Rosenberg & Estis, P.C., counsel to Global Partners LLC (NYSE: GLP) and wholly-owned subsidiary, Alliance Energy, LLC, has successfully defeated a motion to dismiss by its landlord seeking to evict Alliance from its longtime premises at a busy Flushing intersection by convincing Supreme Court’s Commercial Division in Queens County that the landlord could not rewrite the terms of the 50-year lease.
In a masterclass in lease litigation, Rosenberg & Estis Member Howard W. Kingsley and Of Counsel Benjamin Z. Koblentz argued that the purported notice served by the landlord, Richard Wallace Burr, was ineffective because it was not served as required by the lease.
“This decision is a reminder that words matter,” said Kingsley. “When a lease, or any agreement, is negotiated, the parties must choose their words very carefully because those very words will govern the relationship and cannot be changed later.”
At issue was Alliance’s right to control the large, 24-hour service station at the corner of Union Turnpike and 164th Street in Flushing. Alliance is the tenant under a ground lease which gave it a right of first refusal (ROFR) if the owner received a bona fide offer from another potential tenant to lease the premises. The lease states that, if any such offer is made during the 50-year term, the landlord must send the tenant a copy of the proposed new lease and his intention to accept the other offer, which is effective unless the tenant timely exercises its ROFR and accepts the terms of the new lease within 30 days. If the tenant fails to do so, it must vacate the premises and allow the landlord to sign a deal with a new tenant.
The landlord claimed that it obtained such an offer and provided Alliance with a notice signed by Burr’s attorney and sent by US Postal Service Priority Mail on July 7, 2021, together with a new 20-year lease. Alliance exercised its ROFR and returned to the landlord a signed new lease through 2042. The landlord claimed that Alliance did not timely exercise its ROFR, rejected the lease signed by Alliance, took the position that the landlord properly leased the property to a third-party, and claimed that Alliance’s lease expired on November 30, 2022.
To prevent any forfeiture of its valuable real property rights, in June 2022, on behalf of Alliance, R&E commenced the lawsuit claiming that Burr’s notice was ineffective because he, as opposed to his attorney, did not send the notice and it was not served by registered or certified mail, the only method of service permitted by the old lease, which did not allow for service by more modern means, such as overnight courier or email.
Kingsley told Supreme Court’s Commercial Division in Queens County that Alliance properly exercised its ROFR within the required 30 days, noting that it wanted to make some minor clean-up changes to the terms. The landlord’s attorneys argued that this did not constitute an acceptance of the new lease and ordered Alliance to vacate the property by the November 30, 2022, lease expiration date.
“We didn’t want to sue,” said Kingsley. “But this is a valuable commercial property that the tenant had successfully operated under a triple net lease for many years and should not lose if the tenant properly exercised its ROFR.”
In his successful defense of his client’s rights, Kingsley directed the court to the original lease which stated, in part, “Any notices, consents, approvals, submissions or demands given under this lease or pursuant to any law or government regulation, by Landlord to Tenant, or by Tenant to Landlord, shall be in writing. Unless otherwise required by law or governmental regulation, any such notice, consent, approval, submission, or demand shall be deemed given if sent by registered or certified mail, return receipt requested, postage prepaid to the addresses of parties as hereinafter set forth.”
In rejecting Burr’s attempt to dismiss Alliance’s case, Supreme Court Justice Leonard Livote noted that the landlord did “not establish that [he] gave notice in the manner required by the lease” after he “received a bona fide offer from a third party to lease the Property.” As a result, the landlord is now in a very difficult position, having leased the same property to two tenants.
“Alliance is confident that it will ultimately prevail on the merits. While many take the notice provisions for granted, failing to comply with those terms can be fatal,” said Kingsley. “But the terms of notice provisions must be followed, no matter how arcane or ancient. If they’re not, there will be consequences, and it could become very expensive for a landlord who, in this case, now has two leases for the same space, one of which is invalid and leaves him open to a breach of lease claim by the other would-be tenant.”