350 East 30th Parking, Ltd. v. Board of Managers of the 350 Condominium

• Decision Date: 06 February 2001
• Citation: 280 A.D.2d 284,720 N.Y.S.2d 128
• Court: New York Supreme Court — Appellate Division
• Parties: 350 EAST 30TH PARKING, LTD., Respondents,<BR>v.<BR>BOARD OF MANAGERS OF THE 350 CONDOMINIUM, Appellant.

280 A.D.2d 284

720 N.Y.S.2d 128

350 EAST 30TH PARKING, LTD., Respondents,

v.BOARD OF MANAGERS OF THE 350 CONDOMINIUM, Appellant.

Decided February 6, 2001.

Concur — Rosenberger, J.P., Nardelli, Williams, Mazzarelli and Wallach, JJ.

In dispute on this appeal is the amount of rent plaintiffs 350 East 30th Parking, Ltd., and 350 East 30th Management, Ltd. (collectively Tenant) owe defendant, The Board of Managers of the 350 Condominium (the Landlord), for the last two months under a 12-year lease for a commercial garage, entered into on November 1, 1987, and ending on October 30, 1999. The lease contained a 10-year renewal option (and an additional three-year renewal option), which plaintiffs have exercised. Under article 52 of the lease, the annual base rent immediately prior to the termination of the lease is one of two alternatives for determining the rental value during the renewal period (the fair market rent is the other one), the controlling one being the greater of the two.

Under the original lease, the annual base rent for the first three years was $215,000 per year increased by 50% of the Cost of Living Adjustment or COLA (as defined in the lease); $215,000 per year increased by 75% of the COLA for years fourth through sixth; and $225,000 per year increased by 100% of the COLA for years seven through twelve. A stipulation entered into on September 12, 1990, as a result of a summary proceeding, changed the annual base rent for the last and relevant period (that is, years seven through twelve or November 1, 1993, through October 30, 1999) to $261,000, or $21,750 per month, plus 100% of the COLA.

Thereafter, the lease, as amended by the stipulation, underwent four more modifications by written agreements in April 1993, November 1994, May 1996, and November 1997. The first modification agreement in paragraph 1 reduced the base rent for March 1, 1993, through February 28, 1994 (the Rent Reduction Period) to $191,000.04, or $15,916.67 per month without the COLA. At the end of the Rent Reduction Period, the base rent was to revert to $21,750 per month plus 100% of the COLA as stated in the stipulation. The second modification agreement in paragraph 1 reduced the base rent for December 1, 1994, through November 30, 1995, to $15,000 per month, without the COLA. Paragraph 3 provided that at the end of the Rent Reduction Period, "Base Rent and Additional Rent shall be due and owing to Landlord by Tenant in accordance with the terms and conditions of the Lease as amended. (For example, commencing with the month of December 1995, the Base Rent shall be $21,750.00 per month, plus a 100% COLA adjustment, as provided in the Stipulation)." The third modification agreement, which covered May 1, 1996, through April 30, 1997, was almost identical to the second except for the dates. The fourth and final modification agreement commenced on November 1, 1997, and ended on August 31, 1999, two months before the end of the lease on October 1999, and set the base rent at $21,750, the same rate as stated in the stipulation except that it excluded the COLA (approximately $9,000). Paragraph 3 of the fourth modification agreement provided that for the months of September and October 1999, "Base Rent and Additional Rent shall be due and owing to Landlord by Tenant in accordance with the terms and conditions of the Lease, as amended." This sentence, however, unlike the second and third modifications, was not followed by the parenthetical "(For example, commencing with the month of May 1997, the Base Rent shall be $21,750.00 per month, plus a 100% COLA adjustment, as provided in the Stipulation)." Paragraph 3 of the first modification agreement referred explicitly to the stipulation.

The IAS Court rejected the Landlord's argument that "the 100% COLA adjustment necessarily was to be included in the last two months' rent, just as previously agreed in the prior three modification agreements, and to read numbered paragraph 3 any other way would be to obviate the need to have a separate Rent Reduction Period spelled out in numbered paragraph 1." Instead, it held that the lack of the parenthetical rendered the fourth modification agreement ambiguous as to whether the base rent for September and October 1999 would include the COLA, and resolved the ambiguity against the drafter of the lease, the Landlord. It also found persuasive Tenant's argument that since the fourth modification agreement actually raised the monthly rent by $6,750, it provided no benefit other than excluding the COLA for the months of November 1, 1997, through the end of the lease, October 30, 1999, even though it noted Landlord's argument that the benefit was the absence of the COLA during the Rent Reduction Period.

After granting Landlord's motion to reargue, the IAS Court adhered to its original order granting summary judgment in pla...