Mann Report: Management - August 2017
By: Carol A. Sigmond
From time to time, cooperative and condominium boards have issues with commercial tenants over lease appurtenances. Often this issue arises in conjunction with disputes among the cooperative or condominium board and the commercial unit owner and its tenant(s). Typically, the problem is that the commercial unit owner has somehow committed to a tenant some building service or access right that is beyond the commercial unit owner's rights.
There are well recognized appurtenances to leasehold interests, such as egress, ingress and certain utility services. Basically, a lease appurtenance will arise where the tenant needs a service or access in order to use the real estate for its intended purpose and the use appears to be consented to in practice and the lease is silent. In rural communities, these typically involve driveways or water and sewer lines that have been in place for many years crossing from one property to another. The owner of property hosting the driveway or the lines for a neighbor may not necessarily be in his or her rights to terminate the service if the service is long standing, appears to have been accepted as an agreement by the first parties to confront the issue or there are factors present.
The doctrine of lease appurtenances in New York appears to evolve from the law of implied easements and appears to have been formally recognized in Gans v. Hughes, 14 N.Y.S. 930 (Special Term Kings County, 1891). In Gans, a tenant had operated a bakery lease premises. During the first least term, the tenant had connected to the landlord's waterline, without objection. At the end of the first term, the tenant exercised an option to extend the lease for another three year term. The lease and extension made no mention of any water connection in the cellar. After the extension period began, landlord cut off the water supply. Tenant sued. See id.
The court found that the water connection was an appurtenance for use of the demised space as a bakery, because access to the water connection was "necessary and incidental" to the tenant's use of the cellar for bakery operations and that the landlord had agreed to the connection with the stipulation that the tenant pay for the connection. See Gans at 931. Based on these circumstances, the court found the water connection to be a lease appurtenance implied in the lease itself.
Other typical of the cases are Bon LLC v. Fook Luk Realty, 9 N.Y.S.3d 248 (1st Dept. 2015); 23 East 10 L.L.C. v. Albert Apartment Corp. 91 A.D. 3d 573 (1st Dept. 2012) and Second on Second Café, Inc., v. Hing Sing Trading, Inc., 884 N.Y.S. 353 (1st Dept. 2009). Bon concerned a second means of egress. Tenant sought to force landlord to create a second means of access for the demised premises. The second means of egress was nor called out in the lease and was not found to be an appurtenance. 23 East 10 L.L.C. concerned access to a sidewalk-basement hatch for deliveries to a pizzeria. There, the tenant-landlord leased space to a subtenant to operate a pizzeria. For a year, the pizzeria used a sidewalk hatch to the basement for deliveries and garbage removal. Thereafter, the over-landlord caused a new proprietary lease to be executed and the tenant-landlord cut off access to the sidewalk hatch. The court determined access to the harsh for deliveries and garbage removal to be an appurtenance.
Second on Second concerned a tenant fast-food establishment. There the tenant installed a commercial kitchen with a vent. The tenant placed the vent on the property of an adjacent landowner. The adjacent landowner removed the trespass. The tenant sought to go through the building to vent the kitchen on the roof. Landlord refused. Indeed, landlord refused all proposed vent solutions. The tenant sued for the right to install the vent. The vent was found to be an appurtenance based on the tenant's installation of a commercial kitchen, and the prior vent, both with the landlord's approval. The landlord's refusal to work with the tenant to find alternative venting appears to have been factor in the court's decision. The vent was found to be an appurtenance to the lease for the commercial kitchen.
To protect your building from having a sub-tenant awarded a lease appurtenance, under-landlords/over-tenants, particularly in commercial settings, must expressly waive lease appurtenances and must require their tenants to do likewise. Also, when approving any lease between an under-landlord/over-tenant and a tenant, lease appurtenances must be waived and consent to the lease should be condition on an express waiver. If there is a long standing commercial use of a common element that you wish to change, consult counsel about whether this has become a lease appurtenance and proceed accordingly. The best rime to eliminate lease appurtenances in the lease documents and lease approval.
This column presents a general discussion. This column is not intended to provide legal advice. You should consult your attorney for specific legal advice.
This article was originally published by Mann Report: Management. You can access the article on their website.