Damages for breach of lease may be awarded, even if damages are difficult to calculate.

Plaintiff, a tenant shareholder in a cooperative, proved at trial that the cooperative breached their proprietary lease, but plaintiff was unable to prove with certainty what her monetary damages were. The result was that the Supreme Court, New York County dismissed her complaint against the cooperative and awarded costs and attorney fees in favor of the cooperative. Plaintiff appealed.

The Appellate Division, First Department, in the case of Dinicu V. Groff Studios Corp. (N.Y.L.J. June 2, 1999, P. 25, Col. 2) was confronted with the dilemma of finding a way to award damages to this plaintiff, who was substantially damaged by the cooperative which breached the proprietary lease even though plaintiff could not prove damages with certainty.

In 1979, plaintiff entered into a proprietary lease for a second floor loft in a building owned by the Cooperative (Groff). Plaintiff purchased the loft for "mixed use" as a residence and a dance studio under an offering plan which stated that while residential use was not permitted by the existing zoning designation, the cooperative would seek a variance to permit such mixed use. The proprietary lease entered into by plaintiff with Groff provided that the loft could be used in combination for residential and commercial use.

Groff's initial application for a variance to permit combined residential and work quarters was denied by the Board of Standards and Appeals. Subsequently, the City Planning Commission amended the Zoning Resolution to authorize the building to be used for joint living/working loft quarters, providing Groff would submit an Alteration Application with the Department of Buildings to permit such use. However, when Groff did submit the application for alteration, it described plaintiff's loft as a one to be used exclusively for residential purpose and not for mixed use. This was done in order to avoid certain conversion expenses that Groff would have had to pay had it listed the unit properly as a mixed use unit.

Groff's application for a variance was granted, allowing the loft to be used exclusively for residential purposes. Plaintiff, however, continued to use it for her residence as well as a dance studio. This continued without incident for two years until new residents took occupancy of the loft above plaintiff's. The new residents objected to the noise emanating from the studio and despite efforts to soundproof the studio by plaintiff, the new residents persisted with their complaints to the board of directors of Groff.

The board was advised by its legal counsel that the only thing that was required to legalize the mixed use of plaintiff's loft was to amend the Certificate of Occupancy of the building. This of course was not the acceptable solution to the new residents upstairs, who then pressed their complaints with the Department of Buildings, which in turn issued a violation on the building. Groff immediately then demanded that plaintiff cease and desist using her loft as a dance studio.

Plaintiff then went to the extraordinary step of conferring with Groff's architect and obtained from him an Altered Building Application for presentation to the Department of Building which, if accepted, would amend the Certificate of Occupancy and allow mixed use of the loft. However, the application had to be signed by the cooperative. The board, rather than agreeing to sign the application, decided to ask the shareholders of the building to vote on the issue. The shareholders voted to reject plaintiff's efforts and refused to authorize the signing of the Alteration Application.

The upstairs residents continued with their campaign of complaints to the Department of Buildings, which issued yet another violation which could be cured only by amending the Certificate of Occupancy or by plaintiff discontinuing the use of her loft as a studio.

Plaintiff, with her primary occupation and artistic existence threatened, began searching for a new building in the area and found one and purchased it for $800,000. Plaintiff tried to sublet her loft for more than two years and finally secured a rental which was far below her monthly maintenance cost. After sustaining substantial losses over several years, plaintiff was finally able to sell the loft at a price barely covering the mortgage she had gotten when she purchased the unit.

Although it was clear that Groff breached its proprietary lease with plaintiff by failing to deliver the promised loft for mixed use and by breaching the covenant of quiet enjoyment by requiring plaintiff to discontinue the use of the studio portion of the loft, the trial court could not grant judgment to plaintiff because she was unable to prove measurable damages. The Appellate Division disagreed and reversed.

The Appellate Division stated that plaintiff adequately proved the unique importance of this loft to her livelihood. Although to be awarded damages, the damages may not be speculative and must be generally foreseeable within the contemplation of the parties, the damages which plaintiff sustained were in fact not so speculative so as to deny recovery. The Appellate Division held that plaintiff's measure of damages should include the costs of her attempt to soundproof the studio, her costs in finding new suitable accommodations, some of her carrying charges on the loft until she was able to sublet it, and the Appellate Division remanded the case back to the trial judge to determine those damages and also to entertain any additional theories of recovery for the plaintiff.

The Appellate Division recognized that this case presents some special and even unique features which makes ascertainment of damages difficult. The elements of liability occurred over a span of a decade with rising real estate values, particularly for the kind of loft accommodations involved in this case. Added to the complexity in determining damages, the predominant rise in value of plaintiff's loft was attributable to the residential portion and little or no appreciation was attributable to the dance studio. However, such difficulties and obstacles do not create a complete bar to measuring genuine losses arising from a breach of the lease. Plaintiff in a case like this is not restricted to the ordinary rules for measuring damages, nor is she obliged to prove her losses with mathematical certainty.

Plaintiff should not be denied monetary relief simply because the facts are complex and ordinary methods of proving values are not available. Rather, other practical means should be resorted to which would be just for both parties. The cooperative, as wrongdoer, should not escape liability simply because there are none of the ordinary standards for measuring damages.

Finally, the Appellate Division could not condone the imposition of costs and attorney fees to Groff, since Plaintiff never defaulted on her leasehold obligations. Now, since the Appellate Division sustained her right to damages, she is the prevailing party and she now becomes entitled to recover legal fees as an element of damages.

Thus, the Appellate Division, while not deciding how plaintiff's damages should be measured, remanded this case back to the Supreme Court for a determination of those damages with instructions that creativity be exercised by the court in enabling these damages, to be calculated with some degree of certainty so that plaintiff, who has been clearly damaged, should not go away empty-handed.

(Edward L. Schiff is a real estate partner in the Manhattan law firm of Hartman & Craven, LLP)