Tuesday, July 19, 2011

Landlord's Damages Limited in Breach Case

In Weaver Street Properties, LLC v. Cold Stone Creamery, Inc., 2011 NY Slip Op 05803 (2d Dept.), a landlord and a tenant entered into a lease whereby the tenant rented store space in a shopping center owned by the landlord.  The tenant then entered into a sublease with a company owned by two parties, which ran an ice cream store as a franchise of the tenant.  The franchisee defaulted in the payment of rent, and thereafter closed the store about 18 months into the lease term.  The landlord then sued the tenant to recover damages for breach of contract, alleging, among other things, that it was entitled to damages in the amount of the rent due for the remainder of the lease term (which exceeded a 12 month period).

The Appellate Division, Second Department, disagreed with the landlord.  The lease stated that “notwithstanding anything contained herein or elsewhere in the lease to the contrary, landlord and tenant agree that tenant’s liability upon any breach of default hereunder for non-payment of rent shall not exceed an aggregate amount equal to twelve (12) months base rent or the remainder of the rent due pursuant to this lease, whichever is less.”  Therefore, in light of this language in the lease, the Court limited the landlord's damages (for a period not to exceed 12 months), stating the following: “where, as here, a real property transaction contract was negotiated at arm’s length between sophisticated, counseled parties, special import must be given to the rule that a written agreement that is complete, clear, and unambiguous on its face must be enforced according to the plain meaning of its terms.”

Salvatore R. Marino, Esq.

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