COMMERCIAL LEASE - CAN ALL COUNTERCLAIMS BE WAIVED

Despite the lease language, not all counterclaims were waived.

525 Jericho Realty v. Anuj Rani Grp., NYLJ July 03, 2019, Date filed: 2019-06-26, Court: District Court, Nassau, Judge: Judge Scott Fairgrieve, Case Number: LT-006565-18NA:

"….Specifically, petitioner relies on paragraph 38 of the parties’ lease rider, entitled “Set-off and Counterclaim,” which reads as follows:

“It is expressly understood and agreed by and between the parties hereto that the Tenant herein shall not be entitled to any abatement of rent or rental value or diminution of rent or additional rent in any dispossess proceedings for the non-payment of rent or additional rent by reasons of any breach by the Landlord of any covenants contained in this Lease on its part to be performed. In any dispossess proceedings for non-payments of rent or additional rent, the tenant shall not have the right of set-off by way of damages, recoupment or counterclaim in damages which Tenant may have sustained by reason of the landlord’s failure to perform any of the terms, covenants or conditions contained in this Lease on its part to be performed. Tenant shall be relegated to an independent action for damages or for any other relief it may seek, including but not limited to claims for breach of Lease, reformation or rescission and such independent action shall not be at any time joined, or consolidated with, nor asserted in, any action for dispossess or for non-payment of rent or additional rent.”

Thus, petitioner argues that respondent is barred from asserting its counterclaim which seeks damages in the sum of $50,000.00 stemming from a leak in the roof of the premises. Petitioner further contends that the parties appeared before this court in a prior non-payment proceeding, under Index Number LT2764/17. In that proceeding, the parties entered into a stipulation dated October 17, 2017, where it was agreed that, inter alia, petitioner was to repair any roof leak damage within 60 days, at the landlords cost and expense. However, petitioner claims that its inability to repair the roof, as required pursuant to the stipulation, was through no fault of its own because respondent had failed to grant it access to make the necessary repairs.

In opposition, respondent’s counsel alleges that despite the terms of the lease, respondent’s counterclaim is “inextricably intertwined” with the petitioner’s claims herein and thus should be considered in the instant summary proceeding. Specifically, respondent claims that petitioner’s failure to make the roof repairs, pursuant to their lease and the 2017 stipulation, resulted in respondent’s partial constructive eviction and as such, resulted in a monetary loss of income, loss of customers and repeated interference with its quiet use and enjoyment of the premises. Respondent also contends that since the roof repairs were agreed to in a separate contract (i.e. a stipulation), its counterclaim may not be precluded. Finally, respondent refutes petitioner’s allegations that it denied petitioner access to the roof, so that repairs could be made. In fact, respondent argues that petitioner was granted access to make the necessary repairs, but failed to do so.

Commercial lease provisions proscribing counterclaims in summary proceedings are generally enforceable (see Titleserv, Inc. v. Zenobio, 210 AD2d 310 [2d Dept 1994]; Amdar Co. v. Hahalis, 145 Misc 2d 987, 987-88 [App Term, 1st Dept, 1990]). However, despite a no-counterclaim provision in a lease, it does not bar the plaintiff from asserting counterclaims in particular instances, upon the court’s discretion (see generally All 4 Sports & Fitness, Inc. v. Hamilton, Kane, Martin Enterprises, Inc., 22 AD3d 512, 513 [2d Dept 2005]). In Haskell v. Sarita, (109 Misc 2d 409, 413 [1981]), the Civil Court of the City of New York stated that it: “becomes the obligation of the court to examine the nature of each pleaded counterclaim when there is a proper motion to sever. A determination must be made whether any pleaded counterclaim alleges reduction or lack of essential services, or interference with the right to possession, use or enjoyment of the demised premises and might thus be inextricably related to the claim for rent.”

As explained in Rasch’s Landlord and Tenant, Including Summary Proceedings, section 43:40 [5th ed. 2018], entitled Waiver of Right to Interpose Counterclaim, “the primary purpose of the summary proceeding statutes is the speedy and inexpensive determination of landlord-tenant controversies, even where there may be some minimal delay inherent in the trial of a counterclaim, where it is so intertwined with a defense so as to be part and parcel thereof, the court should entertain the counterclaim, exercising its discretion to expedite disposition of the entire controversy, avoid multiplicity of other lawsuits between the parties to accomplish the same result, do speedy justice for all, and eliminate greater delay and expense” [internal citations omitted].

Moreover, in Ring v. Arts Intern., Inc., (7 Misc 3d 869, 880 [Civ Ct 2004]), the court found that:
“[a] principal example of a counterclaim within this exception in a commercial nonpayment proceeding is [a] counterclaim of actual or constructive eviction, to offset the obligation to pay rent, because the claim is inextricably entwined with the nonpayment of rent. (Johnson v. Cabrera, 246 AD2d 578, 579 [2d Dept 1998].)”

In discussing a partial constructive eviction, the Court of Appeals in Eastside Exhibition Corp. v. 210 E. 86th St. Corp., (18 NY3d 617, 622 [2012]), stated that:

 “[i]t is well settled that the withholding of the entire amount of rent is the proper remedy when there has been a partial eviction by a landlord (see Fifth Ave. Bldg. Co. v. Kernochan, 221 N.Y. 370, 372-373, 117 N.E. 579 [1917] ['Eviction…suspends the obligation of payment…because it involves a failure of the consideration for which rent is paid…If such an eviction, though partial only, is the act of the landlord, it suspends the entire rent because the landlord is not permitted to apportion his own wrong']). ‘The reason of the rule is, that the tenant has been deprived of the enjoyment of the demised premises by the wrongful act of the landlord; and thus the consideration of his agreement to pay rent has failed’ (Edgerton v. Page, 20 N.Y. 281, 284 [1859]). This is true even if a tenant remains in possession of the premises (see Barash, 26 N.Y.2d at 83, 308 N.Y.S.2d 649, 256 N.E.2d 707).”

In light of the parties’ stipulation of settlement and respondent’s allegations regarding an alleged partial eviction, the court finds that respondent’s counterclaim is “inextricably intertwined,” such that it warrants consideration by the court herein. Accordingly, based upon the foregoing, petitioner’s motion to dismiss respondent’s counterclaim is denied.