GANFER & SHORE, LLP CLIENT ADVISORY MARCH 2011 RULE AGAINST PERPETUITIES DOES NOT APPLY TO LEASE RENEWAL OPTIONS In the November 2009 issue of this Client Advisory, we discussed how the venerable Rule Against Perpetuities, a doctrine intended to prevent unreasonable restraints on alienation of real property, must be considered in drafting and enforcing leases and other agreements. As one example, we cited the Bleecker Street Tenants case, in which the Appellate Division invalidated a series of nine 14-year lease renewal options under the Rule Against Perpetuities. New York’s highest court, the Court of Appeals, has now reversed that decision and held that “the rule against perpetuities does not apply to options to renew leases.” Bleecker Street Tenants Corp. v. Bleecker Jones LLC, 2011 WL 649766, 2011 N.Y. Slip Op. 1360 (Feb. 24, 2011). Although the option in this case could be exercised during a month-to-month tenancy following an option period’s expiration, the Court held this did not change the result. As long as the tenant must still be in possession when it exercises an option, a series of renewal options “continue the tenant’s possession of the property without interruption, thus encouraging efficient use of the property.” LEASE PROVISION FIXING LATE FEE AS PERCENTAGE OF RENT IS UNENFORCEABLE PENALTY, COURT HOLDS A provision of a residential lease imposing a late fee based on a percentage of the rent is unenforceable, according to a recent court decision. North Clinton Assocs. v. Rehman, N.Y.L.J. Feb. 22, 2011, p. 37 (District Ct. Suffolk Co. Feb. 14, 2011). The lease in this case provided for “the imposition of a fixed late charge equal to 10 percent of the rent due, which is recoverable as additional rent, if rent is not received on or before the fifth day of the month.” In a summary proceeding brought by the landlord, the court found that the tenant owed two months’ unpaid rent. However, the court refused to impose the late fee, because “[i]t has been held that the imposition of a fixed percentage of rent, without proof of actual costs or expenses incurred by the landlord, is unconscionable as it is disproportionately onerous and confiscatory in nature.” The landlord failed to offer any evidence as to its actual expenses caused by late payments, and hence, the court found that “the 10 percent late fee imposed bears no relation to the actual costs and expenses incurred by the [landlord], if any, as a result” of nonpayment or late payment. To avoid a similar outcome, landlords, cooperatives, and condominiums may wish to review their governing documents and make sure that late fee provisions are predicated on actual expenses caused by nonpayment or delayed payment of tenants’ or unit owners’ obligations. WRONGFUL DEATH ACTION PROCEEDS AGAINST COOPERATIVE FOLLOWING ELEVATOR OUTAGE A claim for wrongful death asserted against a Cooperative and its elevator repair company, alleging that a resident suffered a fatal asthma attack after walking up five flights of stairs because the elevator was out of service, will proceed to trial. Worthy v. 14905 Owners Corp., 29 Misc. 3d 1214(A), 2010 WL 4159524 (Sup. Ct. Queens. Co. Oct. 22, 2010). Denying the Cooperative’s motion to dismiss the claims against it, the court held it was foreseeable that residents would have to use the stairs when the building lacked elevator service. In that circumstance, an asthma attack was not such an extraordinary reaction as to be considered unforeseeable. In addition, “[t]he asthma attack was not a legally intervening cause of decedent’s injuries” that would have absolved the Cooperative from liability; rather “the asthma attack was itself an injury” allegedly caused by the elevator outage. The court concluded that factual issues existed that required a trial, including “the time at which the elevator went out of service on the day of the incident and … the frequency of prior elevator breakdowns.” The court also sustained the wrongful death claim asserted against an elevator company that was under contract to maintain and repair the Cooperative’s elevators, because “[a]n elevator company that enters into an agreement to maintain an elevator owes a duty of care to members of the public to correct conditions of which it is aware and to use reasonable care to discover and correct a condition which it ought to find.” However, the court dismissed claims asserted against the managing agent, because the management agreement reflected “that the [Cooperative] reserve to itself a significant amount of control over the maintenance of the premises.” Thus, there was not “a comprehensive agreement that displaced the duty of [the Cooperative] to maintain the premises safely as is necessary to allow the imposition of liability on a managing agent for non-feasance.” FEDERAL COURT DECISION DEMONSTRATES DANGER OF “SELF-HELP” REMEDIES A recent federal lawsuit provides a reminder that cooperatives, condominiums, and homeowners associations should generally avoid resorting to “self-help” remedies to resolve problems with residents, particularly in non-emergency situations. Taylor v. Harbour Pointe Homeowners Association, N.Y.L.J. Feb. 24, 2011, p. 25 (W.D.N.Y. Feb. 16, 2011), was a disability discrimination case brought by a homeowner in a community governed by a homeowners association. The association received complaints concerning the appearance of the plaintiff’s unit, particularly the patio. Thereafter, the plaintiff went away for a trip. While she was gone, her neighbors decided to improve the appearance of her unit. In doing so, “[t]hey rearranged boxes, moved some boxes to the garage, discarded some cardboard and old newspapers, and cleaned out debris.” When plaintiff returned home, instead of expressing appreciation for her neighbors’ cleaning efforts, she filed a police report against them for trespass. Plaintiff then filed federal and state administrative complaints, alleging that the homeowners association had discriminated against her based on a claim that she suffered from clinical depression that prevented her from maintaining her residence in a tidy manner. Plaintiff then sued in federal court under the Fair Housing Act. She contended that she had told her neighbors that while she would clear out the patio, she had to do it at her own pace because outside interference would aggravate her depression. The court dismissed the disability claim, finding that plaintiff’s comments were insufficient to constitute a request that the association provide a reasonable accommodation of a disability. Because plaintiff’s federal claim was dismissed, the court dismissed plaintiff’s claims for trespass and other torts but allowed them to be refiled in state court. In retrospect, the homeowners association could have avoided the litigation by using means other than self-help to address the problems with the appearance of plaintiff’s home. |
