Landlord work may not diminish tenant space - case study of Camatron Sewing Machine Inc. vs. S. M. Ring Associates, New York Journal, April 13, 1992

Real Estate Weekly, July 1, 1992 by Edward L. Schiff

Camatron Sewing Machine Inc. was a major tenant at 142-36 West 104th Street in Manhattan. The tenant rented the entire seventh floor of the building as well as the rentable portion of the building's ground floor and the basement. The seventh floor was used as warehouse, the basement area was used for manufacturing and the ground floor was used as the tenant's store and administrative and executive offices. The store was the most vital part of the tenant's operations since it's day-to-day business was conducted from that space.

In August, 1988 the landlord advised Camatron that renovations of the lobby were being planned. The lobby wall adjacent to the tenant's administrative office on the ground floor was to be knocked down and moved three feet into the tenant's space. It was contemplated that the renovation would improve the lobby by eliminating the existing awkward configuration. The intrusion into the office space would constitute 25 percent of the tenant's administrative office on the ground floor but only a mere 1 percent of the total space rented by the tenant in the building, which included the seventh floor, the ground floor, as well as the basement.

When Camatron was informed of the landlord's plans, it commenced an action to enjoin the landlord from doing the lobby renovation work. The tenant claimed that any intrusion onto the tenant's space would constitute an eviction by the landlord of the tenant from that area.

The landlord argued that Camatron's loss would be minimal and of little significance since the loss represents a very small portion of the total space rented by the tenant in the building. The landlord also relied upon a clause in the lease which stated that: "Owner shall have the right at any time without the same constituting an eviction and without incurring liability to tenant therefor, to change the arrangements and/or the location of the public entrances, passage ways, doors, doorways...or other public parts of the building...."

The landlord also relied upon a series of cases in which the courts held that landlords had the right to conduct repairs and renovations to their buildings even though they interfered with the tenants' businesses. One of those cases involved Bijan Designer for Men Shop at the St. Regis Hotel. In that case, the St. Regis Hotel was renovating its lobby and thereby temporarily closed the lobby entrance into the Bijan store. The other entrance to the store on Fifth Avenue however, was undisturbed. The courts held in that cases as well as in the series of cases relied upon by the landlord, that all of the leases allowed the landlord to make repairs not only in the public spaces but also in tenant's spaces; and that in all of those cases the landlords' entry into the tenants' spaces were temporary ones and only for the purpose of making repairs and alterations pursuant to provisions in the leases, which gave the landlords the right to do so. In none of those cases did a landlord seek to deprive a tenant permanently of a portion of the leased space without a contractual right to do so. In this case however, the landlord was seeking to permanently remove a portion of the tenant's space from its possession without such right being set forth in the lease.

The Court ruled that if the landlord were to remove the lobby wall and move it into the tenant's space, it would constitute a partial eviction of the tenant. The lease does not permit this to take place.

The Court also distinguished this case from the Bijan Designer for Men case since the Bijan, the lease specifically provided that in the event the landlord performed alterations or repairs to its lobby or any other portions of its building, it would not be held responsible for any loss or interruption of Bijan's business. Thus, the hotel clearly had the right to perform alterations and repairs and could not be held responsible for any resultant loss of business to the tenant. With respect Camatron however, the landlord would actually be taking away its space permanently as a result of the lobby renovation.

Further, the Court ruled that the clause in the Camatron lease relied upon by the landlord contemplated changes to take place only within the public areas of the building and that only those changes would not constitute an eviction. That reservation is limited to the building's public area and does not authorize the landlord to take a portion of the space rented by the tenant. The tenant has the sole and exclusive right to undisturbed possession of the leased space and the landlord has no right to take possession of a part of the leased space to the exclusion of the tenant.

The Court also held that the space to be lost by the tenant was not inconsequential. Although it represented a very small portion of the entire space leased in the building, it represented 25 percent of the administrative office of tenant.

The Court ruled in favor of the tenant and it permanently enjoined the landlord from commencing the renovation project.