Owner Entitled to Full Rent for Abandoned Buildings

Facts: An owner sued a tenant for breaching its two leases after the tenant abandoned both of the owner's buildings that it rented and refused to pay the remaining rent due under the leases. Because the tenant failed to appear at two summary dispossess proceedings for nonpayment of rent, the court ruled in favor of the owner. This established that the tenant had breached the leases. However, the court denied the owner's request for a judgment in her favor without a trial as to the tenant's liability for breaching the leases. The owner appealed.

Decision: The appeals court reversed the lower court's ruling.

Reasoning: The appeals court stated that the tenant was liable for breach of its leases, entitling the owner to a judgment in her favor without a trial. It said that, as a consequence of the tenant's failure to appear at the summary dispossess proceedings, the owner's allegation—that the tenant had breached the provisions of both leases requiring payment of rent—should have been deemed “admitted” for the purpose of the owner's request for a judgment in her favor without a trial. In other words, because the court ruled at the summary dispossess proceedings that the tenant was liable for breaching its leases, it had to grant the owner's request for a judgment without a trial in her favor based on the same issue.

Moreover, on appeal, the tenant didn't contest the validity of the judgments made against it at the summary dispossess proceedings. Rather, it claimed that it had furnished the names of prospective tenants to occupy one of the buildings for the balance of its lease term, and that the owner had “unreasonably withheld consent to an assignment of the lease.”

The appeals court pointed out that the lease contained an express restriction against assignment without the owner's written consent, but had no clause prohibiting the owner from unreasonably withholding consent. Therefore, the owner was within its rights to withhold its consent to an assignment. “Once the tenant abandoned the premises prior to the expiration of the lease, the owner was within its rights under New York law to do nothing and collect the full rent due under the lease,” the appeals court said.

The tenant also argued that the owner's failure to mitigate damages by reletting the premises or accepting the assignees proposed by the tenant breached an implied covenant of good faith. The appeals court noted that, in the case of every contract there is an “implied undertaking on the part of each party that he or she will not intentionally and purposely do anything to prevent the other party from carrying out the agreement on his or her part.” Here, however, the owner acted within its rights in refusing to accept an assignment of the lease and did nothing to prevent the tenant from performing its obligations under it—most notably, its obligation to pay the rent.

• REP A8 LLC v. Aventura Technologies, Inc., et al., December 2009

LESSON LEARNED: Use Express Restrictions, Permissions in Lease

In this case, the owner prevailed not only because the lease contained an express restriction against assignment without written consent, but also because the lease language didn't prohibit “unreasonably withholding consent.” Thus, the owner could legally withhold its consent, whether for a good reason or not—entitling it to collect rent from the tenant here. However, the owner could have avoided the lawsuit altogether if it had been more careful when negotiating the lease and included a clause expressly allowing it to withhold its consent for any reason at all.