DECISION AND ORDERAFTER TRIAL On July 18, August 13, 2018 and January 29, 2019, this Court conducted a bench trial in this proceeding. The Court had ample opportunity to observe and assess the demeanor and credibility of the witnesses and carefully reviewed and considered all exhibits admitted into evidence. The parties stipulated to certain facts and documents introduced at trial. The sole issue in dispute and that of this Court’s decision is whether, pursuant to the terms of the lease rider, the respondent is permitted to join in the benefit of tax abatements provided to the petitioner, in the calculation of its additional real estate tax.Factual BackgroundOn May 1, 2011, the parties to the instant litigation entered into a lease agreement for a restaurant at 37-03 95th Street a/k/a 95-08 37TH Avenue a/k/a 95-04 37th Avenue, Store #1, Jackson Heights, NY 11372 (hereinafter “subject premises”), for a term of ten (10) years commencing May 1, 2011 (hereinafter “Lease”).The subject premises are situated within a mixed-use building, which contains commercial space as well as some residential dwelling units, including some that are subject to rent regulation, specifically rent stabilization. The landlord has received J-51 benefits and also participates in the Senior Citizen Rent Increase Exemption (hereinafter “SCRIE”) program.Pursuant to the terms of the lease rider, 43.A., respondent is responsible for a portion of the real estate taxes of the subject premises as additional rent. The lease rider contains a formula for calculating the tax escalation from one year to the next. The base tax year or “Tax Base Factor”, as identified in the lease rider, is the period of July 1, 2010 through June 30, 2011. All of the respondent’s tax liability is determined by using the taxes for that time frame and the formula articulated in 43.A.(2)(i) of the lease rider. Briefly, for whichever year of respondent’s taxes are being calculated, the base year taxes are subtracted from the subject year’s tax amount billed by the City of New York for the entire property. The resulting amount is then divided in half.The lease rider also contains a provision in the final sentence of 43.A.(v),Notwithstanding the foregoing, the term “real estate taxes” shall not include the benefit of: 1) any residential J51 exemption/abatement benefits; 2) senior citizen rent increase exemption benefits (SCRIE); 3) 421(a) benefits; or 4) any other exemption/abatement benefits that reduce the real estate taxes that are due and payable.Relevant Procedural Background and TrialThe instant summary eviction nonpayment proceeding was commenced in January 2018. The respondent never interposed an Answer, nor sought permission or obtained a stipulation to do so. The matter was set down for trial to be conducted on March 6, 2018 at 2pm. On that date, neither respondent nor its attorney appeared initially. Therefore, the petitioner proceeded with an inquest. A default judgment of possession was granted to petitioner, together with a money judgment in the sum of $12,270.32 on March 6, 2018. Respondent’s attorney appeared after the conclusion of the inquest.What followed was a great deal of motion practice, much of which was duplicative in nature. On May 21, 2018, the parties executed a so ordered stipulation, which granted the May 7, 2018 order to show cause to the extent of vacating the money judgment, judgment of possession and the warrant of eviction. The respondent submitted to the jurisdiction of the court and the petition was amended to allege that $23,550.00 was due as of that date. The amount of rent which is due to the petitioner remained in dispute. Therefore, the matter was set down for trial.At trial, petitioner made out its prima facie case through two witnesses, Mitchell Rothkin and Gideon Radich. Through Mr. Rothkin, petitioner submitted its documentary evidence demonstrating ownership of the subject premises and the landlord tenant relationship. Mr. Rothkin also established the tax liability of the respondent through documents consisting of tax bills dating back to 2010 together with subsequent tax bills and demand letters sent to the respondent by the petitioner’s real estate management company. Each of the tax demand letters contained the relevant NYC Department of Finance Quarterly Bill as well as the calculation of the amount due from the respondent utilizing the formula set forth in the lease rider. Mr. Radich, the Manager of the Meter Reading Division of Ashokin Water Services, established the amount of additional rent attributable to water bills. He did this through documentary evidence of water meter reading reports.Due to the fact that respondent never interposed an answer, respondent had no articulable defenses. Respondent’s counsel was limited to challenging the petitioner’s prima facie case.At the conclusion of the trial, counsel for the respective parties agreed that there is but one question for this Court, i.e. whether, pursuant to the terms of the lease rider, the respondent is permitted to join in the benefit of tax abatements provided to the petitioner, in the calculation of its additional real estate tax.DiscussionOnly in unusual circumstances will a party be relieved from complying with a lease. George Backer Management Corp. v. Acme Quilting Co., 46 NY2d 211, 413 NYS2d 135 (1978). The parties to a commercial lease are free to negotiate and agree to whatever terms are suitable for the landlord and tenant under the circumstances, so long as the terms are legal, are not void as against public policy and do not shock the conscience of the court. Once put to paper, however, a lease is a binding contract, not something that serves as a basis for further negotiation down the road when one party becomes dissatisfied. In the case at bar, respondent has not proven, or even alleged fraudulent inducement, mutual mistake or misrepresentation, which would be necessary for a reformation of the agreement.The lease terms in question are common in commercial leases. Myers Parking System, Inc. v. 475 Park Avenue So. Co., 186 AD2d 92, 588 NYS2d 32 (1st Dept 1992); George Backer Management Corp. v. Acme Quilting Co., supra. Moreover, both the calculation formula for determining the amount of annual taxes and the tenant’s exclusion of benefits are crystal clear in their meaning. Where the tax escalation clause has been unambiguous, these provisions have been upheld by the appellate courts of this State. Credit Exchange, Inc. v. 461 Eighth Avenue Associates, 69 NY2d 994, 517 NYS2d 903 (1987); Murray Hill Mews Owners v. Rio Restaurant Associates, 938 NYS2d 59, 92 AD3d 453 (1st Dept. 2012). Tax escalation clauses have been found enforceable upon commercial tenants even where the lease expired. Credit Exchange, Inc. v. 461 Eighth Avenue Associates, supra at 48.The Court of Appeals of this State addressed the exact question put to this Court in Barnan Associates LLC v. 196 Owners Corp., 14 NY3d 780, 899 NYS2d 724 (2010). In that case, the high court determined that the unambiguous clause of the lease which required calculation of the tenant’s taxes without regard to the landlord’s tax exemptions or abatements. This Court sees no reason to vary from that decision.It is noteworthy to point out as well that the tax programs at issue in the case at bar involve J-51 and SCRIE tax benefits, both of which result from a financial sacrifice by the petitioner. In order to obtain a J-51 tax abatement, the landlord must first renovate the subject building. For the landlord to obtain a SCRIE tax exemption, the landlord must freeze the rent of certain rent regulated tenants over the age of 62 who meet income eligibility requirements. The respondent is not the petitioner’s partner and clearly did not share in the expenses of the building renovations or contribute to the rent of SCRIE tenants in this building. Therefore, it would be illogical not to give effect to the lease term which precludes the respondent from sharing in the tax benefits awarded to the petitioner.ConclusionThe respondent is responsible for payment of the taxes as calculated in the lease rider freely executed by the parties, without regard to any tax exemption or abatement benefits that reduce the real estate taxes payable by the petitioner.The petitioner is awarded a judgment of possession and a money judgment for all rent and additional rent charged to the respondent through July 16, 2018 in the sum of $46,676.78, together with the costs and disbursements of this proceeding as well as a warrant of eviction which shall issue forthwith with a 5 day stay of execution.This constitutes the Decision and Order of this Court.May 16, 2019
