interest.
“It is really gratifying for courts to recognize when commercial tenants are misusing the COVID pandemic to avoid their obligations under long-term leases,” said Warren A. Estis. “This case will stand as an important precedent for commercial landlords and should put to rest similar baseless claims by other commercial tenants based on these COVID defenses.”
RECENT EVENTS
CLE: ESSENTIAL ISSUES IN ESTATE PLANNING FOR NON-ESTATE PLANNING
Theodore J. Metzger, 12.15.21
R&E would like to thank our guests Fred Lee and Woolsey McKernon from Bayview Asset Management, LLC for leading the discussion yesterday along with R&E attorneys, Michael Lefkowitz and Stefanie Graham on how to incorporate C-PACE financing into a capital stack along with the process involved in closing a C-PACE financing, including the required coordination and negotiation between C-PACE lender, mortgage lender and any mezzanine lender. We believe C-PACE financing will be a very useful tool moving forward and our attorneys are ready to advise our clients of such resource.
Click here to watch the recording.
NYC AFFORDABLE HOUSING WEBINAR
Daniel M. Bernstein, 12.07.21
Daniel M. Bernstein, leader of R&E’s Tax Incentives & Affordable Housing Department, presented a webinar to share critical information from HPD that may allow residential projects to vest for the 421-a property tax exemption. The deadline for projects to vest for the current 421-a property tax exemption program is June 15, 2022 and is rapidly approaching.
Click here to watch the recording. ROSENBERG & ESTIS, P.C. WELCOME BACK HOLIDAY PARTY
Rosenberg & Estis, 12.02.21
Rosenberg & Estis, P.C. was thrilled to welcome back our team with a holiday party held at Charlie Palmer Steak, Bank of America Tower. The gathering represents a step toward normalcy following the pandemic, and we are so looking forward to being back in the office together with a hybrid schedule starting in 2022. While there were many great shots to choose from, please see pictured from left to right: Caroline F. Corley (Litigation Associate), Kenneth W. Eng (Litigation Associate), Ethan R. Cohen (Litigation Of Counsel), Elizabeth M. Brown (Litigation Associate), Anthony J. Virga (Litigation Of Counsel), Devin P. Kosar (Litigation Of Counsel) and Alexander Lycoyannis (Litigation Member).
RECENT EVENTS
COMMERCIAL L/T ISSUES IN BANKRUPTCY A YEAR INTO THE PANDEMIC
John D. Giampolo, 11.30.21 NYC PROPERTY TAX WEBINAR PRESENTED BY BENJAMIN WILLIAMS
Bejamin M. Williams, 11.22.21
John D. Giampolo presented what has changed for commercial landlords since the COVID-19 pandemic began. The CLE included a discussion of changes to relevant bankruptcy laws as well as how commercial landlords can better prepare for and protect their rights in connection with tenant bankruptcies.
Click here to watch the recording. Benjamin M. Williams, head of R&E’s property tax group, presented a NYC Property Tax Webinar that addressed topics including but not limited to:
• Property assessments and valuation in the age of COVID - What’s special about January 5th? • New mayor, City Council, governor, Tax
Commission president, Department of Finance commissioner - So what? • Increases and decreases in tax rates, decreases in interest rates • Who got tax reduction offers and settlements in 2020 and 2021?
Click here to watch the recording.
Michael E. Lefkowitz and Stefanie M. Graham, 11.02.21
R&E would like to thank our guests Fred Lee and Woolsey McKernon from Bayview Asset Management, LLC for leading the discussion yesterday along with R&E attorneys, Michael Lefkowitz and Stefanie Graham on how to incorporate C-PACE financing into a capital stack along with the process involved in closing a C-PACE financing, including the required coordination and negotiation between C-PACE lender, mortgage lender and any mezzanine lender. We believe C-PACE financing will be a very useful tool moving forward and our attorneys are ready to advise our clients of such resource. IR GLOBAL ‘10 YEAR CELEBRATION’ & ANNUAL CONFERENCE
Michael E. Lefkowitz and Richard L. Sussman, 10.25.21
Rosenberg & Estis, P.C. was thrilled to sponsor IR Global at it’s annual conference in London, the first in-person gathering since the start of covid-19. Pictured above, left to right, are Richard L. Sussman and Michael E. Lefkowitz in front of R&E’s headline sponsor banner.
Rosenberg & Estis, P.C. 733 Third Avenue New York, NY 10017 T. 212 867 6000
www.rosenbergestis.com
