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Rosenberg & Estis, P.C. Secures Appellate Division Win For Karr Graphics Corp. In Lease Renewal Dispute

On Behalf of | Mar 23, 2021 | Press Releases

For Immediate Release

Rosenberg & Estis, P.C. has prevailed in the Appellate Division, Second Department, of the New York State Supreme Court on behalf of tenant Karr Graphics Corp., in a dispute over a lease renewal at 22-19 41st Avenue in Queens. The Appellate Division decision upheld an earlier ruling by Supreme Court granting Karr Graphics a preliminary injunction.

Jeffrey Turkel and Brett B. Theis of Rosenberg & Estis, P.C. represented Karr Graphics Corp. before the Appellate Division.

The dispute focused on a claim by the landlord that the tenant was in default under its lease for subleasing its premises and thus could not exercise its option to extend its lease. The tenant had sublet portions of its space on the second floor of the property for almost nine years with the knowledge and participation of the landlord. Two months prior to the window period for the tenant to exercise its renewal option, the landlord issued a notice to cure, claiming that the tenant had improperly sublet its premises in default of the lease.

Although the tenant removed all of its subtenants within the applicable cure period and timely exercised its renewal option, the landlord rejected the tenant’s exercise of its option, claiming that the tenant’s alleged default precluded it from renewing the lease. Brett B. Theis of Rosenberg & Estis took immediate action to protect Karr Graphics’ valuable renewal option by successfully obtaining a preliminary injunction from Supreme Court, enjoining the landlord from taking any action to evict the tenant on the ground that the lease renewal was not valid, and from marketing or leasing the subject premises to a third party. Theis successfully argued that the landlord was obligated to recognize the tenant’s renewal option because the tenant was never in default beyond the applicable notice and cure period of the lease and that a forfeiture of the tenant’s option should be avoided.

The landlord appealed, and the Appellate Division issued a ruling in favor of the tenant upholding the preliminary injunction issued by Supreme Court.

“The landlord clearly knew and acquiesced to the allegedly improper subleases for nearly a decade but attempted to call a default under the lease shortly before the tenant could exercise its option in an attempt to create a forfeiture,” Theis said. “This case underscores that New York courts continue to view renewal options as valuable leasehold interests worthy of equitable protection and that parties must deal fairly with each other.”

Jeffrey Turkel, who wrote the winning brief at the Appellate Division said: “The commercial landlord took the unreasonable position that a single, cured default forever extinguished the tenant’s right to renew. The Second Department held that the landlord’s interpretation was unreasonable, and that the relevant language simply meant the tenant could not renew while there was an uncured default in effect.”

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