The First Department, in a full-fledged opinion by Justice Tom, reversing Supreme Court, determined questions of fact precluded the granting of landlord's cross-motion for summary judgment dismissing plaintiff-tenant's rescission action (alleging impossibility, fraud, misrepresentation and frustration of purpose). By the terms of the lease the tenant was prohibited from any use of the premises which violated the certificate of occupancy (CO). The lease required tenant to use the premises solely for a commercial purpose (executive recruiting firm). However the CO required that the premises be used solely as residential property. The First Department distinguished the line of cases which enforced leases where the only objection to the lease was a problem with the CO:
… [T]here are issues of fact as to whether plaintiff's cause of action for rescission can be proved. While the purpose of the lease was for the space to be used as an office and plaintiff is in fact prohibited from any other use, the lease also prohibits plaintiff from using the premises in violation of the CO, and the CO itself prohibits commercial use of the space. Therefore, plaintiff properly raises the excuse of impossibility of performance as its ability to perform under the lease was destroyed by law … . Absent defendants' willingness to alter the CO it was impossible for plaintiff to perform its obligations under the lease, and the evidence raises an issue of fact as to whether defendants were willing to cooperate in this regard. * * *
… [T]here is an issue of fact as to whether the lease should be terminated on the ground of frustration of purpose. In order to invoke this defense, “the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense”… . Jack Kelly Partners LLC v Zegelstein, 2016 NY Slip Op 03820, 1st Dept 5-12-16
LANDLORD-TENANT (QUESTIONS OF FACT WHETHER TENANT ENTITLED TO RESCIND LEASE BECAUSE CERTIFICATE OF OCCUPANCY PROHIBITED USE OF THE PROPERTY FOR COMMERCIAL PURPOSES)/CONTRACT LAW (LEASES, QUESTIONS OF FACT WHETHER TENANT ENTITLED TO RESCIND LEASE BECAUSE CERTIFICATE OF OCCUPANCY PROHIBITED USE OF THE PROPERTY FOR COMMERCIAL PURPOSES)/RESCISSION (LEASES, QUESTIONS OF FACT WHETHER TENANT ENTITLED TO RESCIND LEASE BECAUSE CERTIFICATE OF OCCUPANCY PROHIBITED USE OF THE PROPERTY FOR COMMERCIAL PURPOSES)