Court Opinion

ID: 5862873
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:24:09.655283+00
Date Added: 2024-06-11T08:44:06.113284
License: Public Domain

Sandler and Alexander, JJ.,
concur in part and dissent in part in a memorandum by Alexander, J., as follows: I agree that the determination below dismissing the petition should be reversed and the proceeding converted to an action to declare the rights of the parties as to the fixing of the rental for the new lease. I disagree, however, that the new rent should be determined by the arbitrators on the basis of the actual fair market rent found to in fact exist on October 1, 1982, the date of the commencement of the term of the new lease. Rather, it seems clear that the provisions of the agreement require the arbitrators to consider and determine prospectively, from the perspective of the period during which the landlord and tenant would be negotiating the terms of the new lease (during the 60 days following the exercise by the tenant of the option) what a willing landlord would charge and what a willing tenant would pay for the space in question as of October 1, 1982. The renewal option in the agreement of September 28,1966 confers upon the tenant, Dewey, the right to negotiate an extension of the lease for an additional five-year period upon giving notice of not more than 30 months (March, 1980), nor less than 26 months (July, 1980), prior to the expiration of the 15-year lease executed the same day. The extended lease was to commence upon the “expiration of the term of the lease (September 30, 1982) and expiring 5 years thereafter”. The agreement contemplates the parties negotiating and agreeing upon the terms and conditions of the new lease within 60 days of Dewey’s exercise of the option, but if they are unable to so agree, then the new lease “shall be upon the same terms, covenants and conditions as are contained in the lease” except as to the “fixed annual rent”. The agreement provides, in that event, that “such fixed annual rent shall be the then fair annual rental value of the demised premises as determined by arbitration * * * provided however, that should the fair annual rental value as determined by arbitration * * * be less than the sum of the fixed annual rent and additional rent required to be paid for the last year of the term of the lease, then such determination shall not be the fixed annual rent of the New Lease, but the fixed annual rent during the term of the New Lease shall be the sum of the fixed annual rent required to be paid for the last year of the term of the lease.” (Emphasis added.) If, as the plaintiff argues and the majority holds, the arbitrators are to await the commencement of the new term to determine the “fair annual rental” of the demised premises, there would be little or no possibility that the rent thus fixed would be less than the “fixed annual rent * * * to be paid for the last year of the term of the lease”, and the italicized provisions quoted above would be mere surplusage. Moreover, it seems unreasonable to expect that a situation where neither party would or could know what the new rent for the renewed term would be until the new *485term actually began, would be an acceptable proposition to either the landlord or the tenant. Since the agreement contemplated a 60-day period of negotiations between the parties before arbitration was to be demanded, it is reasonable to believe that the parties intended that arbitrators would place themselves in the position of the parties and use the same data that had been available to the parties themselves, viz., prospective projections based on information as to market conditions during that 60-day period. The fact that the parties continued to negotiate beyond the 60 days and the fact that Dewey did not serve its demand for arbitration until after October 1, 1982, does not alter the result or the obligation to comply with the language of the agreement. This is particularly so since there is an option for a further five-year extension of the lease in the September, 1966 agreement, and the issue of fixing the new rent through arbitration may well recur.