# City of New York v. Crest Hous. Co. LLC

> New York Supreme Court, New York County · May 6, 2025 · 2025 NY Slip Op 31670(U)

URL: https://www.frixlaw.com/law-library/cases/11048872

## Case

- **Court:** New York Supreme Court, New York County
- **Decided:** May 6, 2025
- **Citations:** 2025 NY Slip Op 31670(U)
- **Precedential status:** Unpublished
- **Opinion:** Opinion by Nicholas W. Moyne
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

City of New York v Crest Hous. Co. LLC
2025 NY Slip Op 31670(U)
May 6, 2025
Supreme Court, New York County
Docket Number: Index No. 452282/2022
Judge: Nicholas W. Moyne
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
This opinion is uncorrected and not selected for official
publication.
FILED: NEW YORK COUNTY CLERK 05/07/2025 04:27 PM INDEX NO. 452282/2022
NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 05/07/2025

SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. NICHOLAS W. MOYNE PART 41M
Justice
---------------------------------------------------------------------------------X INDEX NO. 452282/2022
THE CITY OF NEW YORK,
MOTION DATE 05/01/2023
Plaintiff,
MOTION SEQ. NO. 001
-v-
CREST HOUSING CO. LLC,BETTER HOUSING CO.
DECISION + ORDER ON
LLC,HPA HOLDING CO. LLC
MOTION
Defendant.
---------------------------------------------------------------------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 15, 16, 17, 18, 19,
20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47,
48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 67, 68
were read on this motion to/for SUMMARY JUDGMENT(AFTER JOINDER .

Upon the foregoing documents, it is

Ordered that the defendants’ motion for summary judgment dismissing the complaint and
the affirmative defenses to the defendants’ counterclaims is denied and, upon searching the
record pursuant to CPLR § 3212(b), the court grants summary judgment to the plaintiff and
dismisses the defendants’ counterclaims and affirmative defenses.

On or about January 2, 2012, plaintiff and defendants entered into a lease for warehouse
space in Long Island City. The lease contains a real estate tax escalation clause, which provides
that, in addition to base rent, in any tax year, the plaintiff is obligated to pay a set percentage of
the amount, if any, by which the amount of real estate taxes “assessed, levied or imposed” by the
City’s Department of Finance exceeds the amount of real estate taxes imposed on the building
for the base tax year designated in the lease.1 Under Article 4B, first Paragraph B of the Lease,
in order for the City to become obligated to pay any tax escalation, the “Landlord shall give
Tenant Landlord’s statement therefor, together with a copy of the Taxes bill showing that the
Taxes have been paid.” (Lease at p. 18) (NYSCEF Document No. 19) (emphasis added)

Since fiscal tax year 2011/2012, the defendants, as landlords, have benefitted from a real
estate tax abatement under the Industrial and Commercial Abatement Program (the “ICAP
Abatement”), which provides abatement of real estate taxes for certain commercial buildings.
The amount of the ICAP Abatement is reflected on the real estate tax statements. The plaintiff

1
Under Article 4B(A) of the Lease, the term “Real Estate Taxes” as used therein means the real estate taxes and
assessments on or with respect to Subject Premises, which are “assessed, levied, or imposed” by any governmental
authority having jurisdiction.

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claims that although the defendants have received the benefit of the ICAP Abatement by paying
reduced taxes, they improperly included the amount of the ICAP Abatement in their calculations
used to determine the amount due from the plaintiff as additional rent. The plaintiff maintains
that the defendants should have calculated the plaintiff’s real estate tax escalation due based on
the amount the Department of Finance actually assessed, which is the amount the defendants
actually paid, as opposed to the hypothetical or estimated amount that did not take into account
the ICAP Abatement. As a result, the plaintiff maintains they have overpaid for additional rent
in the fiscal years 2013 through 2022.

The complaint alleges two causes of action against the defendants. The first cause of
action seeks a declaratory judgment that under Article 4B of the lease, the defendants were and
are required to deduct the amount of the ICAP Abatement from the amount of the real estate
taxes used to calculate the additional rent due under the lease. The second cause of action is for
breach of contract based on the alleged overcharges and seeks reimbursement in an amount to be
determined at trial. Defendants now move for summary judgment. The essential dispute in this
case is whether the additional rent due under the real estate tax escalation clause should be
calculated based on the amount the landlord actually pays in taxes for a particular year and
excluding the amount the defendants are excused from paying as a result of the abatements
awarded under the ICAP Abatement program. The plaintiff maintains that the answer is yes
because otherwise the defendants would receive a windfall that was not provided or bargained
for in the lease. The defendants maintain that they are entitled to additional rent based on real
estate tax escalations as initially assessed by the Department of Finance, without taking into
account the ICAP Abatement, even though that amount would exceed the plaintiff’s
proportionate share of the increase in the defendants’ actual property tax obligation over the
relevant base year amounts.

