71 A.D.2d 101 | N.Y. App. Div. | 1979
OPINION OF THE COURT
Respondents, the new owners of a commercial building, served a notice of termination of a written lease on appellant, a tenant, when the rent which, under the lease, was to be paid on the first day of the month was not received on that date. Throughout the tenancy with the previous owner, appellant had been in the habit of paying the rent after the first of the month. Are the new owners, concededly without actual knowledge of the waiver of strict compliance with this term of the lease by their predecessor, charged with constructive knowledge of it? We think not.
The facts are essentially undisputed and may be briefly stated. On March 1, 1973 appellant, Thomas C. Peters Printing Co., Inc. (Peters), entered into a lease agreement with H. J. Brandeles Corporation whereby appellant, as tenant, was let certain premises located at 637 Eagle Street, Utica, New York, for a period of four years. On December 3, 1976 appellant exercised its option to renew the lease for a second four-year term to expire February 28, 1981. The lease agreement pro
On December 5, 1978 respondents, brothers Basil L., Richard J., Robert J., Frederick J. and Steven A. Tehan (Tehan), purchased the premises from Brandeles. Respondent Richard J. Tehan visited appellant at its office on December 15, 1978 and informed appellant of the purchase from Brandeles and offered to purchase the remaining term of appellant’s lease. The offer was refused. Respondents then formally advised appellant of the change of ownership in a letter dated December 19, 1978. After advising Peters of the Tehans’ purchase of the building which the Peters Company occupied, the letter continued by stating: "[therefore, I am writing this letter to let you know that beginning January 1979, the monthly rental which is due on the 1st of each month should now be paid to the undersigned at the above address, instead of H. J. Brandeles Corporation”. The first rent payment to have been made by appellant to respondents was due January 2, 1979, the first business day of January. Consistent with his prior course of performance appellant did not pay the rent on that day. Respondents treated this as a default under the lease agreement and pursuant to its provisions elected to terminate appellant’s lease. On January 3, 1979 respondents served on appellant a notice of termination, termination being effective as of January 8, 1979.
Immediately after it received the notice of termination appellant tendered a check for the full amount of the rent due. Respondents refused it. Several days later respondents commenced summary proceedings to evict appellant under subdivision 1 of section 711 of the Real Property Actions and Proceedings Law.
At the hearing held in the City Court of Utica on January 22, 1979 appellant testified that Brandeles was in the habit of accepting tardy rent checks; that he conversed with respondent Richard J. Tehan on January 2, 1979, but no mention of a demand for the rent was made at that time. However, appellant did state that at no time did he inform respondents
As a primary matter respondents contend that the issue is moot since appellant concedes that it has relocated its business. However, that does not moot the issue. Appellant’s lease did not expire until 1981 and while a reversal by this court will not automatically reinstate the lease, appellant would have the option to do so (Wolf-Kahn Realty Corp. v Sussman, 240 App Div 422). Further, appellant seeks to avoid any collateral estoppel effect in a possible action for damages. This controversy is, therefore, viable and not moot.
The question presented by appellant is a narrow one, i.e., are respondents, the new owners, charged with constructive knowledge of and, therefore, bound by, their predecessor’s waiver of strict compliance with the lease terms providing for rent payments on the first of the month. This is an issue not previously determined in New York. It is clearly the law of this State that a successor-in-interest to real property takes the premises subject to the conditions as to the tenancy, including any waiver of rights, that his predecessor in title has established if the successor-in-interest has notice of the existence of the leasehold and of the waiver (Bank of New York v Hirschfield, 37 NY2d 501; Radcliffe Assoc, v Green-stein, 274 App Div 277; 33 NY Jur, Landlord and Tenant, § 74, p 376). The key to the liability of the successor-in-interest is notice of the relevant lease provision or waiver thereof. Notice may be actual or constructive (Bank of New York v Hirschfield, supra). Possession of premises is constructive notice to a purchaser of the rights of the possessor (Phelan v Brady, 119 NY 587). The precise issue raised by appellant is whether possession is also constructive notice of all conditions and waivers of the lease agreement which reasonable inquiry by the purchaser would reveal. The trial court determined there was no duty of inquiry on the part of the purchaser as successor-in-interest, except as to those conditions the exis
Appellant argues that the general rule in regard to the obligations of a grantee is broad enough to support its position that a duty of inquiry exists. Support is found for this argument in Phelan v Brady (supra, pp 591-592) where the Court of Appeals held: "[a]ctual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish”. The rule that emerged is that mere possession is constructive notice of any and all rights the possessor can establish. It has been recited in numerous cases and treatises as a general rule, not restricted simply to issues of record notice (see Adelson v Sacred Assoc. Realty Corp., 192 App Div 601; Adams-Flanigan Co. v Kling, 198 App Div 717; American Exch. Nat. Bank v Smith, 61 Misc 49; 3 Warren’s Weed, New York Real Property, Leases and Lettings, § 7.05; Rasch, NY Landlord and Tenant, § 10.98; 33 NY Jur, Landlord and Tenant, § 74). In its application the rule has been broadly stated where the issue before the court was of the continued viability of the waiver of a lease provision (Adams-Flanigan Co. v Kling, supra; Radcliffe Assoc, v Greenstein, supra; Vendramis v Frankfurt, 86 NYS2d 715; 215 West 34th St. v Feldman, 105 NYS2d 209; Irbar Realty Corp. v Vallins, 64 NYS2d 843; Natanson v Gavaert Co. of Amer., 96 NYS2d 774). Appellant contends, therefore, that a purchaser (here respondents) takes no greater rights than his vendor, including the seller’s right to enforce lease provisions; and that it is inequitable to permit a purchaser to terminate a tenant’s interest when his vendor, the original contracting party, could not have done so. While this argument is not without merit, we are persuaded that there are sound policy reasons for allowing this successor-in-interest to terminate the tenant’s lease even though their predecessor could not.
We observe initially that the general rule is stated more broadly than the facts of the cases cited warrant. In each of those cases cited immediately above there was an added element of actual notice to the purchaser of the waiver or constructive notice through the fact that the deviation from the lease provision in issue was readily apparent upon an inspection of the premises. Constructive notice only arises when a purchaser has knowledge of facts which would lead a
Appellant’s final argument is that even assuming a default we should reverse because the law abhors a forfeiture of a leasehold (see J.N.A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392), particularly for nonpayment of rent (57 E. 54 Realty Corp. v Gay Nineties Realty Corp., 71 Misc 2d 353). As the Court of Appeals recently observed, in a somewhat similar context, it may be exploitive or even perhaps unconscionable for a landlord to refuse to accept an effort, to cure a late rent payment and instead seek to enforce a lease acceleration clause. Nonetheless, the court went on to hold that this was a routine commercial lease and absent some element of fraud, exploitive overreaching or unconscionable conduct on the part of the landlord, equitable intervention was not justified (Fifty States Mgt. Corp. v Pioneer Auto Parks, 46 NY2d 573, 578-579).
We believe that holding apt. Here the lease was not uncon
Accordingly, the order should be affirmed.
Schnepp, Doerr, Wither and Moule, JJ., concur.
Order unanimously affirmed, with costs.