Giving proper notice under REBNY Form Commercial Lease.

(The following is the 13th in a 14-part series examining the standard Real Estate Board of New York form commercial lease. The series highlights particular clauses in the REBNY lease and how the courts have interpreted them. Parts one through 12 are available by contacting the author, or by calling Real Estate Weekly at 212-777-6611.)

A number of landlord's rights under the "REBNY" form office lease depend on landlord giving proper notice to the tenant: e.g., notice of termination under [paragraph] 9(d), in the event of a casualty; or under [paragraph] 17, to trigger a conditional limitation in the event of a tenant default.

Conversely, various of tenant's rights may depend on giving notice to landlord: e.g., tenant's right to assert a constructive eviction due to matters not directly caused by the landlord.

The REBNY form office lease, in [paragraph] 28, in a somewhat inelegant way, seeks to make it easier for landlords, and harder for tenants, to give proper notices.

Unsurprisingly, the courts sometimes try to reverse matters, to make it easier for tenants, and harder for landlords.

Somewhat surprisingly, landlords often make it harder on themselves, by permitting seemingly innocuous modifications to the standard REBNY form, which are then forgotten or overlooked, and come back to haunt the landlord.

Part I of this article will consider whether [paragraph] 28 imposes on landlord a mandatory requirement to give all notice in writing (and by the forms of delivery specified therein).

Part II considers the question whether the managing agent can sign various notices on behalf of the landlord.

Part III then considers matters from the tenant's viewpoint: can oral notice to landlord be sufficient, even though the REBNY form clearly mandates that any notice from tenant be in writing?

Landlord Should Not Be Limited to the Form of Notice Specified In Lease [paragraph] 28

REBNY form office Lease [paragraph] 28 provides: "Except as otherwise in this lease provided, a bill, statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice."

As a practical matter, this clause is often modified. One common modification is to provide for additional notice to landlord's counsel and tenant's counsel.

What then happens is that landlord intends to give some sort of notice, but fails to follow precisely the methods prescribed in Lease [paragraph] 28, particularly as it may have been amended; and tenant defends by saying that notice was not given in accordance with the bills and notices provision of the lease.

Landlord then argues thusly: Lease [paragraph] 28, while it is mandatory as to the tenant, is merely permissive as to the landlord. The last sentence of Lease [paragraph] 28 says that tenant "must" follow the Lease [paragraph] 28 procedure. By contrast, the first sentence says only that "if" Landlord follows these procedures then the notice shall be deemed effective. It does not by its terms eliminate all other possible means of effecting a notice.

As a matter of good grammar and usage, the landlord's position is correct, and has been upheld by some Courts. See, e.g., Four Star Holding Co. v. Alex Furs, Inc., 153 Misc.2d 447, 590 N.Y.S.2d 667 (AT 1st Dep't 1992). Justice McCooe, in his concurring opinion, explained: "Paragraph 28 states that a written notice 'shall be deemed sufficient' if given by specified methods... It does not state that a written notice 'must' be given [pursuant thereto]...)"; see also e.g., Duell v. Francesca Lack & Associates Limited, 4/30/92 N.Y.L.J. 25 (col. 5) (Omansky, J.) (Civ. Ct. N.Y. Co.) The court, in denying commercial tenant's motion to dismiss a summary non-payment proceeding, held that an oral demand for rent was consistent with both the applicable statute and the lease, in that the lease did not require written notice of default to the tenant); and 36-59 Main Street Associates v. Mainnor Co., Inc., 6/17/92 N.Y.L.J. 26 (col. 3) (Civ. Ct. Queens Co.) (Lisa, J.) Court declined to give effect to the lease notice provision as applied to the demand for rent and upheld an oral rent demand in commercial non-payment proceeding.

The majority opinion in Four Star v. Alex had held for landlord on a different basis - that the familiar "3-day" rent demand under RPAPL [section] 711 is not considered a "bill or notice" for purposes of this form lease provision. See also, e.g., 96-18 43rd Ave. Corp. v. IBT Industries, Ltd., 5/28/91 N.Y.L.J. 32 (col. 4) (AT 2d Dep't). We would not be surprised, however, to see this majority analysis being reconsidered following Roma v. Heidelberg & Associates, 1998 WL 865098 (2d Cir.) - the recent decision holding that the federal consumer debt collection act applies to such notices. The federal statute does not by its terms apply to commercial cases, but it did seem to reject an attempt to distinguish RPAPL statutory demands from other types of bills and notices.

