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Adam Leitman Bailey, P.C. Negotiates Surrender of Above Market Lease, Saving the Client Millions

The owner of an artistic production company contacted Adam Leitman Bailey, P.C. because its landlord was performing Local Law 11 work in his downtown building, which included the replacement of a parapet directly outside the client’s sound stages and using the terrace between the parapet and his office as a staging area for the façade work.  My client’s lease had more than five years left and the rent with escalations over the years was far more costly than the current market rent.  In the common areas outside of the sound stages, the noise was excessively loud and made it impossible to hear others or even think.  The sound stages were soundproofed to the highest commercial standards, but the jackhammers directly outside the client’s window were so loud that even the soundproofed rooms were penetrated. To make matters worse, this was the high season for the production company’s business.  Many of the commercials played during the Super Bowl were created and produced in our client’s sound studios.  And A-list, name musicians were also scheduled to record in the studios.

Upon review of the lease, unusual provisions allowed termination of the lease by the tenant if conditions caused by the landlord prevented our client, the tenant, from using the demised premises in the usual course of his business.  We reviewed the law concerning constructive eviction, which would have ended the lease, but our client was unwilling to vacate until a new space suitable for his business had been located. We arranged for a well-known sound testing company to test the sound levels and report on its findings.  Not surprisingly, the tests showed that the sound levels were well in excess of the levels permitted by New York’s Noise Control Code.  The sound levels were so high that even short exposures could cause damage to one’s hearing.

The tenant’s financial exposure under the lease for rent during the remainder of the term was in the multi-millions of dollars. It was clear that the landlord did not want to lose the income stream from this tenant. The landlord’s attorney wanted to give the tenant an abatement of rent that didn’t even match the period of time the jackhammering would be at its worst.  The attorney argued that the work was required by law under Local Law 11 for the safety of the public.  In response, we forwarded the sound testing report to the landlord’s attorney and argued the sound levels were so excessive, that they not only violated the Noise Control Code but also that the jackhammering was a danger to the tenant’s workers’ hearing and prevented the tenant from conducting its business. This exchange opened up bona fide negotiations with the landlord and allowed Adam Leitman Bailey, P.C.’s client to terminate the lease and his guarantee without concern for the multi-million dollars in rent that would be due over the next five years. Adam Leitman Bailey, P.C. was also able to cancel rent arrears that had accrued at the beginning of the pandemic the tenant agreed to pay over the remainder of the terms of the lease.  In exchange, the landlord kept a portion of the tenant’s security deposit.

It was an enormous win for the tenant, who walked away from an above-market lease without paying a fortune and did not have to litigate with a landlord who did not want the tenant to leave.

Steven R. Wagner of Adam Leitman Bailey, P.C. represented the client in this matter.

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