Summary judgment shall be granted if, upon all the papers and proof submitted, the cause
of action or defense shall be established sufficiently to warrant the court as a matter of law in
directing judgment in favor of any party (CPLR § 3212[b]). The proponent of a summary
judgment motion, herein “moving party”, must make a prima facie showing of entitlement as a
matter of law, producing sufficient evidence to demonstrate an absence of any material issues of
fact from the case (see Pullman v Silverman, 28 NY3d 1060, 1062-1063 [2016]). When a party
has made a prima facie showing to entitle it to summary judgment, the burden shifts to the
opposing party to show by evidentiary facts that a claim or defense is real and can be established
at trial (See Tatishev v City of New York, 84 AD3d 656 [1st Dept 2011]; Indig v Finkelstein, 23
NY2d 728 [1968]; see also Vogel v Blade Contr. Inc., 293 AD2d 376, 377 [1st Dept 2002]). In
the event the moving party meets its burden, the evidence submitted by the non-moving party
must be accepted as true, and the non-moving party must be given the benefits of all favorable
inferences which may be drawn therefrom (City Line Rent a Car, Inc. v Alfess Realty, LLC, 33
AD3d 835 [2d Dept 2006]; Demshick v Community Hous. Mgt. Corp., 34 AD3d 518, 520 [2d
Dept 2006]; Marine Midland Bank, NA v Dino & Artie's Automatic Transmission Co., 563
NYS2d 449 [2d Dept 1990]).

Under CPLR 3212(b), even in the absence of a cross-motion, upon searching the
record, this Court may grant summary judgment to a party opposing a summary judgment

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motion on issues that are nearly identical to those raised in the motion. (See, e.g., Stephen LLC v
Zazula, 171 AD3d 488, 489 [1st Dept 2019] [citations omitted]).

DECLARATORY JUDGMENT

The first cause of action seeks a declaration that, under the tax escalation
provision of the Lease, the defendants are entitled to additional rent each year for a tax escalation
calculated only upon the tax amount that they actually paid in excess of the applicable
base year amount, that is, after application of the ICAP Abatement. The defendants’
First Counterclaim seeks the opposite declaration that the defendants may include in the
calculation the annual ICAP Abatement amount, even though that amount was not included in
the property tax that they actually paid for the year in question. (NYSCEF Document Nos. 33
and 34).

The purpose of a tax escalation clause in a lease is to afford relief to a landlord only
where an increase in the assessment of the property causes the landlord to pay more in taxes than
the previous year. (see S.B.S Assoc. v Weissman-Heller Inc., 190 AD2d 529 [1st Dept 1993];
Fairfax Co. v Whelan Drug Co., 105 AD2d 647, 648 [1st Dept 1984]). To allow a landlord to
collect additional rent based on taxes forgiven by the taxing authority, and never paid by the
landlord, would permit a landlord to reap a windfall not envisioned by, and contrary to the
parties agreement (see Wellington Tower Associates, L.P. v New York First Avenue CVS, Inc., 3
AD3d 460, 461 [1st Dept 2004], appeal dismissed, 3 NY3d 960 [2004]; Ran First Associates v
363 East 76th Street Corp., 297 AD2d 506. 509 [1st Dept 2002]).

It is well-settled that under New York law, a tenant is not obligated to pay an increase in
real estate taxes that the landlord is not obligated to pay unless the tax escalation clause on the
lease provides for an unequivocal intent that the tenant make such payments ( see Wellington, 3
AD3d at 461). To allow otherwise would cause the landlord to reap the very type of windfall the
law does not permit (see id.). In Wellington Tower Associates, the First Department rejected the
landlord’s argument that it was entitled to escalations calculated on a tax amount calculated
without regard to an existing tax abatement, where the tax escalation provision defined “taxes”
as “all real estate taxes or other governmental levies assessed, levied or imposed on the building
or land ‘without reduction for any abatement.’” (Id). (emphasis added). The First Department
held that, “[r]ead as a whole,” the tax escalation provision required the tenant to pay the landlord
a reasonable estimate of escalations, without reduction for any abatements, at least thirty days in
advance of the tax deadline, subject to later adjustment “in favor of [the] tenant for any
inaccuracies in its [the landlord’s] estimate or refunds it receives. “The result is that, ultimately,
[the] tenant is to be credited for its proportionate share of any abatements obtained by [the]
landlord.”). (Id).

