If your commercial property becomes tied up in litigation, whether you’re the owner or tenant, you’ll want to know about the temporary rights and remedies available to you while the dispute gets resolved.
What does “pendente lite” mean?
The legal term for temporary measures taken by a court to protect all parties while a litigation is pending—such as the award of use and occupancy of real estate in exchange for payment to the property owner—is “pendente lite,” Latin for “during the suit,” or “while litigation continues.”
Under New York law, “[a] court has broad discretion in awarding use and occupancy pendente lite” (43rd St. Deli, Inc. v. Paramount Leasehold, L.P., 107 AD3d 501, 501 [1st Dep’t 2019]). The purpose of this doctrine is not necessarily to enforce any contractual obligation; rather, it “is predicated upon the theory of quantum meruit, and is imposed by law for the purpose of bringing about justice without reference to the intention of the parties” 255 Butler Assocs., LLC v 255 Butler, LLC, 173 AD3d 651, 653-654 [2d Dept2019]).
With awards of use and occupancy pendente lite, courts recognize that alternatives—such as permitting a landlord to remove a tenant during their pending legal dispute, or conversely, allowing a tenant to occupy a space rent free during a lawsuit—may be fundamentally unfair.
In other words: if you stay, you pay. The question for courts then becomes, “how much?”
Can a court change the conditions of use and occupancy of a disputed property while litigation is pending?
Recently, in 538 Morgan Avenue Properties LLC v. 538 Morgan Realty LLC, slip op. 2022 NY Slip Op. 30527(U), Index No. 507788/2015 (Feb. 15, 2022), Justice Lawrence Knipel of the Kings County Supreme Court addressed an interesting pendente lite issue with implications for both property owners and tenants. In that case, plaintiffs agreed to purchase defendants’ stone and marble import business, along with the Brooklyn property where plaintiff operated. Although the sale of the business closed, defendants cancelled the real estate contract. Plaintiff then brought suit to force a sale and, in the meantime, operated its business from the property still owned by the previous businessowner.
Relatively early in the case, in 2017, the court granted plaintiffs’ motion to prevent defendants from interfering with their use and occupancy during the litigation, in exchange for defendants posting an undertaking and paying a court-ordered dollar amount in monthly use and occupancy charges.
In proceedings nearly five years later, Justice Knipel was asked to consider adjustments to the monthly use and occupancy. Plaintiff requested a downward modification, citing the COVID-19 crisis. Meanwhile, defendants sought an upward modification, citing an increase in property values and an updated rent analysis. After reviewing the parties’ expert appraisals and considering the increase in real estate taxes, among other factors, the court held that an increase in monthly use and occupancy was appropriate. See 538 Morgan, slip op. at 8-11.
The key takeaway: courts have broad discretion to decide the conditions of use and occupancy of a disputed property while litigation is pending. So, whether you’re a property owner or an occupant with a potential dispute or an ongoing litigation, consider your right to apply to the court for a workable temporary arrangement based on market factors and fairness principles while you pursue your case.