The owners of Pete’s Tavern won the right to continue operating a sidewalk cafe. Image credit: Marina Chetner
Landlord was required by lease to consent to tenant’s operation of a sidewalk café, absent a good-faith basis. DMF Gramercy Enterprises, Inc. has operated Pete’s Tavern, a sidewalk café at 129 East 18th Street in Gramercy, Manhattan, and claims to be the longest continuously-operating bar and restaurant in New York City. DMF Gramercy has operated Pete’s since 1964 when it entered into a lease with the building’s then-owner. The current owner is the Lillian Troy 1999 Trust. To operate the café, DMF Gramercy requires a license from the Department of Consumer Affairs, to which the Trust and their predecessors consented over the years. On March 7, 2012 the Lillian Troy 1999 Trust issued a letter to DCA indicating it would not consent to a renewed sidewalk café license.
DMF Gramercy sued for declarative relief stating it is permitted to operate the sidewalk café pursuant to its lease with the Trust. DMF Gramercy also requested a declaration that the Trust is required to provide their consent and a permanent injunction barring the Trust from revoking their consent. On December 9, 2013, Manhattan Supreme Court Justice O. Peter Sherwood ruled for DMF Gramercy and granted the permanent injunction. Justice Sherwood found nothing in the lease or other evidence indicating the Trust reserved the right to withhold consent in its sole discretion. The Trust appealed, arguing the sidewalk surrounding the building is not a part of the leased premises and the Trust could not grant consent to operate on property not a part of the premises.
On October 21, 2014 the Appellate Division, First Department unanimously affirmed Justice Sherwood’s decision. Writing for the court, Justice Rolando Acosta said the lease grants DMF Gramercy the right to use the space beyond the building line, which he defined as referring to the sidewalk café already in existence at the time of executing the lease. Justice Acosta wrote that to permit the Trust to withhold or revoke consent at-will would destroy DMF Gramercy’s right to “receive the fruits of the contract” gained by operating the sidewalk café.
DMF Gramercy Enterprises, Inc. v. The Lillian Troy 1999 Trust, 994 N.Y.S.2d 605 (A.D. 1 Dept. 2014) (1st Dep’t Oct. 21, 2014) (Attorneys: Jeffrey H. Roth, for The Lillian Troy 1999 Trust; Jaffe Fross & Light LLP, Burton Ross and Bill S. Light of counsel, for DMG Gramercy Enterprises, Inc.).
By: Michael Twomey (Michael is the CityLaw Fellow and a New York Law School Graduate, Class of 2014.)