Nevertheless, the REBNY form is hardly as clear as it might be, and there appear to be cases where the courts have simply refused to follow such a precise reading of the notice clause. See, e.g., Jeremias v. Reynaldo, 9/15/93 N.Y.L.J. 24 (col. 5) (Civ. Ct. Queens Co.) (Gould, J.) in which the court dismissed a residential summary nonpayment proceeding on the grounds that landlord made an oral rent demand, concluding that the lease required all notices to be in writing); Atlantic Hylan Corp. v. Four Corners Health Club, Inc., 7/30/97 N.Y.L.J. 26 (col. 3) (Civil Ct. Richmond Co.) (Straniere, L), in which the court, in dismissing a commercial non-payment proceeding, in part based upon improper service of the three day notice, held "since the lease requires that all notices must be in writing, the demand is required to be in writing.

We accordingly suggest modifying the first sentence by adding, after the opening clause - "and without excluding other means of giving notice that landlord may choose to adopt." A landlord might also wish to expressly exclude 3-day notices from [paragraph] 28).

Managing Agent's Signature

The managing agent's signature may be ineffective unless: (i) the notice does not threaten or seek termination of the lease; or (ii) the tenant has a previous track record recognizing the managing agent's authority.

In Siegel v. Kentucky Fried Chicken of Long Island, Inc., 108 A.D.2d 218, 488 N.Y.S.2d 744 (2d Dep't 1985), aff'd, 67 N.Y.2d 792, 501 N.Y.S.2d 317 (1986), the Court held that the managing agent could not sign a notice on behalf of the landlord, where that notice asserted a right on the part of landlord to terminate the lease. The Appellate Division explained: "[W]hile it may be true that a tenant who is in default under the terms of his lease has no cause to complain about the messenger who delivers his landlord's notice to cure, the fact remains that he is entitled to know whether his landlord is insisting upon the strict performance of all of the covenants of the lease, i.e., whether the only person who is entitled to insist upon full compliance actually desires that these often technical defaults be cured. In addition, and more important, a tenant is also entitled to know 'with safety' whether the notice to terminate emanates from a person with the requisite authority, for if he acts upon such notice to vacate the premises, he may later be found to have acted at his peril should the landlord prevail in a claim that the notice was unauthorized. (108 A.D.2d at 222 [citation omitted].)

Siegel v. Kentucky Fried Chicken has been limited, in later decisions, in two ways: (1) It should not apply to rent bills, demands for replenishment of security deposit, or other such notices that do not assert a right to terminate. As set forth in 54-55 Street Co. v. Torres, L&T Index No. 74650/96 (Civ. Ct. N.Y.Co.) (Freedman, J.), aff'd, 171 Misc.2d 237, 656 N.Y.S.2d 591 (AT 1st Dep't 1997), leave to appeal denied, A.D.2d (1st Dep't 1997), Siegel v. Kentucky Fried Chicken does not apply to a demand that is a predicate to establishing a default; rather, it applies only to the subsequent notice to cure that default or the notice to terminate the lease. For example, a demand to replenish a security deposit does not put a tenant to the choice of complying or risking termination - it simply informs a tenant of the fact that landlord has drawn-down the security, and that tenant is obligated to replenish. Because the demand to replenish did not threaten lease termination, it is in effect just a bill. The rationale and strict rule of Siegel v. Kentucky Fried Chicken applies only where the notice is one requiring strict compliance to effectuate a termination of a lease;

(2) It should not apply where tenant has had prior dealings with the agent who signed the notice.

A lease by its terms can authorize an agent to sign notices. See, e.g., Yui Woon Kwong v. Sun Po Eng, 183 A.D.2d 558, 583 N.Y.S.2d 457 (1st Dep't 1992); L&B 595 Madison Inc. v. Susan Sheehan, Inc., 8/31/94 N.Y.L.J. 22 (col. 6) (Civ. Ct. N.Y. Co.). The Landlord should be careful, however, when changing managing agents, to update these clauses.

What happens, though, if there is no existing written authorization of the (present) managing agent - can the agent still sign?

As stated in, e.g., 54-55 Street Co. v. Torres, 171 Misc.2d 237, 656 N.Y.S.2d 591 (AT 1st Dep't 1997), leave to appeal denied, A.D.2d (1st Dep't 1997), a Kentucky Fried defense is defeated where a tenant has in fact previously dealt with the managing agent giving the notice. This can be established by, e.g., a pattern of correspondence, such as prior rent payments sent to the managing agent. See also, e.g., Zirinsky v. Violet Mills, 152 Misc.2d 538, 578 N.Y.S.2d 88 (Civ. Ct. Queens Co. 1991); and 80-02 Leasehold Co. v. 1st Nationwide Bank, FSB, 3/30/94 N.Y.L.J. 25 (col. 4) (Civ. Ct. Queens Co.). See generally Triborough Bridge and Tunnel Authority v. Serling, 7/12/96 N.Y.L.J. 25 (col. 3) (AT 1st Dep't), in which there is no requirement that the signatories for the landlord itself demonstrate their relationship to the landlord).

