Effects of Taking Property “As Is,” the Implied Covenant of Fair Dealing, and Constructive Eviction Discussed

Plaintiff-tenant took possession of the leased premises “as is.” Subsequently plaintiff stopped paying rent claiming that the condition of the elevator prevented the issuance of a certificate of occupancy.  In denying both parties’ motions for summary judgment (because plaintiff failed to show the condition of the elevator was the reason for the denial of the certificate of occupancy; and because the defendants failed to show it properly maintained the elevator), the Second Department explained the relevant contract principles:

A court’s fundamental objective in interpreting a contract is to determine the parties’ intent from the language employed and to fulfill their reasonable expectations … . “[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” … . Thus, “[i]t is the role of the courts to enforce the agreement made by the parties—not to add, excise or distort the meaning of the terms they chose to include, thereby creating a new contract under the guise of construction” … .

Moreover, “[i]mplicit in every contract is a covenant of good faith and fair dealing, which encompasses any promise that a reasonable promisee would understand to be included” … . “The implied covenant of good faith and fair dealing is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement” … . * * *

…[T]he fact that the plaintiff agreed to take possession of the leased premises in “as-is” condition does not necessarily warrant the conclusion that the plaintiff intended to waive any claims with respect to the portions of the building that were not leased to him, or to waive the landlord’s obligation to maintain the elevator. The defendants … argued that the provision of the lease which required them to “maintain the current elevator services and maintain and repair the elevator in reasonable condition” only obligated them to prevent any deterioration in the elevator service existing on the date that the parties entered into the lease. However, in light of the implied covenant of good faith and fair dealing, a reasonable tenant could interpret that provision as obligating the landlord to maintain the elevator free from violations and to promptly perform repairs, particularly if failing to do so could prevent the tenant from obtaining a certificate of occupancy for the leased premises. …

[Re: the defendants-landlords’ motion for summary judgment to recover unpaid rent:] “The obligation of a commercial tenant to pay rent is not suspended if the tenant remains in possession of the leased premises, even if the landlord fails to provide essential services” … . Before a tenant may withhold rent, the tenant must prove actual or constructive eviction … . To demonstrate constructive eviction, then, a tenant must vacate the premises … . Here, the defendants’ submissions failed to demonstrate, prima facie, that the plaintiff remained in possession of the leased premises and thus, was not constructively evicted. Prakhin v Fulton Towers Realty Corp, 2014 NY Slip Op 07487, 2nd Dept 11-5-14