2641 Concourse Co. v. City University of New York, 68716

• Decision Date: 20 November 1987
• Docket Number: No. 68716,68716
• Citation: 137 Misc.2d 802,522 N.Y.S.2d 775
• Parties: , 43 Ed. Law Rep. 1098 2641 CONCOURSE CO., Claimant, v. The CITY UNIVERSITY OF NEW YORK and Herbert H. Lehman College, Defendants. Claim
• Court: New York Court of Claims

Page 775

522 N.Y.S.2d 775

137 Misc.2d 802, 43 Ed. Law Rep. 1098

2641 CONCOURSE CO., Claimant, v. The CITY UNIVERSITY OF NEW YORK and Herbert H. Lehman College, Defendants.

Claim No. 68716.

Court of Claims of New York.

Nov. 20, 1987.

Alex Rosenthal, Peter H. Brandt and Hubert J. Brandt, for claimant; Richard A. Steinberg, New York City, of counsel.

Robert Abrams, Atty. Gen. by Peter L. Zimroth, Corp. Counsel, for defendants; Joseph I. Lauer, Robert Pfeffer, Peter Mound and Anthony P. Semancik, New York City, of counsel.

GERARD M. WEISBERG, Judge.

The issue before the Court is the fair market value for the use and occupancy of the land and building known as No. 2641 Grand Concourse, Bronx, New York during the period from October 22, 1981 through January 5, 1982.

The property covers an entire square block and is located at the corner of Grand Concourse and Kingsbridge Road in the north Bronx. It is improved with an "L"-shaped four story and basement building having approximately 62,000 square feet of rentable area. The subject also has about 38,000 square feet of exterior, fenced land. It is zoned R-8 (residential) but is surrounded by commercially zoned properties.

Claimant rented the premises to the City of New York (City) for the benefit of the Board of Higher Education. The lease, dated April 30, 1971, was for ten years and provided the tenant with an option to extend the term for an additional five years. The "base rental" was $439,000 per annum for the initial period and $252,000 per annum if the option were exercised. The lease also called for additional rent equal to the real estate taxes in excess of $45,000 per annum, which amounted to $98,200 in 1981.

The agreement required claimant, at its expense, to alter the building from a home for the blind into an educational facility. The specifications were annexed to and incorporated into the lease which provided that if claimant failed to complete the alterations the City could perform them and deduct the cost from the rent. Claimant performed the alterations which cost approximately $1,000,000, and Herbert H. Lehman College (Lehman College), a senior college, took possession.

During the term of the lease, by operation of law (Education Law § 6228[5]; L.1979, ch. 305, § 10 [effective July 1, 1979] ), the master tenancy changed from the Board of Higher Education to City University of New York (CUNY), thereby vesting this Court with jurisdiction over this matter pursuant to Education Law § 6224.

In 1980, CUNY decided not to renew the lease and so notified claimant. That notwithstanding, on or about January 12, 1981, CUNY sublet the subject on a rent-free basis to the Board of Education of the City of New York which converted it to an annex to Public School 46. During the 1980-1981 school year it was used by approximately 350 grade-school children. Certain offices in the building were also occupied with the City's consent by various school boards and municipal agencies.

In early 1981, claimant entered into negotiations with Alex Liberman, chief negotiator for the Bureau of Leasing of the Department of General Services, on behalf of the City, to either purchase or rent the subject. Claimant knew the Board of Education continued to need the premises as an annex to Public School 46.

As of July 1981, the negotiations had progressed to the point where a resolution was drafted for the Board of Estimate seeking the Board's permission to enter into a one-year lease of the building. The proposed rent was to be $450,000 per annum with the City to pay all real estate taxes and utilities. The resolution was accompanied by a transmittal report, prepared by Mr. Liberman for the signature of his superior, Leonard Kahn, Assistant Commissioner of General Services. Although the report noted the former rent, it failed to mention the cost of the renovations or the lower rent which would have become effective had the option to renew been exercised.

By resolution dated July 23, 1981, the Board of Estimate authorized the Board of Education to enter into the proposed lease. However, the resolution omitted the statutorily required finding that the proposed rent was "fair and reasonable." (See, Administrative Code of the City of New York § 3-406.) For reasons which do not appear in the record, the Department of General Services refused to prepare or execute this lease.

The original lease expired by its own terms on October 21, 1981. While Lehman College had vacated the premises, CUNY's subtenants remained in possession. Claimant commenced eviction proceedings which were rendered moot on January 6, 1982 when the City took title by condemnation. No rent or tax reimbursements have been paid by or on behalf of CUNY subsequent to October 21, 1981. By an Order pursuant to Court of Claims Act § 10(6) (2641 Concourse Co. v. City Univ. of N.Y., Ct. of Claims, Oct. 14, 1983, Amann, J.), claimant was permitted to file a late claim which it did on December 1, 1983. Damages are sought from CUNY and Lehman College ¹ for such holdover covering the period from October 22, 1981 through January 5, 1982.

