(The comments of the landlord's attorney have been added to this story. See below).

NEW YORK CITY-Though it could be an isolated incident, the decision that is believed to be the first ruling in a commercial lease case from Hurricane Sandy case also could be construed as an ominous sign for other tenants embroiled in lawsuits.

Retail occupant Just Salad, located at 100 Maiden Lane, was seeking a rent abatement after it lost electrical power in the wake of the superstorm, according to a report from industry law firm Fried, Frank, Harris, Shriver & Jacobson LLP. Following the October storm, and the subsequent loss of power in all of Lower Manhattan, Just Salad didn't pay its December and January rent. The landlord, Maiden Lane Properties, sued and the tenant claimed it was entitled to a two-month rent abatement because MLP had failed to provide it with electricity.

Justice Jennifer Schecter sided with the landlord, the report states. She said neither the restaurant nor its building suffered any physical damage from the hurricane, therefore eliminating any entitlement to a break on rent for the tenant. Further, she said, Just Salad did not notify the landlord of the issue, in accordance with the lease agreement.

Not surprisingly, the tenant's attorney, Steven Kirkpatrick of Belkin Burden Wenig & Goldman, LLP disagrees with the Judge's assessment, he tells GlobeSt.com. “We have filed a notice of appeal,” he says. “We disagree with the judge's interpretation and we're evaluating next steps. “

Speaking on behalf of Just Salad, Kirkpatrick says, “It's factually incorrect that no notice was given. Clearly there was notice to the landlord because there were emails between [the two parties]; they were in discussions, so MLP knew,” he says. “ I think what the judge was ruling on was that the lease may have talked about mailed notice. That wasn't done,” he concedes, noting that most tenants wouldn't stop to send a letter after an event such as a hurricane.

Kirkpatrick also disputes the claim that no damage was done to the building. “All of lower Manhattan was dark but this building didn't have power for a longer period because the basement—where the electrical room was located—was flooded and the power was off until the end of January,” he states.

In fact, says Kirkpatrick, “The landlord did a lot of work and ultimately had to move the electrical equipment to another floor.” He suggests the intent behind the lease verbiage addressing a potential power outage was intended to cover the amount of power provided, not what is done in the wake of a casualty. Kirkpatrick has filed a motion to appeal the decision.

Attorney Adam Leitman Bailey of Adam Leitman Bailey, P.C., who represented the landlord, vehemently disagrees with Kirkpatrick. “He's completely wrong,” Bailey says. “To determine whether a tenant is entitled to a rent abatement, in a commercial case, the lease governs. In this case, the lease says that the tenant has to have experienced a casualty, and they didn't prove that.”

“To me,” Bailey continues, “a casualty is catastrophic, it destroys everything. I don't know of a casualty where you're open in two months,” which Just Salad was, he points out. The lease also specifies how the landlord is to be notified, and the restaurant failed to comply with those rules, Bailey adds. “The requirement is for the tenant to send the landlord notice via certified, registered or overnight mail. Email is not part of the lease.”

Despite Kirkpatrick having filed a notice of appeal, he is highly unlikely to appeal the verdict as it would be a conflict of interest for Belkin Burden, according to Bailey. “They don't represent tenants,” he explains. In fact, the firm's website says it represents property owenrs and landlords in landlord/tenant disputes; it doesn't mention tenants. “Plus,” Bailey adds, “It's a guaranteed loss, and he can't make bad law for landlords. I'll put my license on the line that he won't be appealing."

Attorney Meyer Last, of Fried Frank, says there is some gray area in cases like these. “Virtually all leases have a casualty provision,” he notes. “The buildings that didn't suffer damage didn't have a casualty, but then there's a gray area.”

Cases like this one may change the lease negotiation process, Last contends. “Leases generally work, especially from the landlord perspective,” he says. “But tenants may be more careful now in negotiating lease provisions.”

Instant Insights /

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