This matter was referred to this court on March 27, 2006 on a motion to vacate a default judgment. On this date the court issued an order vacating the default on condition that respondent deposit in escrow the sum of $18,000.00 with petitioner's attorney by March 30, 2006 and scheduled the matter for a hearing on "reasonable market value" of the premises to be held on April 6, 2006 (See Court's decision dated March 27, 2006 in court file). Respondent having deposited the amounts ordered in escrow, the parties appeared before this court on April 6, 2006 for a hearing on the reasonable rental value of the premises.

Respondent entered into a lease, with petitioner's predecessor in interest, for premises located at 198 Delancey Street New York, NY 10002. The term of the lease was for 10 years with an option for two (2) more years at its expiration. If respondent chose to exercise the option then the lease set the new monthly rent at market value (See petitioner's 2 in evidence, copy of lease and rider). By deed dated May 29, 2003 petitioner acquired title to the premises (see Petitioner's 1 in evidence). The lease expired on September 30, 2005. Respondent exercised the option to remain an [*2]additional 2 years. On November 1, 2005, Petitioner mailed respondent a notice, via Mr. Bill Lam of Longines Realty Inc., notifying respondent that as per the "option language in the lease the new rent shall be based on fair market value and.... it has been determined by our office that the current fair market value for your space is $8000.00 per month plus proportionate share of real estate taxes" (see Petitioner's 3 in evidence).

At the hearing petitioner presented Mr. Bill Lam as its main witness and expert to establish fair market value.Mr. Lam testified that he is a licensed real estate broker since 1983 and has operated his own office since 1987, specializing in commercial real estate, retail, industrial and office space. He was raised in chinatown and his focus is on chinatown and the Lower East Side. He was asked by petitioner to determine the reasonable market value for the premises in question, which is something he has done previously over one hundred times. He stated that in order to reach a market value one must look at comparables in the area, because if the area changes the values change. He surveyed the area in a 5 to 10 square block radius and looked at three comparables:

1) 140-146 Delancey Street, a property located in the Soho Submarket, asking price $90 per square foot.

2) 343 Grand Street, a property located in the Soho Submarket, asking price $48 per square foot.

3) 75 Grand Street, a property located in the Soho Submarket, asking price $85 per square foot ( See petitioner's 4A, 4B, 4C in evidence).

Mr. Lam reached the conclusion that these properties, which were more expensive and in a more desirable area, should be discounted and that's how he arrived at a "market value" of $49 per square foot for the subject premises.

Respondent presented the testimony of Mr. Sam Irlander a Licensed Real Estate broker for 34 years. Mr. Irlander surveyed the area within a 3 square block radius and obtained a comparable property one-half block away from the subject premises ( See Respondent's B in evidence). The property located at 112-114 Ridge Street in his view is the only comparable because the properties surveyed by petitioner are superior. For instance, (4A) is a superior location because of its [*3]visibility, the subject property is not as readily visible or populated by restaurants and other boutiques; (4B) is in a more desirable and expensive area, subject property is in an area blocked off by the bridge and is not as visible or desirable;(4C) is a Soho property, which is a different neighborhood and not comparable at all. In his opinion the subject premises should rent for no more than $42 per square foot.

Mr. Aszaalarab Ali, testified that he is the president of respondent, has a year and a half left on the lease and that the size of the premises is 1667 square feet. At lease end respondent paid a yearly rent of $29,400.00, which is approximately 18 per square foot.

Market rent is reached by analyzing the property's leases and the leases of comparable nearby properties (Reckson Operating Partnership, LP. v Assessor town of Greenburgh, 2 Misc 3d 1005(A), 784 NYS2d 923 [2004], 2004 NY Slip Op. 50153 [U] ). The parties herein have not submitted for this court's consideration the leases of comparable nearby properties. They have only submitted the asking price for premises that they consider to be comparable to the subject property and this court is left with the task of finding the "reasonable market value". Reasonable value is fair market value, that is, the amount in cash which a willing purchaser would pay and a willing seller would take, see Adler v. Edwards, 6 Misc 3d 1024(A), 800 NYS2d 341, 2005 NY Slip Op. 50168 [U]; quoting, Beacway Operating Corporation v. Concert Arts Society, Inc., 123 Misc 2d 452, 474 NYS2d 227 [ NY Civ Ct.,1984]; The reasonable market value is the rental value the premises would have obtained in the open market.(Adler v. Edwards, supra ; In the Matter of the Estate of Seviroli, 5 Misc 3d 1031(A), 799 NYS2d 164, 2004 NY Slip Op. 51659 [U] ).

It is the Landlord who has the burden of proving reasonable value of the premises and in discharging that burden, the landlord may rely upon the testimony of an expert witness (Beacway Operating Corp v. Concert Arts Society, , supra ). That valuations of land must take into consideration all encumbrances thereon, including restrictions as to its use, unless there is a clear provision to the contrary is well settled (Plaza Hotel Assoc. v Wellington Assoc., 55 Misc 2d 483, 285 NYS2d 941). All the facts and circumstances which a buyer and seller would consider in connection with the purchase and sale of a piece of property are relevant and material in arriving at a determination as to its rental market value (Sparkill Realty Corp. v. State of New York, 254 AD 78, 4 NYS2d 679). It is undisputed that the subject premises lie in an area close to the Williamsburg bridge on Delancey Street, that they are partially [*4]obscured by the bridge and are not surrounded by trendy restaurants and boutiques. To adjust for this reality petitioner's expert has discounted the asking price for the comparable premises by almost 50% to reach what he considers a "reasonable market value" of $49 per square foot.

To be probative an opinion must be based on facts properly before the court

(Caton v. Doug Urban Constr. Co., 65 NY2d 909; Matter of Chrysler Realty Corp. v Foley, 74 AD2d 847, 425 NYS2d 387 (2nd Dept., 1980). Once adjustments reach the level employed here, the transactions cease to be comparable thereby losing their evidentiary weight (2641 Concourse Co., v City University of New York, 137 Misc 2d 802, 522 NYS2d 775 [1987]). Thus the only competent evidence before this court is that presented by Respondent's expert, who after surveying a three square block radius found a comparable property one-half block away asking $42 per square foot.

Fair market rental is what a tenant desiring but not compelled to rent, would pay to a landlord who desires but is not compelled to lease (2641 Concourse Co., v. CUNY, supra ; Beacway Operating Corp. v Concert Arts. Socy., supra ). Since the Lease is silent as to the amount that Respondent should pay as rent if he exercises the option and the only competent evidence before this court is that proffered by Respondent's expert, this court finds that the "reasonable market rental value" of the premises is $42 per square foot.

Accordingly, it is the decision of this court following the hearing that the "reasonable market rental value" of the premises is $42 per square foot.

This constitutes the decision and order of this court.

Dated: April 28, 2006_______________________

Manuel J. Mendez

Judge Civil Court