Court Interprets Real Property Law Section 223

On October 28, 2014, Justice Schmidt of the Kings County Commercial Division issued a decision in W.D.G.R. Properties, LLC v. Reich, 2014 NY Slip Op. 32799(U), interpreting Real Property Law S 223.

In W.D.G.R. Properties, the plaintiff sued for money due under a commercial lease. The court rejected the argument that the action should be dismissed because the plaintiff lacked standing, explaining:

As an initial matter, defendant argues that the plaintiff's action should be dismissed pursuant to CPLR 3211 (a)(3) because the plaintiff lacks standing to commence this action . . . [because] the plaintiff fails to set forth how it is the successor in interest to the original landlord, and therefore cannot establish that it has a lease agreement with the defendant upon which it can seek relief.

In opposition, plaintiff maintains that it has standing to sue for unpaid rents under the lease agreement because the lease was "assigned" to it as well as to its prior successors in interest by operation of law pursuant to Real Property Law S 223. That statute provides, in pertinent part . . . :

The grantee of leased real property, or of a reversion thereof, or of any rent, the devisee or assignee of the lessor of such a lease, or the heir or personal representative of either of them, has the same remedies, by entry, action or otherwise, for the nonperformance of any agreement contained in the assigned lease for the recovery of rent, for the doing of any waste, or for other cause of forfeiture as his grantor or lessor had, or would have had, if the reversion had remained in him. A lessee of real property, his assignee or personal representative, has the same remedy against the lessor, his grantee or assignee, or the representative of either, for the breach of an agreement contained in the lease, that the lessee might have had against his immediate lessor, except a covenant against incumbrances or relating to the title or possession of the premises leased.

It is well settled that Real Property Law S 223 gives the grantee or assignee of the landlord of property the same rights and remedies against the tenant for nonperformance of the agreements contained in the lease as the original landlord would have had.

(Internal quotations and citations omitted). The trial court went on to find that the plaintiff had met its burden of establishing an unbroken chain of interest from the defendant's original landlord. It further explained that:

[C]ontrary to defendant's contention, upon each transfer of the premises, Section 223 of the Real Property Law gave to the new owner all of the rights which the prior owner had in the subject premises and in the lease. The owner of leased property may sell it and if there is no reservation the grant conveys the lessor's interest in the lease. Since the property was transferred without any reservation, a formal assignment of the subject lease was not necessary to transfer all of the grantor's rights in and under the subject lease. The conveyance[s] . . . were all transferred by deeds without any reservation. As such, pursuant to Real Property Law section 223, MRP Lieberman's initial interest in the subject lease with the defendant was transferred to each new owner of the premises, including the plaintiff.

(Internal quotations and citations omitted) (emphasis added). The court went on to address the defendant's additional argument that even if the lease

was assigned to plaintiff by operation of law pursuant to Real Property Law S 223, plaintiff no longer has standing to prosecute this action since it has transferred title to the subject property and is no longer the record owner. In this regard, defendant refers to a deed, dated January 27, 2014, pursuant to which the plaintiff conveyed title of the premises to an entity known as 102 West End Ave. Development LLC.

Contrary to defendant's contention, plaintiff has not lost its standing and rights under the lease including the right to prosecute this action. It is undisputed that the plaintiff was the fee owner of the demised premises from August 31, 2004 until January 27,2014. As set forth above, Real Property Law S 223 gives the grantee or assignee of the landlord of property the same rights and remedies against the tenant for nonperformance of the agreements contained in the lease as the original landlord would have had. Moreover, section 223 applies to rent accruing subsequent to a transfer of the owner's fee interest and not for rents accrued prior. Therefore, the plaintiff has standing to seek recovery of rents that accrued during its ownership of the property -- the date the property was transferred to it up until January 27,2014, the date the property was conveyed to the new owner, 102 West End Ave. In its amended complaint, plaintiff alleges that the defendant failed to pay rent and other fees as of November 1, 2012 and thereafter. Plaintiff has standing to prosecute an action to recover any unpaid rent that accrued prior to the plaintiffs sale of the property.

(Internal quotations and citations omitted).