Park Square Garage, Inc. v. New York University

McNally, J. In this action on submitted facts there is presented the question of plaintiff tenant’s liability for additional rent. Plaintiff is in possession of a subsurface parking facility located in the area known as Washington Square Village. The lease therefor, dated November 6, 1958, is for 15 years, commencing January 10,1959. The annual rental is $115,000.08, plus a percentage of annual gross income. The tenant is also required to pay as additional rent the increase over the base year of real estate taxes in respect of the leased premises. The original tenant assigned the lease to plaintiff. Defendant purchased Washington Square Village on December 20, 1963. [461] Washington Square Village is a single plot covering three square blocks, improved with two 16-story apartment buildings. The leased premises are within said plot, which is Block 533, Lot 1, on the tax map of the City and County of New York. The leased area constitutes about one fifth of the entire plot. The leased area is not separately assessed. The entire plot is assessed as one unit, and the buildings and improvements are assessed in the aggregate. The lease provides for the apportionment of any increase in real estate taxes over the base year in the event the leased premises are not separately assessed. In such case, plaintiff’s share of the increase of land tax is determined by the ratio of surface area of the leased premises to total surface area. In addition, plaintiff is required to pay 12% of the increase in taxes in respect of the buildings. Since its acquisition of Washington Square Village, defendant has utilized residential portions for housing of its faculty and students, as well as offices. Said uses qualified the portions involved for tax exemption under section 420 of the Real Property Tax Law. Defendant applied for and was granted exemption from the real estate tax on the portions so utilized. No part of plaintiff’s premises is within the exempt portions. If plaintiff’s garage premises had been on á tax lot within and apart from the rest of Washington Square Village and separately assessed, plaintiff unquestionably would be liable for the increased real estate tax thereon. In such case, defendant’s partial exemption would have no bearing on plaintiff’s liability therefor. The lease does not relieve plaintiff from payment of the increased real estate tax because the leased portion is not separately assessed. On the contrary, the lease provides plaintiff’s obligation shall continue even though the leased premises are not separately assessed, and sets out the formula for allocation of the increased tax. There is no ambiguity as to the expressed intent. It is that plaintiff pay the increase in real estate taxes “ payable on the leased premises ”. The land assessments and tax rates for the years involved exceeded those for the base year. Since no part of plaintiff’s leased premises is exempt from real estate tax, the tax exemption extended to defendant is irrelevant on plaintiff’s obligation to pay the increased real estate tax “ on the leased premises.” Moreover, if plaintiff prevails, it will be the beneficiary of an exemption intended solely for nonprofit organizations and a diversion of public moneys to the plaintiff, a business corporation. The formula set out in the lease for allocation of the increased real estate tax should be applied as if there had [462] been no exemption and as set out in Exhibit “ D ” of the submission. Plaintiff’s reliance on Wendell Foundation v. Moredall Realty Corp. (282 N. Y. 239) is misplaced. There the tenant was required to pay as additional rent the income taxes of the landlord arising out of the ownership of the property and the income therefrom. The landlord was a charitable corporation exempt from income taxes. In Wendell, the additional rent sought was sought to be measured by a hypothetical income tax. Here, the increased taxes are a reality and not hypothetical because the leased premises were subjected to higher assessments and tax rates and the increased tax on the leased premises is unaffected by the exemptions granted as to portions of defendant’s property not within the leased premises. The defendant is entitled to judgment as provided in paragraph “24” of the submission, with costs. Settle judgment.