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Be Courteous

It is an age-old adage that “records are made to be broken”. Unfortunately, so, too, are contracts. Since the parties who entered into the contract have a vested interest in seeing it fulfilled rather than litigating the breaches, many agreements require the non-breaching party to give written notice of the breach with an opportunity to cure. It is not uncommon for agreements, especially commercial leases, to also require that copies of these notices must also be served on the breaching party’s lawyers. This is sometimes referred to as a “courtesy copy”, but it is no mere good will gesture since the failure to give this “predicate notice” can torpedo the aggrieved party’s ability to pursue its claim in court.

It is also not uncommon for long term commercial leases to be assigned from one tenant to a new tenant. With an assignment, the “body” of the lease remains intact; the new tenant simply takes the place of the original tenant, much like when a manager substitutes the batter due up next. Other lease terms can be modified in the assignment, but the gist of an assignment is that the original lease remains in force.

What is the impact of an assignment on the requirement to serve the courtesy copies? Must the claimant still serve the original tenant and/or the original tenant’s lawyer?

In DOREEN PROPERTIES, LLC et al v. DECK 7-289, LLC, the respondent was the second assignee of a long-term lease. The original lease was assigned to a new tenant, who then subsequently assigned it to DECK 7-289, LLC. The landlord commenced a non-payment proceeding in Housing Court after DECK 7-289, LLC (the current tenant) failed to pay the rent. Among its defenses, DECK 7-289, LLC argued that the predicate notice required under the lease was defective – and the action must therefore be dismissed – because the landlord failed to provide written notice of the breach to the lawyers for the original tenant listed in the lease.

Agreeing with our analysis, the trial court held that “Respondent’s motion [to dismiss] is without merit.” The judge first noted that the assignment to DECK 7-289, LLC expressly modified the requirement that notices must be served on the prior tenants and their respective lawyers. Thus, the parties knowingly deleted the notice provisions in the original lease. This alone was sufficient reason to deny respondent’s motion to dismiss the petition.

But the court went further. In looking beyond the four corners of the lease, the judge focused on the intent of the notice provisions:

“The point of specifying methods by which a notice of default is to be given is, fundamentally, to ensure that the putative defaulter has actual notice and an opportunity to protest the claim of default or, if so provided, to avail itself of an opportunity to cure the default, if any”. [Internal citations omitted]. Respondent’s argument that petitioner must serve the former tenant and its attorney after that tenant relinquished all rights and obligations it once had as of May 27,2007, does nothing to further this objective.

You can read the entire decision by clicking on this link.

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