Case Law Summaries

Tovar v. Bailey

• Opinion Date: June 24, 2002
• Real Property Law
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LEASES— Where a lease of only part of a property requires the tenant to pay tax increases without further elaboration, it is a reasonable interpretation that the tenant is responsible for only its proportionate share.

A landlord sued to evict a commercial tenant for failing to pay, as additional rent, the increase in real estate taxes as provided for in the lease. The landlord had demanded that the tenant pay the tax increase for the entire building, including for the four residential apartments. The lease included a provision regarding the tax increase, but no percentage was included, only the word “yes” underlined, with an asterisk next to it, and no further typed or handwritten notations. The tenant, after reviewing the tax records and assessment methods, recalculated its fair share of the tax increase based, in part, on its percentage of the square footage of the entire building. The tenant then paid one third of the tax increase, because it considered that to be its pro rata share. At trial, the landlord argued that the lease was unambiguous, was negotiated at arm’s length, and required the tenant to pay the entire tax increase above the base year of the lease. The lower court dismissed the eviction complaint after finding that the lease was ambiguous and that the tenant had substantially complied with the terms of the lease. The landlord appealed, and the Appellate Division affirmed. It agreed with the lower court’s finding that the lease was unclear as to the portion of the tax increase that the tenant was required to pay. Therefore, the landlord was unable to prove that the tenant failed to pay the rent as required by lease. The Court also found that, by paying all of its rent and one-third of the tax increase each month, the tenant substantially complied with the terms of its lease.

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