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1201 Sixth Ave. Corp. v. Altor Grill & Restaurant, Inc.

Supreme Court of New York, Appellate Division

June 21, 1954

1201 SIXTH AVE. CORP., Respondent,

Page 456

APPEAL from a judgment of the Supreme Court in favor of plaintiff, entered March 10, 1954, in New York County, upon a decision of the court at Special Term (GREENBERG, J.), which declared and adjudged that plaintiff is entitled as of May 1, 1953, to a rental of $7,200 per annum plus 15%.


Harry Simon of counsel (Jerome I. Hyman with him on the brief; Harry Simon, attorney), for appellant.

Herbert J. Wallenstein for respondent.


By chapter 452 of the Laws of 1953, section 2 (subd. [c]) of the Business Rent Law (L. 1945, ch. 314, as amd.) was amended to grant a second 15% increase in emergency rents. The section, as amended in 1953, reads: '(c) 'Emergency rent.' The rent reserved or payable under any lease, agreement or tenancy of business space in force on June first, nineteen hundred forty-four, plus fifteen percentum of such rent, except with respect to a tenant who, since January first, nineteen hundred forty-seven, has paid such emergency rent without an increase pursuant to any of the provisions of this act, and in any such case such emergency rent, plus fifteeen per centum; * * *' (Italicized matter being the 1953 amendment).

The question on this appeal is whether the amendment applied to leases fixing rent on a graduated scale.

The present lease provided for rent at the rate of $5,500 per annum from May 1, 1944, to April 30, 1946, and at the rate of $6,500 per annum from May 1, 1946, to April 30, 1948. After the lease expired, and in October, 1948, the Supreme Court, on the landlord's application, fixed the tenant's rent at $7,200 a year based, we assume, on rents prevalent in the most nearby comparable business space in the same building or rental area or other satisfactory evidence (ยง 13).

We note, therefore, that (1) the rent on June 1, 1944 (the freeze date as to business space not rented under graduated leases) was increased thereafter by the terms of the lease; and (2) in 1948 (after January 1, 1947) a further increase was granted without any 15% limitation, but for the full sum that rents in the vicinity would warrant. Such neighboring rents could well include rents fixed in a free market.

Page 457

We do not believe that the Legislature intended the amendment to section 2 (subd. [c]) to apply to graduated leases like the present. Such leases have been considered as exempt from the ordinary provisions in the rent laws for determining statutory rent ( Matter of 500 Fifth Avenue [Wise Shoe Co.], 274 A.D. 241, affd. 300 N.Y. 491). This distinction was said by this court to be due to the fact that the graduated lease could not fairly be submitted to the emergency rent formula, because the rent payable on the freeze date might not bear any relation to the rental value at the time. We pointed out there that the opposite sort of treatment was given to the two types of leases (graduated and nongraduated) in determining the rent to be paid upon expiration of the lease.

We need not rest on the force of precedent to establish the inapplicability of the amendment to graduated leases. In recommending the 1953 amendment the commission on rent controls reported to the Legislature as follows: '2. Some tenants have occupied rental space in business and commercial properties from the time that such space was subjected to rent and eviction regulation. The rents paid by such tenants were fixed at the rent level of 1943 or 1944, plus 15% which was declared to be the 'emergency rent' to be paid during the period of the emergency. The occupants of such premises have enjoyed a period of unprecedented business boom. Landlords of these properties during the same period of time have been subjected to substantial increases of operating costs * * *. It is recommended, therefore, that so-called 'statutory' tenants, i.e., tenants whose leases have expired and who continue in occupancy under the emergency statutes merely by paying the emergency rent, who have not volunteered to pay or whose landlords have refrained from compelling them to pay an increase in rent pursuant to appropriate provisions of the Emergency Acts, pay an increase in rent of 15% exceeding the amount of the emergency rent.' (See N.Y. Legis. Doc., 1953, No. 43, pp. 19-20.)

This language clearly indicates that the commission was recommending legislation with respect to emergency rents that had been based on 'freeze day' rents of June 1, 1944, and not emergency rents based on judicial awards depending on market conditions. It was the first class of emergency rents, where the tenant had paid only 15% over frozen rents, that was to get the second 15% increase. It does not seem to have been intended that where ...

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