Court rules landlord need not permit sub-subleasing - Supreme Court of State of New York

Real Estate Weekly, July 29, 1992

Where a landlord has executed a lease agreeing not to unreasonably withhold its consent to a sublease by tenant, and previously has permitted the tenant to sublet the premises, is the landlord bound to not unreasonably withhold consent to further sub-subleases? Recently, the Supreme Court of the State of New York held that the landlord has no such obligation.

For almost a decade, Mitsubishi Electric America maintained its executive offices in an approximately 10,000square-foot fifth floor space in Olympic Tower, the office/commercial/residential tower at 545 Fifth Avenue, opposite Rockefeller Center and between St. Patricks Cathedral and Tiffany's. In 1991, Mitsubishi decided to consolidate its operations in California.

Mitsubishi's space was rented pursuant to a sub-sub-sublease under an original lease between the owner, Olympic Tower Associates ("Associates.") and Olympic Airways.

When Mitsubishi attempted to sublet the space, the subtenant demanded proof of consent by Associates and the others in the chain of subleases. When Associates did not consent, Mitsubishi moved out. Mitsubishi then was sued by its landlords, Tamco Enterprises, Inc ("Tamco") and Esselto Pendaflex Cot poration ("Esselto"), for rent and darn ages. In turn, Mitsubishi sued Associates for damages of approximate ly $400,000 which it claimed it has suftered.

Mitsubishi argued that it was a beneficiary of the right of Olympic Airways to sublet subject to Associate's consent, not to be unreasonably withheld, as well as similar provisions in its sublease from Tamco/Esselte.

Supreme Court Justice Joan Lobis ruled that since Mitsubishi had no lease or other agreement with Associates, it Could not enforce against Associates any right to sublet contained in lease from Associates to Olympic Airways. Nor could Mitsubishi enforce against Associates the sublet rights provided in it own sublease from Tamco/Esselte Thus, Mitsubishi's suit against Associates was dismissed.

Olympic Tower Associates was represented by David Rosenberg and Laurie L. Lau of Marcus Borg Rosenberg & Diamond, a firm specializing in real estate transactions and litigation. Mitsubishi was represented by Paul M. Brown, Jonathan S. Sanoff and Harold J. Levy of Whitman & Ransom.