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Queens court awards building to tenants.

Queens court awards building to tenant

A Queens court has ruled that a commercial property owner must turn over his building, worth between $10 million and $12 million, to a tenant who had an agreement to purchase the building in 1983.

In the decision that owner's attorney called "mind boggling," the court also awarded the tenant a $4 million judgment in damages because the owner mortgaged the property -- together with two other -- for that amount. The judge's order is currently stayed pending a decision by the Appellate Division.

"The judge's award structured the sale as if it were a 10-year interest free payout to the purchaser," said Gary Rodolitz, the son of the owner and a spokesman for their company, Tal-Spon. "The envelope company has occupied the building without paying a dime for almost two years. They never paid the real estate taxes, never paid the insurance or maintenance, never paid the nominal amount to close -- they haven't paid anything. They have gotten all of the benefits and are basically freeloaders."

In 1983, his father, Abe Rodolitz, a Queens developer who built the property himself 20 years earlier, had agreed to sell a 200,000-square-foot Maspeth building to Arthur Rogers of the Exclusive Envelope Corporation for $3.8 million in cash. The purchase did not close at the time, attorneys say, because among other things, the closing deteriorated into a shouting match.

The younger Rodolitz contends Rogers did not comply with an "all-cash" option and in addition, owes another $2 million in back rent. Rodolitz' attorney, Kenneth B. Schwartz, said neither a survey nor a title report necessary to complete closing was obtained by the prospective purchaser.

The case was originally brought to court when Rodolitz attempted to evict Rogers on the basis of non-payment of rent. The envelope company then brought an action for specific performance of the contract, to compel the owner to close on the property. After a protracted trial, last April, Justice Nat H. Hentel granted the specific performance and awarded the building to the envelope company.

In his ruling, Judge Hentel credited $3.5 million in rent paid, effectively turning over the building to Rogers for approximately $300,000.

"No one said the plaintiff was entitled to a mortgage or a payout or entitled to a massive bargain," Schwartz said.

"The judge's decision sets a new standard for being ready, willing and able to close that is frightening," Rodolitz said. What was originally a negotiating ploy to knock off rent, he said, by some gross misunderstanding of how real estate works, has turned into a "theft of the building."

"There is no rational way that legally, morally or ethically that kind of result can be achieved, based on the facts as presented," said Joseph H. Driscoll, general counsel to the Rodolitz organization. "I'm just shocked at the result."

Schwartz was brought in recently to look into pension and tax issues involved in the case. He brought a motion to vacate Justice Hentel's original decision, but it was recently upheld by the same judge. Papers have already been filed with the Appellate Division, he said.

Schwartz said the case is complicated because of evidence submitted at trial. "I found pages and pages of things that were wrong in the case," he said. Some issues related to the ability of certain individuals to pay.

Roger's propsective financiers had stated at trial that they had the ability to put up most of the money for the purchase of the property to comply with the all-cash option. Schwartz said he found some of this money was either tied up in pension funds or undervalued because it was in Canadian funds. One of these individual financiers person said a multi-million dollar mortgage was going to be put on his own building in order to lend the financing to Excelsior. During the time period in question, however, he had made sworn statements that his building was worth much less than $1 million.

Rodolitz said the purchaser had been looking for Industrial Development Agency financing at that time and repeatedly denied they were trying to obtain financing from individuals. "Seven years later four people come out of the woodwork saying 'I had the money then and I would have lent it to them.' It's so preposterous," Rodolitz added.

Additionally, Schwartz found the tenant has also considered the rental payments as leasing payments when calculating taxes for the eight years. "The plaintiff had deducted every dollar it had spent on the lease," Schwartz said. "They wrote off everything and treated it as lease. The IRS should be involved in this case."

"Irving Bizar, a partner with Bizar, Martin and Schneider, handled the trial work for the tenant after the case had been pending for some time. He said a title report was ordered but was never provided because "the whole thing degenerated at the closing" and said a survey was not necessary because the meets and bounds were already written into the contract of sale. The trial itself involved nearly 4,000 pages of testimony and 200 exhibits. "We feel that justice was done," he added.

Rodolitz said the meets and bounds were not in the contract but there was a "sketch" outlining the property. He said the property is made up of different lots which were owned by various family members. Since not all the property was being purchased, a deed could not be prepared without a survey, he said.

Another of Rodolitz's concerns is that the envelope company is having financial problems. A recent Dun and Brad-street report on Excelsior Envelope, and examined by REW, shows some arrearages and judgments but misstates that Excelsior owns the building. Driscoll said that information would have been supplied by Excelsior.

"Sooner or later," Rodolitz predicts, "this will be turned around by the Appellate Court and we will be out the $2 million which they don't have."

'There is no rational way that legally, morally or ethically that kind of result can be achieved, based on the facts presented.'
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Title Annotation:Maspeth building
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Feb 12, 1992
Previous Article:REBNY: industry works toward a better city.
Next Article:Property owners can get copy of 'assessment card.' (assessor's assessment card for their properties) (Brief Article)

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