Here, the tax escalation provision in the lease , like the one in Wellington Tower, defines
the taxes upon which the escalations are calculated as the amounts “assessed, levied or imposed”
by the Department of Finance on the building and land. See Defendant’s Exhibit B (Lease at pp.
16-17) (NYSCEF Document No. 19). The lease does not expressly provide for a calculation of
the tax escalation based on the pre-abatement amount. Instead under the Lease, at the first
Paragraph B and Paragraph C of Article 4B, the City must pay a tax escalation to the extent that

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“the total annual Real Estate Taxes imposed or assessed upon the Land and Building” exceeds
the amount of Real Estate Taxes “finally imposed or assessed upon the Land and Building” in
the base year. See Defendants’ Exhibit B (Lease at pp. 17-18) (NYSCEF Document No. 19) and
City’s Exhibits 21 and 22. There is nothing in the Lease that suggests that the parties meant by
the “imposed or assessed” and “assessed, levied or imposed” language anything other than taxes
that the Landlord actually paid, a meaning that is consistent with the purpose of the tax
escalation provision and the public policy to avoid giving the landlord an unneeded windfall.

The Lease clearly and unequivocally indicates that the plaintiff’s proportionate share of
the tax escalations must be based on the amount the defendants actually pay in real estate tax.
There is no other reasonable interpretation that would give effect to the entire language of the tax
escalation provision. For example, under Article 4B, first paragraph B, the plaintiff’s obligation
to pay its share of tax escalations is contingent upon the defendants providing the plaintiff with
semi-annual invoices for tax escalations accompanied by “a copy of the taxes bill showing that
the taxes have been paid.” See Defendants’ Exhibit B (Lease at p. 18) NYSCEF Document No.
19). The fact that the defendants are required to provide proof of their actual tax payments,
including tax bills reflecting receipt of those payments, is a clear indication that the plaintiff’s
share of the tax escalations are to be calculated based only on the amount the defendants actually
pay in excess of the amount the defendants paid for the applicable base year.

Defendants’ insistence that the ICAP Abatement amounts should be disregarded in
calculating the plaintiff’s share of the tax escalations is contrary to the express language of the
lease. Defendants argue that Article 4B, Paragraph D if the Lease expressly entitles the plaintiff
to a credit for any refund obtained by a reduction in the assessed valuation but is silent as to the
entitlement of the plaintiff to receive a credit based on an abatement. This argument improperly
turns the caselaw on its head and assumes the landlord is entitled to a windfall in the absence of a
provision in the lease directing otherwise. As set forth above, the law is exactly the opposite and
absent express language allowing the landlord to collect tax escalation payments based on
amounts that were never actually paid, the landlord cannot obtain a windfall at the expense of the
tenant. As the plaintiff points out, the relevant distinction is that a credit to the tenant as the
result of the landlord receiving a partial refund after the assessment valuation is retroactively
lowered is the result of the higher valuation no longer being applicable to the time period
covered by the tax amount that the landlord already paid. That is sharply distinct from an
abatement that reduces the tax amount due before the tax is actually billed to and paid by the
landlord. In the former scenario, the landlord is required to pay the amount billed, but becomes
entitled to a refund if, after the fact, the landlord’s tax liability is reduced due to a retroactive
reduction in the assessed valuation. But in the latter, the landlord is never required to pay the
“pre-abatement” amount at all, and instead must pay only the amount actually billed, that is, after
the abatement amount is deducted from the amount that otherwise would be due.2

Defendants’ argument that the plaintiff is attempting to claim advantage of tax relief that
is only available to property owners is unavailing. They claim that the tax escalation clause does

2
This case is clearly distinguishable from the Court of Appeals decision in Barnan Assoc. LLC v 196 Owners Corp.,
14 NY3d 780 [2010]. In Barnan, the lease agreement unambiguously addressed abatements and stated within the
four corners of the lease that tax valuation calculations would be made without regard to abatements. That is not the
case here as the subject lease makes no mention of abatements.
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not provide them with a windfall because it compensates them for the various expenditures they
incurred in upgrading the building in order to qualify for the ICAP Abatement. This is the same
type of argument rejected by the First Department in Ran First Associates. The Court in Ran
First Associates held that, even if the benefits of the abatements to the landlord netted zero, the
opposite is true for the landlord's collection of rent based on taxes that were not paid by the
landlord. “To permit landlord to collect additional rent based on taxes forgiven by the taxing
authorities, and therefore not payable by either the landlord or the shareholders, would allow the
landlord to reap a windfall not envisioned by, and contradictory to, the parties' agreement” (Ran,
297 AD2d at 509).

Accordingly, the Court denies the portion of the defendants’ motion seeking summary
judgment dismissing the first cause of action and, after searching the record pursuant to CPLR
§3212(b), grants summary judgment to the plaintiff on its first cause of action and dismisses the
first counterclaim in its entirety. It is hereby declared that the defendants are entitled to
additional rent for real property tax escalations calculated only upon the tax amounts that the
defendants actually pay, after application of any abatements or credits including the ICAP
Abatement amount.

