Tuesday, February 27, 2007

Tenant's obligation to "yield up" premises in good condition

Tenant's obligation to "yield up" premises in good condition does not apply to land outside leased buildings.
"IBM, as tenant, leased premises defined as 113,400 gross square feet in two buildings.
The lease separately defined the land on which the buildings were situated, with certain lease provisions applicable to the land.
Before execution of the lease, IBM had used the site for manufacturing purposes under other arrangements. An underground storage tank had leaked chemical waste, which IBM abated under an agreement with the landlord and the state environmental agency.
After the lease terminated, the landlord claimed that the lease obligated IBM to clean up the soil, bedrock, and groundwater to a higher quality, even though IBM was in full compliance with the earlier abatement agreement. The landlord pointed to a lease provision that called for the tenant, at lease termination, to remove its goods and effects [and] peaceably yield up to the Landlord the premises in good order and condition.
The trial court, allowing extrinsic evidence, held for the landlord, construing the lease as a whole to obligate IBM to yield up the land in good condition, free of all contamination. The appellate courts reversed, holding that the lease definition of premises was clear and unambiguous, and thus the yield up provision did not apply to the land. Whether this outcome is what the parties actually intended is impossible to say. Arguably the landlord should have lost for an alternative reason. Should not its participation in the abatement agreement estop it from subsequently claiming that the lease required abatement to a higher standard? The decision underscores the need for real estate lawyers to pay careful attention to the use of defined terms throughout documents that they draft and review. South Road Assocs., LLC v. IBM, 826 N.E.2d 806 (N.Y. 2005)."
from Probate & Property, March/April 2006

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