Tenant's Failure to Pursue Required Zoning Change Justifies Lease Termination

April 21, 2021

What Happened: One nonpaying tenant that didn’t catch a break from the courts was the one that leased store space for use as a boxing studio. The lease obligated the tenant to “pursue and diligently prosecute a change” in zoning that would allow the property to be used for such purposes. Alas, the zoning board never issued the necessary certificate of occupancy. With the tenant now in bankruptcy, the landlord asked the court to declare the tenant in default so it could sue for money damages later.  

What Happened: One nonpaying tenant that didn’t catch a break from the courts was the one that leased store space for use as a boxing studio. The lease obligated the tenant to “pursue and diligently prosecute a change” in zoning that would allow the property to be used for such purposes. Alas, the zoning board never issued the necessary certificate of occupancy. With the tenant now in bankruptcy, the landlord asked the court to declare the tenant in default so it could sue for money damages later.  

Ruling: The New York court agreed and issued declaratory judgment in favor of the landlord.

Reasoning: The tenant didn’t live up to its obligation to “pursue and diligently prosecute” the necessary zoning change. After the board rejected the initial plan, the tenant proceeded no further in the zoning change administrative process even though there were still avenues it could have pursued. In addition, while the tenant did lay out over $1 million for the initial buildout after taking possession, it didn’t install the soundproofing necessary to secure approval of the zoning change. So, the court concluded that the tenant had violated the lease and that the landlord could terminate the lease as a result.

  • Shadowbox Holdings LLC v. Panasia Estate: 2021 N.Y. Misc. LEXIS 1268, 2021 NY Slip Op 30917(U)

 

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