Commercial Division Blog

Posted: March 29, 2024 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Seth D. Allen, Joshua Wurtzel, Channing J. Turner / Categories Commercial, Summary Judgment

Court Grants Plaintiff Summary Judgment Requiring City To Close Pursuant To Terms of Ground Lease

On March 5, 2024, Justice Andrew Borrok granted plaintiff’s motion for summary judgment and denied the City’s motion.  The decision in Atlantic Center Fort Greene Assoc., LLC v. The City of New York, Index No. 656207/2021, concerned a lease agreement dated August 4, 1995, between the City as landlord and plaintiff’s predecessor in interest as tenant.  The Court explained:

Pursuant to the terms of the Ground Lease, the parties agreed to a 99-year term and that pursuant to Section 12.2(a) of the Ground Lease, the Tenant could purchase the Landlord's fee interest (the Purchase Option) at any time after the 10th anniversary of the Lease's "Rent Commencement Date."

Pursuant to Section 12.2(c) of the Ground Lease, the parties further agreed that the Tenant could exercise the Purchase Option by paying, among certain other amounts, "one hundred fifty (150%) percent of the fair market value of the Land:"

Pursuant to Section 3.2(e) of the Ground Lease, the parties agreed that "fair market value" was equal to $3,446,168 during the first twenty-five years of the Ground Lease:

To the extent that the Landlord relies on the Mayoral Authorization or the Public Notice to modify the terms of the Ground Lease the parties negotiated, the argument fails. These documents executed solely by the Landlord to provide the authorization necessary to enter into the Ground Lease (i) do not modify the express terms of the Ground Lease and (ii) are in fact not inconsistent with the terms of the Ground Lease. To wit, Section 41.11 of the Ground Lease provides that

[n]o covenant, agreement, term or condition of this Lease to be performed or complied with by either party, and no Default thereof by Tenant or Landlord's failure to perform them shall be changed, modified, altered, waived or terminated except by a written instrument of change, modification, alteration, waiver or termination executed by the other party

(NYSCEF Doc. No. 38, § 41.11 [emphasis added]).

These documents referred to by the Landlord were not signed by the Tenant or its predecessor-in-interest and thus do not change, modify, or alter the terms of the Ground Lease. The Ground Lease by its terms does not incorporate these other documents. Nor does it provide that in the case of inconsistency between the terms of the Ground Lease and these other documents, the other documents govern. Thus, the Landlord's argument that these documents-never executed by the Tenant- modify the terms of the Ground Lease fails as inconsistent with the express requirements of the Ground Lease and does not create an issue of fact preventing the grant of summary judgment.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning ground leases or summary judgment.