East 56th Plaza, Inc. v. New York City Conciliation and Appeals Board, 51 N.Y.2d 548 (1980)
Under rent stabilization laws, a landlord’s offer of lease renewal must be a binding offer including all terms, such as a potential termination clause, existing at the time of the offer, to be enforceable.
Summary
East 56th Plaza, Inc. sought to include a 90-day termination clause in a lease renewal offered to a tenant under rent stabilization. The clause was contingent on the landlord obtaining approval for a co-op conversion plan after the initial renewal offer. The court held that the renewal offer must be binding and contain all terms, including any termination clauses, that are in effect at the time of the offer. Since the termination clause was not definite at the time of the offer, it could not be included in the binding lease agreement. The landlord’s intent is immaterial because the statute mandates that the offer be binding.
Facts
East 56th Plaza, Inc. (landlord) was subject to the Code of the Real Estate Industry Stabilization Association of New York City.
The landlord offered a lease renewal to a tenant.
The landlord attempted to include a 90-day termination clause in the renewal lease.
This termination clause was contingent upon the landlord submitting a co-operative or condominium plan to the Attorney-General and having it approved by the Department of Housing Preservation and Development.
At the time of the renewal offer, the co-op conversion plan was not yet approved.
Procedural History
The Supreme Court, New York County, ruled in favor of the tenant.
The Appellate Division reversed the Supreme Court’s decision.
The New York Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s judgment.
Issue(s)
Whether a landlord can include a termination clause in a lease renewal offer based on a contingency (approval of a co-op conversion plan) that was not yet satisfied at the time of the offer, under the Code of the Real Estate Industry Stabilization Association of New York City.
Holding
No, because Section 60 of the Code requires the landlord to offer the tenant renewal of the lease on the same terms except for authorized rent increases, and subdivision 7 of section 61 creates an exception only when the landlord has already satisfied the Department of Housing Preservation and Development that a proposed co-operative or condominium plan has been submitted to the Attorney-General; since the cancellation clause was not part of the offer at the time of acceptance, it cannot be part of the binding lease agreement.
Court’s Reasoning
The Court of Appeals reasoned that the statutory scheme requires the landlord to provide the tenant with a binding offer containing all terms of the lease, including the possibility of premature termination if a pending condominium or co-operative plan should become effective.
Acceptance by the tenant creates a binding lease agreement on the terms authorized by statute and included in the offer. The court emphasized that “the obvious statutory scheme and purpose is to require the landlord to provide the tenant, within the statutory period, with a binding offer containing all terms of the lease including the possibility of premature termination if a pending condominium or co-operative plan should become effective.”
Since the offer did not, and could not, include the cancellation clause prior to the tenant’s acceptance, that clause could not be part of the binding lease agreement.
The court explicitly stated that the landlord’s intent is immaterial: “The fact that the landlord may not have intended the proposed lease and transmittal letter to constitute a binding offer is immaterial because the statute requires that the offer be binding.”
The dissent, as noted by the Court of Appeals, sided with the Appellate Division opinion, but the Court of Appeals rejected that viewpoint in favor of a strict interpretation of the rent stabilization code.