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All feet are not as sweet.

When Shakespeare described a rose, as by any other name, smelling he Bard was describing an absolute standard of beauty. However, the descriptive phrasing utilized in reference to a rose would not apply to a foot: a rentable foot, that is. A recent legal dispute concerning the meaning of the terms "rentable square feet" and "usable square feet" found these phrases to be "terms of art". As a result, a foot, by any other name, may not be the same number of feet.

In Urbach, Kahn & Werlin. P.C. v. 250/PAS Associates commercial tenant commenced an action in the New York State Supreme Court alleging fraud and misrepresentation pertaining to the leasing of a floor for use by an accounting firm. The dispute centered upon New York City's unique phraseology pertaining to commercial space; "usable" square feet versus "rentable" square feet.

The owner and its leasing agent had advertised the premises as containing 10,000 rentable square feet. However, they also represented that there was a 20% loss factor.

The commercial lessee, a sophisticated financial professional, retained his own broker and an experienced attorney to review the lease. The prospective tenant sought specific representations as to the size of the floor. The landlord refused to provide such representations, asserting that rentable square footage and usable square footage were "terms of art" that varied from building to building. However, the owner provided the tenant and the tenant's space planner with ample opportunity to have access to the floor area for the purpose of measurement and the drawing of plans and drafting of an appropriate configuration.

Subsequent to the execution of the lease, the tenant brought suit seeking to reform the lease to reflect what the tenant described as the actual square footage. The tenant predicated the action upon his claim that the actual usable space was less than it understood had been rented to it.

The owner was represented by Joseph Burden and Deirdre A. Carson, my partners in Belkin Burden Wenig & Goldman, who argued at a trial in the Supreme Court that rentable and usable square footage were terms of art used in the real estate industry which, along with the loss factor, are variables used by the owner to reflect market conditions. The court accepted this thesis, finding that the representation as to rentable square footage was not a misrepresentation rep: "An accurate representation of the conditions which [existed] in the real estate industry at the time the lease was entered into."

In addition, the Court found that these terms of art, although unique to the real estate industry, were terms which or should have been understood by a sophisticated tenant represented by its own broker and experienced legal counsel. Further, the Court found that any claim of reliance by the tenant upon the owner's representations would be rendered unreasonable by virtue of the unlimited opportunity the tenant had to inspect, measure and verify the size of the space prior to renting.

This decision reaffirms the long held practice in New York City real estate industry that rentable square footage is a market driven number which is often unrelated to the actual usable square footage in the premises. So long as the owner makes it clear that there is a loss factor and couples this notice to the tenant with an opportunity for the prospective lessee to inspect the premises and take measurements to verify the amount of space being rented, the bargain between the parties will be deemed to be an arms-length transaction which will prevent the tenant from having any claim demand that the lease be rewritten at subsequent period of time.

Further, a prudent landlord can obviate any claims of misrepresentation by including a provision in the least stating that the landlord makes no representations as to the actual square footage contained in the premises, and confirming the right of inspection and measurement being made available to the prospective tenant prior to the execution of the lease.
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Title Annotation:New York State Supreme Court finds legally acceptable differences between "rentable square feet" and usable square feet" in rental leases
Author:Belkin, Sherwin
Publication:Real Estate Weekly
Date:Jun 24, 1992
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