Commercial lease dispute resolved

A national retailer withheld rent on a Midtown flagship over a disputed co-tenancy clause. We moved for summary judgment in the Commercial Division and recovered every dollar of arrears.

Practice

Real Estate Law

Year

2024

Duration

14 months

Lead attorney

Daniel Reyes

The challenge

In early 2023 the tenant of a 40,000 sq ft store on lower Fifth Avenue began paying a fraction of the contract rent. It relied on a co-tenancy clause: when a neighbouring ‘anchor’ store closed, the tenant said it was entitled to pay ‘alternative rent’ and, after twelve months, to terminate the lease.

By the time our client, the building’s owner, instructed us, arrears were growing by $310,000 a month and the tenant had filed for a declaratory judgment in the Commercial Division. Re-letting a flagship of that size takes a year or more. Losing would have meant a long, expensive vacancy.

Commercial lease dispute resolved — case result

Our approach

We treated the lease as the case. Every step, from interim rent to settlement, followed from what the clause actually said.

01. Read the lease, not the summary

We rebuilt the drafting history of the co-tenancy clause from the 2016 negotiation files. The ‘anchor’ definition covered only stores above 25,000 sq ft; the neighbour that closed was 18,000.

02. Keep the rent coming in

We moved for use-and-occupancy payments pending trial, so the landlord was paid at the contract rate while the case ran.

03. Test the tenant’s numbers

Footfall and sales data obtained in discovery showed the store’s trade had grown after the neighbour left, undercutting its claimed loss.

04. Move for judgment

We moved for summary judgment on the plain meaning of the clause, then opened settlement talks from a position of strength.

“They told us what the lease actually said, not what we hoped it said. Then they won on it, and the tenant paid every dollar.”

Managing Director, retail landlord

The outcome

The court granted partial summary judgment on the meaning of the co-tenancy clause. Two weeks later the tenant settled. It paid $4.2M in arrears, interest and legal costs within 30 days, and agreed to surrender the premises nine months early so our client could re-let at today’s market rent.

$4.2M

recovered for a retail landlord

14 months

matter duration

2024

year resolved

Prior results do not guarantee a similar outcome. Some details have been changed to protect client confidentiality.

Case facts

$4.2M

recovered for a retail landlord

Practice

Real Estate Law