Two Guys from Harrison, Inc. v. S.F.R. Realty Associates, 63 N.Y.2d 396 (1984)
When a lease agreement specifies the types of alterations a tenant is permitted to make, any alterations not explicitly authorized are implicitly prohibited, especially when the lease was drafted by the tenant.
Summary
Two Guys from Harrison, Inc. (tenant) sought to make structural changes to a leased building to accommodate a subtenant. The landlord, S.F.R. Realty Associates, objected, citing the lease terms. The tenant argued a statutory and contractual right to make the changes. The New York Court of Appeals held that because the lease specified permitted alterations (interior, non-structural), other alterations, especially structural ones, were implicitly prohibited. The court emphasized that a specific provision in a contract is rendered meaningless if another, broader interpretation is allowed to override it.
Facts
S.F.R. Realty Associates owned property leased to W.T. Grant Company, whose interest was later sold to Two Guys from Harrison, Inc. (Two Guys). Two Guys operated a store on the premises. In 1981, Two Guys decided to close the store and sublet a portion of the building to Grace Realty Corporation for a “Channel Home Center.” To accommodate the sublessee, Two Guys planned interior and exterior changes, including extending a sign canopy, adding brick fascia, installing a new door, and adding a loading door. S.F.R. Realty Associates objected to the changes as violations of the lease.
Procedural History
Two Guys initiated a special proceeding claiming statutory and contractual rights to make the changes. The trial court ruled in favor of Two Guys, finding the lease “silent and nonprohibitive” regarding exterior alterations. The Appellate Division reversed, reasoning that express permission for certain alterations implicitly prohibited others. The Court of Appeals affirmed the Appellate Division’s decision.
Issue(s)
Whether a tenant has the right to make substantial structural changes to a leased property when the lease agreement specifies certain permitted alterations, but is silent on the specific type of alterations proposed.
Holding
No, because the lease agreement specifies certain permitted alterations (interior, non-structural), other alterations, especially structural ones, are implicitly prohibited, as the specification of permitted activities should be read as implicitly prohibiting other alterations.
Court’s Reasoning
The Court of Appeals based its reasoning on the interpretation of the lease agreement, particularly Paragraph 6(a), which addressed alterations. The court applied the principle of inclusio unius est exclusio alterius (the inclusion of one thing implies the exclusion of another). Since the lease expressly allowed only interior, non-structural alterations, any other alterations, particularly exterior structural changes, were implicitly prohibited. The court rejected Two Guys’ argument that its right to sublet under Paragraph 12 implicitly included the right to make any necessary alterations. The court reasoned that this interpretation would render Paragraph 6(a) meaningless. The court stated, “Under petitioner’s interpretation, Paragraph 12 gave it a broad power to alter the premises as it deemed necessary for subletting. As a prohibitive clause, however, Paragraph 6(a) would be meaningless if not given effect here because all the conduct it restricts could be freely pursued under Paragraph 12.” The court distinguished Premium Point Park Assn. v. Polar Bar, stating that the tenant’s power to sublet or subdivide would not be practically defeated if it could not make structural changes. The court emphasized that since Two Guys’ predecessor drafted the lease, any ambiguities should be construed against the tenant. As the court noted, “Under all the circumstances here, the specification of certain permitted activities in Paragraph 6(a) should be read as implicitly prohibiting other alterations.”