Notices Required From Tenant

Notices required from Tenant may be treated more leniently, notwithstanding Form Lease [paragraph] 28. Two common situations where landlords argue that tenants should be precluded by reason of insufficient notices are concerning: (a) constructive eviction; and (b) exercise of renewal options.

One of the elements a tenant must allege in order to claim a constructive eviction - at least where the alleged condition is not the result of a knowing wrong by the landlord itself - is that tenant have given notice to landlord concerning the condition:

A tenant who contemplates vacating the premises on ground of constructive eviction must give his landlord notice and a reasonable opportunity to correct or remove the condition complained of, when this is feasible. ("Friedman on Leases" [section] 29.301 at 1653 (4th Ed. 1997) (fns. omitted, emphasis added). See also, e.g., Kayser-Roth Corporation v. Heckler Manufacturing and Investment Group, Inc., Index No. 28277/92 (Sup. Ct. N.Y. Co.) (Huff, J.), a decision dated June 11, 1993 granting summary judgment dismissing defense of constructive eviction, explaining that tenant failed to give notice; Joseph P. Day Realty Corp. v. Mintz, 10/24/96 N.Y.L.J. (col. 2) (AT 1st Dep't), where the tenant failed to proffer "any statement that it notified the plaintiff-landlord in writing of [the alleged] 'problems' or 'defects'..."

What if the tenant gave only oral notice of such a condition: can the landlord argue that that notice is insufficient, in view of Lease [paragraph] 28?

"Friedman on Leases" [section] 29.303, at 1658 n. 1, suggests that one older case held generally that a tenant's oral notice was sufficient, notwithstanding a lease clause requiring written notice, citing Gordon v. McAfee, 184 Misc. 469, 54 N.Y.S.2d 443 (1945). That case, by its terms, does not go so far. In that case, an action to recover damages for personal injury, the court held that the provision in the residential lease requiring written notice of all defects and repairs was void as against public policy, and further held that oral notice provided to the landlord, by a residential tenant, of a cracked, defective and dangerous condition in the apartment's bathroom ceiling was sufficient. See also, G.R. Vanderhoff v. Chrysler, 91 A.D.2d 49, 458 N.Y.S.2d 289 (3d Dep't 1983).

Nevertheless, it is difficult, in our experience, for a landlord to preclude, on summary judgment, a claim of constructive eviction based solely on a lack of written notice. In Hirsch v. Radt, 228 N.Y. 100 (1920), the Court of Appeals held that a requirement of written notice could be enforced except "where landlord, by his active negligence or affirmative wrong, has created the defect." Since a tenant will typically combine a constructive eviction claim with other allegations of affirmative wrong by the landlord, an issue of fact may be created, so that the tenant can survive a summary judgment motion on this point.

Turning then to tenants' notices to exercise renewal options, the Courts appear to be of two minds. Slight defects in tenants' notices have often been excused. See, e.g., Souslian Wholesale Beer & Soda, Inc. v. 380-4 Union Ave. Realty Corp., 166 A.D.2d 435,560 N.Y.S.2d 491 (2d Dep't 1990), and cases cited therein.

But, sometimes, and when a landlord would be prejudiced by defective notice by a tenant, courts have strictly enforced notice provisions of a lease. See, e.g., Dan's Supreme Supermarkets, Inc. v. Redmont Realty Co., 8/14/96 N.Y.L.J. 25 (col. 2) (Sup. Ct. Queens Co.) (Lisa, J.), dismissing tenant's complaint, holding that landlord was entitled to judgment declaring that tenant had failed to effectively exercise its option to extend its lease, where tenant first attempted to exercise its option some nine months after the deadline set forth in the lease, and landlord had negotiated.and executed a new lease with a new tenant; 107 West 13th Street Realty Corp. v. Mantel, 2/3/93 N.Y.L.J. 22 (col. 2) (Sup. Ct. N.Y. Co.) (Sherman, J.), granting landlord summary judgment, holding that tenant, a sophisticated business operating approximately 75 garage facilities, had failed to timely exercise a renewal option under its lease based solely on carelessness.

A specific written notice requirement, with time made of the essence, may be of assistance to landlord in these sorts of cases.

Conclusion

Lease [paragraph] 28 can be made clearer, to broaden a landlord's ability to give notice. It can also be made into a stumbling block for landlords by careless modifications, and by failing to keep current the notice provisions and authorizations of agents. Finally, notwithstanding its seemingly absolute language, it will not always preclude a tenant from relying on an oral notice: if there are specific types of notices that the landlord insists on receiving in writing, these should he separately specified.