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Perspectives

Tenants Lose Claims for Improvement Allowances for Failure to Submit Documentation by Deadline

A landlord signed simultaneous leases with two separate, but related, companies covering different floors in the same building. Each lease provided that the tenant would be entitled to reimbursement from the landlord for certain expenditures for improvement of the premises, provided that the improvements were completed and documentation submitted within 18 months of the signing of the leases, or by January 1, 2015.

In August 2014, the parent corporation of both tenants submitted a combined reimbursement request under both leases.  The landlord responded the same day that the tenants’ documentation was deficient because, among other things, the amounts requested must be allocated and submitted separately for each of the two leases.  The tenants did not respond until December 2014, when they submitted revised reimbursement requests that still commingled the expenses and certifications for both tenants.  Three days later, the landlord responded that these requests still did not comply with the requirements of the lease.  The tenants did nothing further before the deadline expired.  In April 2015, the tenants made a third submission for reimbursement.  The landlord responded that it no longer owned the building, which had been sold in February, and that in any event, the January 1, 2015 deadline had expired.

The tenants sued both the old and new landlords. The court dismissed the case against the new landlord based on estoppel certificates that the tenants had signed.  This court also granted summary judgment in favor of the original landlord.  Aerotek, Inc. v. MEPT 757 Third Avenue, LLC, Index No. 654294/2016 (Sup. Ct. N.Y. Co. Sept. 25, 2019).

The court held that the tenants had failed to submit their reimbursement requests, in a form complying with the leases’ requirements, by the deadline clearly specified in the leases. The deadline and the documentation requirements for reimbursement were clearly specified in the leases, so there was no basis on which the court could rewrite the terms of the leases.  Accordingly, the tenants’ claims were dismissed in their entirety, and the landlord was held to be the prevailing party under a legal-fee clause in the leases.  Ganfer Shore Leeds & Zauderer LLP represented the successful former landlord in this case.