The law is clear, and CUNY does not dispute, that its failure to remove its undertenants at the expiration of the lease has rendered it liable for the reasonable value of the use and occupancy for the entire premises for the holdover period together with incidental damages which are attendant thereto. (Stahl Assoc. Co. v. Mapes, 111 A.D.2d 626, 490 N.Y.S.2d 12; Beacway Operating Corp. v. Concert Arts Socy., 123 Misc.2d 452, 474 N.Y.S.2d 227; see also, Jaroslow v. Lehigh Valley R.R. Co., 23 N.Y.2d 991, 298 N.Y.S.2d 999, 246 N.E.2d 757; Rasch, Landlord & Tenant § 281 [2d ed. 1971].) Such value and damages are, therefore, the sole issue before us.

The landlord has the burden of proving its damages including the reasonable value of use and occupancy. (Beacway Operating Corp. v. Concert Arts Socy., supra, 123 Misc.2d at 453, 474 N.Y.S.2d 227; Mercurius v. Burke, 21 Misc.2d 201, 190 N.Y.S.2d 826.) Reasonable value is fair-market rental and may be established by appraisal testimony based on comparable rentals or by reference to the rental history of the subject itself. (New York Connecting R.R. Co. v. Queens Used Auto Parts, 298 N.Y. 830, 84 N.E.2d 144; Goelet v. Natl. Surety Co., 249 N.Y. 287, 164 N.E. 101; Earl v. Nalley, 273 App.Div. 451, 78 N.Y.S.2d 92; Beacway Operating Corp. v. Concert Arts Socy., supra, 123 Misc.2d at 454, 474 N.Y.S.2d 227; Rand Prod. Co. v. Mintz, 69 Misc.2d 1055, 332 N.Y.S.2d 452 affd. 72 Misc.2d 621, 340 N.Y.S.2d 444; see also, Merman v. The Surrey, 106 Misc.2d 941, 436 N.Y.S.2d 690.)

In the analogous area of condemnation valuation, the rule is that a price set in the course of an arm's length transaction involving the subject, of a recent vintage, if not explained away as abnormal, is evidence of the highest rank in determining the true value of the property. (Plaza Hotel Assoc. v. Wellington Assoc., 37 N.Y.2d 273, 372 N.Y.S.2d 35, 333 N.E.2d 346; Vasile v. State of New York, 30 A.D.2d 1042, 294 N.Y.S.2d 854, affd. without opn. 24 N.Y.2d 969, 302 N.Y.S.2d 596, 250 N.E.2d 79; Hardele Realty Corp. v. State of New York, 125 A.D.2d 543, 509 N.Y.S.2d 621.) In holdover proceedings, this rule finds its expression in the caveat that while probative of fair-market rental, the rent reserved in a lease is not conclusive on such issue. (Goelet v. Natl. Surety Co., supra, 249 N.Y. at 295, 164 N.E. 101; Beacway Operating Corp. v. Concert Arts Socy., supra, 123 Misc.2d at 453, 474 N.Y.S.2d 227.) Whether a distinction exists between these formulations is a question which need not detain us for, as shall be seen, the rental history of the subject is the only competent evidence of valuation in this case.

Claimant's appraiser relied exclusively on three comparables located in the south Bronx. Based on that area being "blighted" and a "jungle," he adjusted his "Rental One" up by 70% and his "Rental Two" and "Rental Three" up by 50% for location. Rental Two and Rental Three were also modified up by 15% because of their proximity to an "elevated subway." After other adjustments, the net changes to the three comparables totalled 80%, 70% and 65%, respectively.

Claimant's appraiser offered no evidence to support the location adjustments other than his opinion bolstered by his general experience.

Based on these comparables, he opined that the fair market rental was $527,000 per annum on an "absolutely net" basis. Absolutely net was defined to be an arrangement whereby the tenant pays, in addition to the rent, all real estate taxes and utilities.

We find that we can give no weight to this appraisal. To be probative, an opinion must be based on facts properly before the Court. (Caton v. Doug Urban Constr. Co., 65 N.Y.2d 909, 493 N.Y.S.2d 453, 483 N.E.2d 128; Matter of Chrysler Realty Corp. v. Foley, 74 A.D.2d 847, 425 N.Y.S.2d 387, appeal dismissed 50 N.Y.2d 928; Ridgeway Assoc. v. State of New York, 32 A.D.2d 851, 300 N.Y.S.2d 944; Roskin Bros. v. State of New York, 5 Misc.2d 929, 160 N.Y.S.2d 32, affd. on other grounds 8 A.D.2d 895, 187 N.Y.S.2d 51.) Here, the massive location adjustments were offered on a "take it" or "leave it" basis without any corroborative or objective support. That the south Bronx may have been a jungle in 1981 does not, ipso facto, establish that properties in the north Bronx rented for 50% to 75% more. We are forced to either accept that, for example, Rental One must be adjusted up by 75% to make it comparable with the subject, or not accept it. But nothing has been submitted upon which we can evaluate this opinion or reach a middle ground.

We are told that claimant's appraiser was forced to rely on these three comparables because they were the only properties in the Bronx being rented for school purposes and, therefore, were the only ones qualified for comparison. Whether true or not, ² such reason does not change the result. The primary consideration...