Bank of New York, Albany v. Hirschfeld, 37 N.Y.2d 501 (1975)
A grantee taking title to property “subject to” an existing lease affirmatively assumes the landlord’s obligations under the lease covenants, especially when the lease contains clauses indicating assumption by subsequent purchasers.
Summary
The Bank of New York sued to enforce a lease provision requiring free parking spaces. Hirschfeld, the original landlord, conveyed the property “subject to” the bank’s lease to 112 State Street Operating Co., Inc., who then conveyed it, in lieu of foreclosure, to Teachers’ Retirement System. Hirschfeld, who still owned the garage, refused to provide free parking. The court held that Teachers’ Retirement System, by taking title “subject to” the bank lease, assumed the landlord’s obligations, including providing the parking spaces. However, specific performance was inappropriate as Teachers’ Retirement System lacked control over the garage. The bank’s remedy was limited to monetary damages.
Facts
On May 18, 1971, Bank of New York entered a lease with Hirschfeld for office space, including Covenant 42, which stipulated that the landlord would provide 10 free parking spaces in an adjoining garage. A supplemental garage lease was also executed. Hirschfeld conveyed the property to 112 State Street Operating Co., Inc. on January 2, 1972, subject to the bank lease. On January 19, 1973, the Operating Company conveyed the premises, subject to the bank lease, to Teachers’ Retirement System in lieu of foreclosure. Hirschfeld, still owning the garage, refused to provide the free parking spaces. Covenant 33 in the lease stated that upon sale of the land and building, the purchaser assumes all obligations of the landlord. A memorandum of the lease was recorded.
Procedural History
The Bank sued Hirschfeld, the Operating Company, and Teachers’ Retirement System to enforce the parking arrangement. Hirschfeld and the Operating Company cross-claimed against Teachers’ Retirement System, seeking a determination that Teachers’ Retirement System was the primary obligor for providing the parking spaces. Special Term ordered specific performance by Hirschfeld/Operating Company under the garage lease and Teachers’ Retirement System under the bank lease, and granted Hirschfeld/Operating Company summary judgment on their cross-claim. The Appellate Division affirmed. Teachers’ Retirement System appealed.
Issue(s)
1. Whether Teachers’ Retirement System, by taking title to the property “subject to” the existing bank lease, assumed the obligations of the landlord under the lease, specifically the obligation to provide free parking spaces?
2. Whether specific performance is an appropriate remedy against Teachers’ Retirement System, given its lack of control over the garage property?
Holding
1. Yes, because by taking title