Scott E. Mollen

Commercial Landlord-Tenant—Court Rejects Tenant's Claim That Landlord Concealed Building Violations That Caused Utilities To Be Turned Off—Lease Provided That Tenant Accepted Premises “As Is,” “After Inspection” and Agreed to Make Necessary Repairs –Experienced Tenant, Represented by Counsel, Failed to Use Available Means to Verify Conditions—Reliance On Alleged False Representations Not Justified

A tenant appealed from a final judgment of a trial court which, following a nonjury trial, awarded the landlord possession, recovery of rent arrears and dismissed the tenant's counterclaims in a nonpayment summary proceeding. The Appellate Term (court) held that “[t]he commercial tenant's counterclaims for fraudulent inducement, breach of contract and breach of the covenant of good faith and fair dealing were properly dismissed by the trial court.” Those counterclaims were based upon the “landlord's alleged failure to disclose certain building violations that caused all utilities to be turned off….” The court held that such counterclaims were “wholly barred by the plain language of the governing lease agreement providing that tenant accepted the premises 'as is' after having inspected the premises, and that tenant agreed to make all necessary repairs and replacements, 'including the repair and replacement of pipes, electrical wiring, heating and plumbing systems, fixtures and all other systems and appliances and their appurtenances.'”

The court further found that the evidence established that the “tenant was an 'experienced restauranteur,'” who had been “represented by counsel during the lease negotiation, and that the terms of the lease put 'all the onus' on getting the premises ready to operate as a restaurant/bar and lounge on the tenant.”

The court also explained that the “tenant could not justifiably or reasonably rely upon landlord's alleged false representations regarding the condition of the subject premises, since she failed to make use of the means of verification that were available….” The tenant had admitted that “at the time of the rental she knew that there was neither electricity nor gas service nor a useable kitchen at the premises….” The court further opined that “[e]ven accepting tenant's claim that she asserted a counterclaim for rescission, and that the amount in controversy did not exceed $25,000 . . ., such relief is unwarranted in view of the aforementioned lease provisions….” The court's decision was without prejudice to any counterclaim by the tenant seeking a refund of her security deposit.