Petitioner commenced this nonpayment proceeding to recover possession of the premises described as: all that certain lot, piece or parcel of land, situate, lying and being in the Incorporated Village of Hempstead, County of Nassau, State of New York, being part of Section 34, Block 294 and Lot 0208, all as more fully set forth as Exhibit "A", currently being used as a parking lot for tenants of the Hempstead Professional Building located at 131 Fulton Avenue, Hempstead, New York. The Petitioner also seeks $31,531.74 in back taxes from Respondent, monthly rent, costs and disbursements, and attorney's fees.

The Respondent counterclaims seeking to recover $29,314.39 or 10% of the tax refunds, which the Petitioner received from the county on the premises, plus interest. In opposition to the counterclaim, the Petitioner denied that it owes the Respondent any tax refunds. The Petitioner admits that the Respondent paid an amount purporting to be payment of taxes for 2009/2010, which payment was accepted on account and without prejudice. Additionally, Petitioner admits that the Respondent paid an amount purporting to be payment for September 2010 rent. Subtracting the amount of $1,000.00 for the September rent, $12,368.61 paid for real estate taxes for 09/10, $360.00 for costs and disbursements, and $3,000.00 for reasonable attorneys fees as additional rent, the Court will address the amount allegedly due in the notice of default, dated August 11, 2010.

Said amount allegedly due is summarized as follows in the notice of default:

2003/04Real Estate Taxes Due$866.49Reduction applied

2004/05Real Estate Taxes Due$ 2,431.85No reduction applicable

2005/06Real Estate Taxes Due$ 2,803.07No reduction applicable

2006/07Real Estate Taxes Due$ 4,539.19No reduction applicable

2007/08Real Estate Taxes Due$ 4,162.53Reduction applied

Total Outstanding Taxes Due$14,803.13

A trial was held on January 26, 2011.

During the trial the premises was described by the parties as belonging to Petitioner's property and adjacent to Respondent's building located at 131 Fulton Avenue, Hempstead. Respondent leased the said property for the purpose of having parking for its tenants at 131 Fulton Avenue.

Petitioner presented evidence at the trial that it became aware that it did not bill Respondent the proper amount of taxes when the Respondent requested an accounting of all sums paid for taxes. Petitioner discovered that its CPA used the wrong land value to calculate said taxes which caused the improper billing.

Respondent presented two main defenses at trial as to why it is not liable for the back taxes:

1. Inability of Respondent to bill its tenants for the taxes for which Petitioner is now seeking to collect from it.

2. Respondent is entitled to credits for tax refunds which Petitioner received on its property, but not reimbursed to Respondent.

First Defense

To support its position, the Respondent introduced into evidence a sample lease between it and one of its tenants, Harcharan Duggal and Inder Pal Singh, which contained the following paragraph concerning tax reimbursement:

(65) REAL ESTATE TAXES: The tenant shall pay to the Landlord as additional rent hereunder a sum equal to 5.0% of all the real estate taxes and assessments against the land and building of which the demised premises form a part. The tax charges shall be billed as rent and shall be collectable as rent. Photostatic copies of the tax bills used in computation shall be deemed conclusive evidence of taxes due the Landlord. The Landlord will bill the Tenant's tax contributions on a monthly basis in advance so at the time the tax bill is due the Landlord shall have all the monies required in his possession.

An analysis of Paragraph 65 demonstrates that Respondent's tenants had no contractual obligations to reimburse Respondent for the taxes it had to pay to Petitioner. In other words, Respondent's tenants were only contractually obligated to pay taxes with respect to the land and building of which the demised premises is identified in the Lease between the parties at 131 Fulton Avenue, Hempstead, New York, not the land leased by Petitioner to Respondent. Therefore, the Court rejects Respondent's claims that Petitioner is barred from collecting the back taxes due to laches or "stale claims" which prejudices Respondent's ability to collect the taxes from its tenants.

