In another successful appeal, the Appellate Division has ruled in favor of a commercial tenant, represented by Peter Moulinos, Esq., reversing a lower court’s decision which had dismissed a commercial tenant’s claims on a motion for summary judgment.
In Jack Kelly Partners v. Elsa Zegelstein, the plaintiff sought to rent a space from which to operate its business. It rented a space in a townhouse owned by the defendant. The lease provided that the plaintiff was to use the space for office purposes and that it was not permitted to use the space in any manner that would violate the certificate of occupancy for the premises or the building. Unbeknownst to plaintiff, the certificate of occupancy only provided that the premises be used for residential purposes only. When plaintiff discovered that its occupancy was contrary to the certificate of occupancy, it vacated and sought a declaratory judgment finding that the lease was illegal and an order to have its security deposit be returned. The defendant counterclaimed for breach of lease.
The lower court ruled that defendant was entitled to summary judgment declaring that the lease was valid and enforceable. The appellate division reversed the lower court. It agreed with plaintiff that, given the illegal use of the space and the status of the certificate of occupancy, and the landlord’s unwillingness to alter that certificate, it was impossible for the plaintiff to perform its obligations under the lease. The Court found that there were issues of fact that precluded summary judgment, particularly whether the plaintiff had the right to rescind. The Court also ruled that the defendant should not be shielded from a clause in the lease where they made “no representations” while at the same time representing that the space is fit for commercial purposes. There was also an issue of fact whether the entire purpose of the lease was frustrated thus justifying summary judgment.
This case was significant as it sets new precedent in the area of commercial leasing between parties. Landlords cannot expect to skirt their obligations just by inserting a clause into a lease which states that the landlord makes no representations.
The complete decision may be viewed by clicking Jack Kelly Partners LLC v Elsa Zegelstein Appellate Decision this link.