| Kunze v Arito, Inc. |
| 2008 NY Slip Op 01391 [48 AD3d 272] |
| February 14, 2008 |
| Appellate Division, First Department |
| Klaus Kunze, Appellant, v Arito, Inc.,Respondent. |
—[*1] Lowenstein Sandler PC, New York City (Jason E. Halper of counsel), forrespondent.
Amended judgment, Supreme Court, New York County (Mary H. Smith, J.), entered June14, 2007, to the extent appealed from as limited by the briefs, dismissing both causes of action inthe complaint, unanimously affirmed, with costs. Appeal from judgment, same court and Justice,entered March 2, 2007, unanimously dismissed, without costs, as superseded by the appeal fromthe later amended judgment.
The parties entered into a one-year lease in 2003 that included an option to renew for anadditional year, and an option to purchase the property. Paragraph 50 stated: "If the tenantexercises the right to either renew the lease or purchase the apartment, the tenant must do so priorto sixty days of the expiration of the lease." The court found this language limited the purchaseoption to the first term of the lease, and not any renewal period, as plaintiff could exerciseeither the option to renew the lease or the option to purchase. However, the use ofthis "either/or" language could just as reasonably be interpreted as applying the time limit to bothterms, while recognizing the fact that the renewal and purchase options could not be exercisedsimultaneously (see e.g. Fabulous Stationers v Regency Joint Venture, 44 AD2d 547[1974] [lease permitting assignment "or" sublease, rather than assignment "and" sublease, wasinsufficient to conclude that it did not permit a sublease followed by an assignment]). In otherwords, either the renewal option or the purchase option must be exercised more than 60 daysbefore expiration of the lease, but the actual expiration of the lease would depend on whether ornot the renewal option is exercised. "Where the original lease includes an option to renew, theexercise of it by the tenant does not create a new lease; rather it is a prolongation of the originalagreement for a further period. Once the option is exercised, the original lease is deemed aunitary one for the extended term and a new lease is not necessary" (Dime Sav. Bank of N.Y.v Montague St. Realty Assoc., 90 NY2d 539, 543 [1997]). Therefore, if plaintiff properlyexercised his right to renew the lease, the purchase option would still be viable because the leasewould have a new expiration date, and the time in which to exercise the purchase option wouldthus be extended until 60 days before expiration of the renewed term (see Masset v Ruh,235 NY 462 [1923]).
Even though plaintiff did not timely exercise either option, he seeks this Court's equityjurisdiction to approve his belated request for renewal. However, it is "a settled principle of law[*2]that a notice exercising an option is ineffective if it is notgiven within the time specified" (J. N. A. Realty Corp. v Cross Bay Chelsea, 42 NY2d392, 396 [1977]). Such an equitable interest may be recognized and protected against forfeiture"where the tenant has in good faith made substantial improvements to the premises with intent torenew the lease, the landlord is not harmed by the delay in notice, and the tenant would sustainsubstantial loss if the lease were not renewed" (5 E. 41 Check Cashing Corp. v Park & Fifth Owner, LLC, 44 AD3d373, 373 [2007]). It may even be recognized where there is no indication of suchimprovements having been made (Sy Jack Realty Co. v Pergament Syosset Corp., 27NY2d 449, 452 [1971]). However, we do not find that plaintiff's position warrants the exercise ofequity here.
As plaintiff concedes, he has made no improvements to the premises. He was not a long-termtenant, but had rented the condominium for only one year before missing the deadline forexercising his renewal option. Moreover, plaintiff has since moved out of the condominium dueto business that requires his presence in Europe, which supports defendant's contention thatfollowing plaintiff's failure to renew, he indicated he would probably not be able to stay anotherfull year, and the parties continued on a month-to-month basis. Plaintiff now seeks to enforce therenewal option to enable him to exercise the purchase option, thus gaining a windfall from thegreatly increased value of the property. This is not the type of loss to a tenant that equityenvisions.
Defendant did not waive objection to the untimely renewal by accepting rent; the leaseexpressly provided that acceptance of rent is not a waiver of the landlord's rights (see JefpaulGarage Corp. v Presbyterian Hosp. in City of N.Y., 61 NY2d 442, 446 [1984]; Thruway Ctr. Assoc. v AM Assoc., 5AD3d 376 [2004]). Nor may defendant be estopped from objecting to the untimeliness of theexercise of the renewal option by its failure to respond to plaintiff's attempt to renew afterexpiration of the option period. Again, an untimely exercise of an option is ineffective (J. N.A. Realty, 42 NY2d at 396). Plaintiff, a sophisticated businessman, did not reasonably relyon defendant's silence to conclude that his belated attempt to renew was valid, nor did he changehis position to his detriment (see Goldman v Beekman Hill House Apt., 121 AD2d 908,910 [1986]).
Because plaintiff did not effectively renew the lease, his option to purchase the premisesexpired when he failed to exercise it within 60 days of expiration of the original term.Concur—Lippman, P.J., Tom, Buckley and Gonzalez, JJ.