Since there is no right of reimbursement between Respondent and its tenants, Respondent's defense of laches and prejudice fail. The Respondent bears the burden of proving laches. (See 1 Dolan, Rasch's Landlord & Tenant including Summary Proceedings, §43:33 at 129-130 [4th ed] and, Finkelstein and Ferrara, Landlord and Tenant Practice in New York §14:347 at 14-185 [West's NY Practice Series, vol F, 2007]).

The case law holds that the defense of laches is not a viable defense to commercial nonpayment disputes. See Landlord and Tenant Practice in New York, Section 14:351 at 14-186 [West's NY Practice Series, vol F, 2007]) footnote No.1 which cites:

Kalimian v. Collezioni Fifth Ave., Inc., N.Y.L.J., 11/13/98, p. 28, col. 3 (App. Term, 1st Dep't); U.B.O. Realty Corp. v. Fulton, N.Y.L.J., 9/8/93, p. 21, col. 1 (App. Term, 1st Dep't) (laches "finds application only in the context of residential nonpayments").

Since this is a commercial dispute, laches cannot be used by Respondent to defeat Petitioner's claim for back taxes.

Second Defense

Paragraph 28 of the Lease between Petitioner and Respondent provides that the tenant agreed to reimburse Petitioner for the following taxes:

28.The tenant covenants and agrees to pay as additional rent ten (10%) percent of the increase in real estate taxes and assessments annually levied, assessed and imposed against the land (excluding buildings) of which the herein demised premises forms a part, over and above the taxes established and paid thereon for the tax year 1955. The amount of such increase is to be paid by the tenant on the 1st day of the month next succeeding each date on which the semi-annual instalment [sic] of such taxes and assessments is due and owing. Said increase shall be pro-rated for the first and last lease years of the demised premises. If an assessment is payable in annual instalments, the tenant shall only be required to pay its share of such of said instalments [sic] as fall due within the demised term.

The Court agrees with Respondent that it could be entitled to a portion of the tax refunds even though the Lease didn't provide for reimbursement. In Rudd v. 176 West [*2]87th Street Owners Corp., 283 AD2d 202, 724 N.Y.S.2d 299 (1st Dep't 2001) the Court held:

We reject the landlord's argument that the tenants are not entitled to the refund they seek simply because the lease does not expressly provide therefor. To hold otherwise would allow the landlord to realize a profit from the tenants' compliance with a clause that was not intended to provide the landlord with a windfall (cf., Fairfax Co. v. Whelan Drug Co., 105 AD2d 647, 481 N.Y.S.2d 366; S.B.S. Assoc. v. Weissman-Heller, Inc., 190 AD2d 529, 593 N.Y.S.2d 28).

However, the Court rejects attempts by Respondent to introduce evidence of credits Respondent claims that it is entitled to for tax refunds because no competent evidence was introduced which would allow the Court to properly evaluate these claims. The Respondent merely offered letters and/or documents without any proper foundation by fact or expert witnesses, who would be subject to cross examination, to establish a proper basis for their admissibility. Respondent's attempts clearly violated the hearsay rule and no exceptions to the hearsay rule were demonstrated.

58 NY Jur 2d, Evidence and Witnesses Section 456, states in part:

The fact that the matter offered as evidence is a writing, inscription, or even a formal document, does not alter the application of the ordinary rules and tests of relevancy and competency. A writing may be incompetent as hearsay, unless it comes within an exception to the rule which excludes hearsay . . . .

Petitioner has presented evidence that the Respondent was given credit for the tax refunds. The $14,803.13 was a net dollar amount of taxes due to Petitioner after giving credit to Respondent for tax refunds.

Petitioner is awarded $14,803.13 and a judgment of possession with the warrant stayed until March 15, 2011. Petitioner may submit an application for legal fees with proper citation, the applicable lease provision allowing same, together with a detailed affidavit of services rendered on notice to Respondent. The Respondent's counterclaim is denied.

So Ordered:

/s/ Hon. Scott Fairgrieve

DISTRICT COURT JUDGE

Dated:February 15, 2011