The second cause of action is for breach of contract based on alleged overpayments under
the lease and seeks recovery of damages based upon the overpayment. Defendants, in addition
to arguing that there were no overpayments for the reasons outlined above, also maintain that any
otherwise valid claims for breach of contract are time-barred by the statute of limitations. A
breach of contract claim is subject to a six-year limitations period. See CPLR §213(2). Pursuant
to CPLR §213(2), an action based on a contractual obligation or liability must be commenced
within six years of accrual. In contract cases, the statute of limitations begins to run and the
cause of action accrues when a contract is breached or one party fails to perform a contractual
obligation. Plaintiff concedes that the statute of limitations bars its claims to the extent that they
relate to rent overpayments made more than six years before it filed its complaint on August 9,
2022. Plaintiff contends, however, that its claims relating to overpayments made on or after
August 9, 2022 are not time-barred because where a lease requires the payment of rent in
installments the statute of limitations begins anew with each separate installment. It is well-
established in New York that a cause of action for breach of contract or unjust enrichment arising
from a series of installment payments accrues separately for each installment. (See, e.g., Phoenix
Acquisition Corp. v Campcore, Inc., 81 NY2d 138, 141–42 [1993]; Vigilant Ins. Co. of Am. v
Hous. Auth. of City of El Paso, 87 NY2d 36, 45 [1995]). New York courts have consistently
applied this rule to real property lease overcharge and nonpayment disputes. (See, e.g., Walton v
E. Analytical Labs, Inc., 246 AD2d 532, 534 [2d Dept 1998]; Arrathoon v E. N.Y. Sav. Bank, 210
AD2d 366, 367 [2d Dept 1994]; Woodlaurel, Inc. v. Wittman, 199 AD2d 497, 498 [2d Dept
1993]; Yeshiva Univ. Dev. Found., Inc. v Consultants & Designers, Inc., 60 AD2d 525, 527 [1st
Dept 1977]).

As set forth above, the plaintiff’s tax escalations should have been calculated based upon
the amount the defendants actually paid in taxes, taking into account the amount of the ICAP
Abatement. Since the defendants overcharged the plaintiffs by disregarding the amount of the
ICAP Abatement, they breached the lease by overcharging the plaintiff for real property tax
escalations. Based on the formula contained in the lease and taking into account the statute of

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limitations analysis discussed above, the plaintiff has demonstrated that it is entitled to recover
89.3% of its overpayments for the 2016-2017 tax year3 and 100% of is overpayments for each
subsequent tax year through 2022-202. The total amount of damages the plaintiff is entitled to is
$185,599.70 on its second cause of action.

The Court has considered the defendants’ affirmative defenses and remaining
counterclaims and finds them without merit. Specifically, there are no facts in the record which
would allow the Court to make any finding concerning wavier, estoppel or laches on the part of
the plaintiff. Nor is there any evidence that the plaintiff has unclean hands. Accordingly, the
court searches the record and finds that the plaintiff is entitled to summary judgment on its
second cause of action for breach of contract for $185,599.70.

Accordingly, the motion for summary judgment by the defendants is denied. Upon
searching the record, the Court grants summary judgment to the plaintiff on its first cause of
action for declaratory judgment. It is hereby declared that the defendants are entitled to
additional rent for real property tax escalations calculated only upon the tax amounts that the
defendants actually pay, after application of any abatements or credits including the ICAP
Abatement amount. The plaintiff is also entitled to summary judgment on its second cause of
action for breach of contract in the amount of $185,599.70. The defendants’ counterclaims and
affirmative defenses are dismissed.

It is ORDERED and ADJUDGED that the plaintiff is to serve a copy of this order with
notice of entry upon the Office of the County Clerk, who is directed to enter judgment in favor of
plaintiff, City of New York and against defendants, Crest Housing Co. LLC, Better Housing
Co. LLC and HPA Holding Co. LLC in the amount of $185,599.70, plus interest at the rate of 9
% per annum from the date of August 9, 2022 , and costs and disbursements, as taxed by the
Clerk of the Court upon the submission of proper proof thereof; and it is further

ORDERED that plaintiff shall submit judgment directly to the Clerk of the Court, not
chambers or the Part, unless otherwise directed by the Clerk of the Court; and it is further

ORDERED that any such service upon the Clerk of the Court shall be made in
accordance with the procedures set forth in the Protocol on Courthouse and County Clerk
Procedures for Electronically Filed Cases (accessible at the “efiling” page on this court's
website).

This constitutes the decision and order of the court. ,
~~
5/6/2025
DATE NICHOLAS W. MOYNE, J.S.C.

B □ B
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION

□
GRANTED DENIED GRANTED IN PART X OTHER

3
From August 9, 2016 through June 30, 2017, the end of the 2016-2017 tax year totals 326 days, or 89.3%
(326/365) of that tax year.
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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11048872. Public record. Not legal advice.