UPDATESEPTEMBER 2012 | VOLUME 20

Belkin Burden Wenig & Goldman, LLP

TENANT’S FAILURE TO SATISFY A CONDITION PRECEDENT IN A COMMERCIAL LEASE BARS TENANT’S $600,000 OVERCHARGE CLAIM

By Jeffrey Levine

Commercial lease provisions are typically

construed strictly by the courts and enforced

as written in an effort to generally avoid any

reformation of the lease agreement between the

parties. One such provision that has been found to be enforceable

provides that, in order for the tenant to preserve its right to

challenge any additional rent charges billed by its landlord,

the tenant must first pay to its landlord the full amount of the

additional rent charge being challenged and send to its landlord

a written objection to such additional rent charge, by certified

mail, within thirty days of receipt of the additional rent statement

or bill. This type of provision, requiring the performance of a

condition prior to exercising a right under the lease or prior to

pursuing a course of action, is known as a “condition precedent.”

A condition precedent can be applied in various commercial lease

provisions to impose a prescribed threshold obligation upon a

party to the lease.

In a recent case handled by BBWG, a commercial tenant sued

its landlord for recovery of certain alleged additional rent

overcharges paid to the landlord over a two year period, in the

amount of $600,000. BBWG filed a pre-trial motion, on behalf

of the landlord, seeking to dismiss the tenant’s overcharge claim

on various grounds, including the ground that the tenant had

failed to comply with the condition precedent in the lease, which

required the tenant to send to the landlord written notice of

the tenant’s challenge within thirty days of the tenant’s receipt

of each monthly additional rent statement being challenged.

Finding that the tenant had failed to comply with the lease

provision containing the condition precedent, the court granted

the landlord’s motion and dismissed the tenant’s overcharge

claim. Significantly, the court did not determine whether or not

an overcharge had occurred, since the question of whether an

overcharge had occurred was irrelevant to the determination as

to the tenant’s compliance with the condition precedent. This

case demonstrates the significant value to a landlord of lease

provisions requiring a tenant to satisfy a condition precedent

prior to exercising a right to challenge additional rent charges,

and the importance of careful drafting of commercial leases to

incorporate such provisions.

Jeffrey Levine (jlevine@bbwg.com) and Lewis Lindenberg (llindenberg@

bbwg.com), partners in the firm’s Litigation Department, represented the

landlord in the case discussed in this article.