Legislation Agency Wins $2M Lease Credit score for Unhealthy HVAC Throughout Covid
Many commercial tenants went to court for a pandemic rent break. A Murray Hill law firm can now count itself among the few to have won one.
New York’s Appellate Division ruled that affiliates of landlord ABS Partners Real Estate must credit Wolf Haldenstein, a firm specializing in stocks and antitrust law, over $2 million in rent and legal fees after the office owner failed to complete renovations on the firm’s two floors of leased space.
The HVAC system roared like a “jet engine,” the landlord’s architect said, produced 90-degree temperatures in the summer and failed to circulate fresh air as Covid raged in New York.
The law firm, which has occupied 270 Madison Ave for nearly 100 years, agreed to move temporarily from the ninth and 10th floors to the 11th and 13th when it signed a 12-year lease in 2018.
ABS planned to revamp the heating and air conditioning systems on the two lower floors and agreed in the lease that its tenant would rent the upper floors until an architect deemed the work substantially complete.
The lease included four months of free rent once the firm moved back to the lower floors and a rent credit if renovations took too long. Wolf Haldenstein would receive a daily credit for each day that work continued after February 2020. The rate would jump to a day and a half after April.
Wolf Haldenstein moved back to the ninth and 10th floors in December 2019, ahead of schedule. But the firm immediately questioned whether work had been completed.
“We should have another construction meeting to discuss HVAC problems,” Mark Rifkin, managing partner at Wolf Haldenstein wrote in an email to the job’s contractor on Christmas Eve.
“I think some may have assumed substantial completion before it was done,” he continued. “Had this been summertime, when we need the AC, the space would be uninhabitable.”
In another email to ABS Partners, Rifkin described the floors as excessively hot and the HVAC system as excessively loud.
Those problems continued into 2020. In February, as Covid began spreading in the city, ABS’ construction manager acknowledged in an email that “many ‘existing condition’ items … need to be figured out and resolved.”
James Caseley, an executive at ABS, went so far as to describe the HVAC system as a “disaster” to the landlord’s construction manager in a memo.
The same month, the landlord started work on the 11th and 13th floors, making it impossible for Wolf Haldenstein to relocate to a more hospitable floor.
The HVAC issues lasted through the pandemic, forcing partners, associates, staff and clients, once they returned to the office, to deal with a system that failed to adequately circulate fresh air, according to Scott Mollen of Herrick Feinstein, attorney for the tenant.
In April 2021, Wolf Haldenstein sued ABS Partners, alleging that the landlord’s architect had not declared the work complete, meaning the firm had no obligation to pay rent.
ABS answered a month later, arguing that the law firm had defaulted on rent and owed $1.2 million on its roughly $145,000-per-month lease.
That November, a Supreme Court judge sided with Wolf Haldesstein, ruling the work was incomplete and the firm had no need to pay rent. The Appellate Division upheld the ruling that the landlord should pay a $1.2 million rent credit, $100,000 in moving expenses and $700 .00 in attorney’s fees.
“Much of the unnecessary fees were incurred as a result of landlords’ litigation tactics,” the court noted.
Rosenberg & Estis attorney Alex Estis, who represented ABS, said his legal team appreciated the Appellate Division reduced Wolf Aldenstein’s rent credit award. A lower court had granted the firm an additional $647,869, plus interest.
“We are considering further options in light of the ruling,” Estis added.
The firm’s late co-founder Warren Estis had represented ABS for most of the suit, one of his last. Estis died in April.
Contact Suzannah Cavanaugh
This article has been updated to include comments from Rosenberg & Estis, counsel for ABS Partners Real Estate.