Mobil Oil Corp. v. Finance Adm'r of City of New York

• Decision Date: 15 February 1983
• Citation: 446 N.E.2d 130,58 N.Y.2d 95,459 N.Y.S.2d 566
• Parties: , 446 N.E.2d 130 In the Matter of MOBIL OIL CORPORATION, Appellant, v. FINANCE ADMINISTRATOR OF the CITY OF NEW YORK, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 566

459 N.Y.S.2d 566

58 N.Y.2d 95, 446 N.E.2d 130

In the Matter of MOBIL OIL CORPORATION, Appellant, v. FINANCE ADMINISTRATOR OF the CITY OF NEW YORK, Respondent.

Court of Appeals of New York.

Feb. 15, 1983.

Jerome R. Hellerstein and J. Dwight Evans, Jr., New York City, for appellant.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Gale Zareko, New York City, and Frances Henn, Little Neck, of counsel), for respondent.

OPINION OF THE COURT

SIMONS, Judge.

Petitioner in this article 78 proceeding contends that the tax assessed against it under the New York City commercial rent or occupancy tax law is invalid because assessed, in part, against sums it paid to the landlord for cleaning and janitorial services, not rent. The Appellate Division, 86 A.D.2d 504, 449 N.Y.S.2d 123, held otherwise and we affirm its judgment.

Petitioner occupies New York City premises under leases containing three different clauses relating to cleaning services. ^* In two of the leases the landlord agreed that upon payment of the agreed rent, it would supply the tenant cleaning and janitorial services but that the tenant could, if it elected, supply cleaning services at its o expense. If the tenant did so, the lease provided that the rent would abate pro rata according to formulae contained in the leases. Petitioner contends that because abatement is available to it the amount by which the rent would be reduced if it exercised the option to supply its own cleaning is payment for services which should not be taxable. Its submission proceeds along two lines. First, it contends that cleaning is not an item normally supplied by landlords and since the charge for the service can be mathematically computed and segregated it should not be taxable. Second, it contends that charges for cleaning services are specifically excluded from the taxable rent by the language of the local law.

Pursuant to title L of chapter 46 of the New York City Administrative Code business and professional tenants within the City of New York are required to pay a tax measured by their rent. "Rent" is defined as: "[t]he consideration paid or required to be paid by a tenant for the use or occupancy of premises * * * including any payment required to be made by him on behalf of his landlord for real estate taxes, water rents or charges, sewer rents or any other expenses (including insurance) normally payable by a landlord who owns the realty other than expenses for the improvement, repair or maintenance of the tenant's premises" (Administrative Code of City of New York, § L46-1.0, subd. 6).

Preliminarily it should be noted, although this is not dispositive of the issue, that petitioner's monthly rent is billed and paid in one lump sum, as specified in the leases and modifications, and without any breakdown for the amounts claimed to be attributable to cleaning services. The parties agreed upon this sum as rent for the leasehold and if the tenant had failed to pay it, then the tenant was subject to eviction (see, e.g., Haskel v. 60 West 53 St. Corp., 138 Misc. 595, 246 N.Y.S. 698, affd. 231 App.Div. 800, 246 N.Y.S. 875; Pope v. Battcock, 218 App.Div. 857, 219 N.Y.S. 111). The landlord, in consideration of the sum paid, agreed to supply the tenant with a variety of services such as heat, air conditioning, window washing and garbage collection. It also agreed to supply the tenant with cleaning and janitorial services. Because the leases expressly give the tenant the option to supply its own cleani services and a formula for abatement is stated, it is possible to compute the portion of the rent allocable to cleaning services although that for other services cannot be segregated. Petitioner contends therefore that cleaning services should be treated differently because their actual cost is subject to computation. The short answer to that is that the formula sums in the lease do not represent the economic cost of the services supplied. Manifestly, they are bargained for elements of the rent because the abatement allowed varies from lease to lease and for different tenants in the building depending upon...