The Importance of a Crystal-Clear Lease

Melvyn B. Ruskin and Eric C. Rubenstein Comments
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Neither the landlord nor its attorneys intended to have an ambiguous lease. They labeled it an “escalation” clause, and yet two tenants were awarded substantial rent reductions that were later reversed and remanded on appeal. The landlord may ultimately prevail, but not without lengthy litigation, including appeals addressing the “hopelessly ambiguous” clause.

Perhaps the landlord will be spared because the tenant presented virtually no credible evidence that the parties intended that fixed rent would be reduced due to lower real estate taxes, or that the tenant itself believed it was entitled to such a reduction, or that such clauses are customary in New York City leases. One wonders whether the next tenant who sues 666 Fifth Avenue Limited Partnership will learn from these mistakes.

Recommendations

The problem suggests the solution. The practitioner should consider the following:

Keep it clear.

“Fixed rent” or “base rent” should stay fixed and immutable. Mortgage lenders need to know these amounts can never decrease. Additional rent should encompass all escalations and any credits or refunds. Review form leases with a critical eye, as a disinterested third-party arbiter would, to uncover potential ambiguities. If there is any confusion, clarify the language.

Use examples.

Sample calculations and examples are excellent for clarifying a concept difficult to follow. Still, examples are not a cure for poor drafting. Use them to illustrate how a clause works and to help the reader follow the computation. Do not rely on a clear example to repair a problematic clause.

Get help.

Landlord’s administrative or financial staff should make sure they understand the clause and are instructed by counsel how to bill.

Retain lease drafts to establish intent.

Lease drafts can evidence intent. The court may look beyond the “four corners” of the lease; make sure to retain prior drafts that could be used stop a claimant from taking a variant position. Modern document-imaging techniques, e-mail and retaining drafts on CD may be more manageable than maintaining paper files for the number of years of the lease term.

Melvyn B. Ruskin has been practicing law form more than 30 years and is a founding partner of Ruskin Moscou Faltischek P.C., a 55-attorney firm that maintains offices in Hauppauge, New York City and Uniondale, N.Y. He can be reached at 516.663.6650 or mruskin@rmfpc.com.

Eric C. Rubenstein is a partner and co-chair of the firm’s Real Estate Department, where he specializes in zoning, land use and environmental issues. He can be reached at 516.663.6513 or erubenstein@rmfpc.com.  For more information about the Ruskin Moscou Faltischek, visit www.rmfpc.com

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