Wednesday, December 4, 2002, p. 16, col. 1.

CITY ORDERED TO PAY LANDLORD IN RENT ESCALATION CASE

New York, NY, November 25, 2002.

The City of New York, which leases thousands of square feet of space around the five boroughs, has a history of bullying property owners when they try to collect or raise rents. But the tide may be turning in favor of property owners who lease all that space to the City.

In a ruling issued late last week, Manhattan Civil Court Judge Carol R. Edmead ordered the City to pay back rent in the amount of $342,819 for space it leased at 1490 Madison Avenue, marking a rare occasion that a property owner took on the City for nonpayment of rent and won at trial.

The City’s Human Resources Administration, which leased the entire second floor of the property at 1490 Madison Avenue, had refused to pay rent increases under their lease from March 1995 through December 2001, claiming that the landlord was not entitled to the money until certain renovation work was completed. The landlord testified at trial that the City had been notified about the rent increase in a March 1993 letter saying “the new rent will be payable upon the signing of the lease rather than at the completion of site improvements, as is customary in our industry.”

In a decision released on Friday, November 22, Judge Edmead wrote:

“This court concludes that the petitioner has established that the rent escalations commencing March 24, 1995 and thereafter were not conditioned upon substantial completion of the work and that the respondent (City) failed to pay rent in accordance with such terms.”

Jonathan H. Newman, a partner at Newman Ferrara LLP, a law firm specializing in real-estate litigation, represented 1490 Madison Avenue Operating Company, the owner and landlord in the lawsuit.

“This decision is great for landlords who operate in the five boroughs and who lease property to the City,” said Newman. “The City often flexes its considerable legal muscle to intimidate property owners from collecting rents that they are clearly entitled to by law. Hopefully, this victory will ensure that landlords who lease to the City will now have an easier time collecting their rents--and won’t be intimidated.”