Trial Necessary for Dispute Over Holdover Rent

Facts: A tenant leased office space for its law firm. The lease term was four years and provided for two five-year extensions. After the final extension of the lease term expired, the tenant continued to occupy the space on a month-to-month basis, paying rent as specified in the holdover section of the expired lease. The owner later sued to evict the tenant, terminating the month-to-month tenancy. It claimed that the tenant failed to pay rent equal to the “use and occupancy” of the space, which it asserted was significantly higher than the month-to-month rent. The owner sought to recover the difference—“additional rent.” The owner also sought to recover real estate taxes it alleged the tenant hadn't paid.

The owner asked the court for a judgment in its favor without a trial.

Decision: The court denied a judgment in the owner's favor without a trial.

Reasoning: The court noted that judgment in either party's favor in a case was not appropriate when there were “issues of material fact” with respect to certain items, such as damages, that necessitated a trial. Damages include rent. The court pointed out that, here, there was an issue as to what the correct amount of rent was—the amount of holdover rent or reasonable value of the use and occupancy of the property.

“In determining the reasonable value of the use and occupancy of a property, the rent reserved under an expired lease is not conclusive, although it is certainly of some probative value,” said the court. It defined “reasonable value” as fair market value.

The court pointed out that it was the owner's burden to prove the reasonable value, and that it would determine a figure only after having received “competent evidence” of the value of the premises. The owner claimed that the tenant had not produced any evidence establishing that the fair value of the use and occupancy for the holdover period was less than the total of the holdover rent plus the additional rent it was trying to collect—$6,596.75. However, the tenant produced documents showing that after it vacated the space, the owner leased it to a new tenant for $3,300 a month, renovated the space to include a new HVAC unit, and included all utilities in the monthly rent.

The court pointed out that the owner had only submitted evidence of the amount the tenant was paying during the holdover period while it was a month-to-month tenant, which was based upon the expired lease. But it failed to submit any other evidence of the reasonable value of the property. Because the owner didn't satisfy its burden of proof with respect to the reasonable value of the use and occupancy of the property for the holdover period, the amount of additional rent due, if any, should be determined at trial, said the court.

The court also denied the owner's request for judgment in its favor without a trial on its claim that the tenant had breached the lease by failing to pay real estate taxes during the holdover period. The owner had sent a statement notifying the tenant of the outstanding balance of $13,113.02 for real estate taxes during the holdover, but the statement was not a bill according to the court, because it did not make any demand for payment. Moreover, the owner failed to establish that, as required under the lease, it provided a copy of the tax bill of the City of New York outlining the calculation of the amount the tenant was to pay.

• Ideal Parking Corp. v. Rosenthal, December 2010