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Lease; Services Agreement Did Not Allow Building Owner to Recover for Condition of Property

In a full-fledged opinion by Judge Smith, the Court of Appeals determined that plaintiffs, the building owners, could not recover damages related to the condition of the property upon the termination of the lease.  The property was used as a homeless shelter.  The City of New York entered into a Services Agreement with The Salvation Army to run the shelter.  The Salvation Army leased the property from the property owners. The City, in the Services Agreement, was required to pay The Salvation Army’s obligations to the property owners under the lease. The Court wrote:

The Lease is clear that, as a general proposition, The Salvation Army is not obliged to pay more to plaintiffs than it can recover from the City, and it is equally clear that The Salvation Army must do what it reasonably can to recover what the City owes it.  If The Salvation Army breached its duty to use commercially reasonable efforts to enforce a City obligation, it could not rely on the City’s non-payment of that obligation to defeat plaintiffs’ claim.  …[H]owever, … the complaint fails to allege any commercially reasonable step that The Salvation Army should have taken to recover money from the City. Plaintiffs do not identify any provision of the Services Agreement under which the City owes money to The Salvation Army that The Salvation Army failed to collect.  JFK Holding Company LLC v City of New York…, 196, CtApp 11-14-13

 

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