Agip Petroleum Co., Inc. v. 666 Fifth Avenue Limited Partnership

• Decision Date: 05 September 2002
• Citation: 297 A.D.2d 483,746 N.Y.S.2d 717
• Parties: AGIP PETROLEUM CO., INC., Respondent,<BR>v.<BR>666 FIFTH AVENUE LIMITED PARTNERSHIP et al., Appellants.
• Court: New York Supreme Court — Appellate Division

297 A.D.2d 483

746 N.Y.S.2d 717

AGIP PETROLEUM CO., INC., Respondent,

v.666 FIFTH AVENUE LIMITED PARTNERSHIP et al., Appellants.

Decided September 5, 2002.

Concur — Tom, J.P., Sullivan, Rosenberger and Friedman, JJ.

Defendants 666 Fifth Avenue Limited Partnership and 666 Fifth, L.P. are the former owner and current owner, respectively, of the building known as 666 Fifth Avenue in the Borough of Manhattan. Plaintiff is the tenant of part of the fifth floor, having entered into a lease dated September 11, 1979, amended March 3, 1993, which provided for the payment of a base annual rental plus certain rent escalation charges. Pursuant to paragraph 28 of the lease, the fixed rent was increased or decreased "resulting from increase or decrease in real estate taxes, operating expenses, wage rates," as set forth in the rent escalation rider that provided that the base annual rental rate would be increased or decreased in any given year by plaintiff's proportionate share of the increase or decrease in operating expenses and real estate taxes for the building as against the lease year from July 1, 1993 to June 30, 1994. Operating expenses include various expenses incurred in the operation, maintenance and management of the building but do not include real estate taxes.

With respect to real estate taxes, section B (1) of the rider provides, inter alia, "If the Taxes payable for any Tax Year * * * shall represent an increase above or decrease below the Base Taxes, then the Base Annual Rental Rate for such Tax Year * * * shall be increased or decreased, as the case may be, by the Tenant's Proportionate Percentage of the increase or decrease." Similarly, with respect to operating expenses, section B (2) provides, inter alia, "If the Operating Expenses for any calendar year * * * subsequent to the Base Expense Year shall be greater or less than the Base Operating Expenses, then the Base Annual Rental Rate payable under this lease for such calendar year * * * shall be increased or decreased, as the case may be, by the Tenant's Proportionate Percentage of the increase or decrease." These provisions are qualified by section E (3), which provides that, notwithstanding any provision in section B, "under no circumstances shall the rental payable under this lease be at a rate less than the Base Annual Rental Rate." Section C (1) requires the landlord to send the tenant "a comparative statement(s) showing separately or together: (i) a comparison of the Taxes for the Comparison Year with the Base Taxes, (ii) a comparison of the Operating Expenses for the comparison year with the Base Operating Expenses, and (iii) the amount of the increase or decrease in the Base Annual Rental Rate resulting from each of such comparisons." Section E (2) provides that all comparative statements are binding unless the tenant sends the landlord a written objection within 60 days specifying the aspects of the statements claimed to be incorrect. Section E (1) provides that if the assessed valuation used in computing the taxes for the comparison year is reduced after the comparison statement is sent to the tenant and the landlord receives a tax refund the landlord must send the tenant a statement adjusting the taxes for said comparison year and setting forth the tenant's proportionate share of the refund, and the tenant would be entitled to receive such percentage as a credit against the next rent, "provided, however, that Tenant's share of such refund shall be limited to the amount, if any, which Tenant had theretofore paid to Landlord as increased rent for such Comparison Year on the basis of the assessed valuation before it had been reduced."

During the first 20 years of the lease, plaintiff did not make any objections. In September 1999, however, plaintiff claimed that the operating expense escalation charges should be reduced by the proportionate share of the annual decrease in real estate taxes whenever current real estate taxes fell below the base tax. Based on this claim, plaintiff's proportionate share of the annual decrease in real estate taxes exceeded its proportionate share of the annual increase in operating expenses. According to its computation, plaintiff...