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Bleecker Street Tenants Corp. v. Bleeker Jones LLC

June 23, 2009


Plaintiff appeals from an order of the Supreme Court, New York County (Carol Robinson Edmead, J.), entered August 6, 2008, which granted the motion by the Bleeker Jones defendants for summary judgment dismissing the complaint and denied plaintiff's cross motion for summary judgment.

The opinion of the court was delivered by: Saxe, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Luis A. Gonzalez, P.J., Angela A. Mazzarelli, David B. Saxe, Karla Moskowitz, Rosalyn H. Richter, JJ.

Index 600053/08

This appeal requires us to consider the centuries-old Rule against Perpetuities, specifically, whether the exception to the prohibition against remote vesting of options appurtenant to a lease is applicable to the renewal option clause contained in the parties' lease.

Plaintiff Bleecker Street Tenants Corp. is the owner of the building located at 277-279 Bleecker Street, a six-story walkup that was converted to cooperative ownership effective September 1, 1983. Contemporaneously with the co-op conversion, the building's first-floor commercial space was leased to defendant Bleeker Jones LLC's predecessor in interest, Bleecker Jones Leasing Company, a partnership made up of the same four individuals who made up the sponsor partnership.

The lease, drafted by the tenant, provided for an initial term of 14 years, with nine options to renew for consecutive 10-year periods, exercisable through a series of notices. The tenant could exercise the renewal options by giving written notice at least six months before the end of the preceding term; the lease also provided that the landlord would send the tenant a "reminder notice" regarding the option, seven months before the end of the preceding term, if the tenant had not already exercised the option. In the event that the landlord did not send the seven-month notice and the tenant did not exercise the option on six months' notice, then the renewal option would remain in effect until such time as the landlord sent the tenant notice of its right to exercise the option. Once the landlord sent the tenant this final written notice, the tenant would have 60 days within which to exercise the renewal option. The lease further provided that, in the event that the renewal option went unexercised and the landlord did not send the 60-day notice, then, "[i]f the term shall have expired, Lessee shall remain in possession as a month-to-month tenant" until such time as the landlord sent the 60-day notice.

At the end of the initial 14-year lease term, on August 30, 1997, there was no exercise of the lease option. Accordingly, the commercial tenant thereafter remained in possession as a month-to-month tenant.

Plaintiff commenced this action in December 2007, seeking a declaration that the lease renewal options are void under the statutory and common-law rules against perpetuities and unreasonable restraints on alienation.

Defendants moved, and plaintiff cross-moved, for summary judgment. The motion court granted defendants' motion, ruling that the Rule against Perpetuities does not apply because the lease's renewal option is appurtenant to the lease, in that it " originates in one of the lease provisions, is not exercisable after lease expiration, and is incapable of separation from the lease'" (quoting Symphony Space v Pergola Props., 88 NY2d 466, 480 [1996]). The court reasoned that during the period of extended month-to-month possession, "[w]hile the term' of the lease may expire upon the failure of either party to issue their respective notices, the Lease itself does not."

New York's statutory Rule against Perpetuities includes a codification of the common-law rule prohibiting the remote vesting of interests and provides that "[n]o estate in property shall be valid unless it must vest, if at all, not later than twenty-one years after one or more lives in being at the creation of the estate . . ." (EPTL 9-1.1[b]). Stated another way, subsection (b) " invalidates any interest that may not vest within the prescribed time period'" (Symphony Space v Pergola Props., 88 NY2d at 476, quoting Wildenstein & Co. v Wallis, 79 NY2d 641, 647-648 [1992]). The rule flows from "the principle that it is socially undesirable for property to be inalienable for an unreasonable period of time" (Symphony Space, 88 NY2d at 475), and is designed to " ensure the productive use and development of property by its current beneficial owners by simplifying ownership, facilitating exchange and freeing property from unknown or embarrassing impediments to alienability'" (id., quoting Metropolitan Transp. Auth. v Bruken Realty Corp., 67 NY2d 156, 161 [1986]). Although the statutory period is lives in being plus 21 years, where --- as here -- the parties to the agreement are corporate entities and no measuring lives are stated in the instrument, "the perpetuities period is simply 21 years" (Symphony Space, 88 NY2d at 481; Bruken Realty, 67 NY2d at 161).

The rule against remote vesting has been held to be applicable to purchase options contained in leases (see Symphony Space at 476), as well as to lease renewal options contained in leases (see Warren St. Assoc. v City Hall Tower Corp., 202 AD2d 200, 200-201 [1994]).

On their face, all except the first of the renewal options provided for here would run afoul of the rule, as they vest more than 21 years after execution of the lease (see e.g. Warren St. Assoc., supra). However, an exception to the rule's generally strict application exists for options appurtenant to a lease, which are considered "part of" the lease (see Buffalo Seminary v McCarthy, 86 AD2d 435, 441 n5 [1982], affd 58 NY2d 867 [1983]). The required characteristics of such options are that they (1) "originate[] in one of the lease ...

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