A recent court victory for a Fairport, New York, landlord shows the importance of prospective tenants or buyers to perform sufficient due diligence before signing rental or purchase agreements.
In the case before the Supreme Court of Monroe County, Three Buds LLC agreed to lease commercial property in Fairport from NCTBP Calabrese, LLC. Before Three Buds could open its business, the floor of an adjoining unit collapsed, causing the Village of Fairport to deem the entire structure unsafe for occupancy, prohibiting Three Buds from occupying the leased premises.
Three Buds sued for breach of contract, breach of implied warranty of good faith and fair dealing, fraudulent representation and fraud in the inducement, unjust enrichment and negligence. It sought partial summary judgment on the breach of contract, unjust enrichment, and breach of implied warranty of good faith and fair dealing claims and, additionally, sought an order dismissing NCTBP Calabrese’s affirmative defenses and counterclaims.
This set up a case where the following applied:
Summary Judgment
In order to grant a motion for summary judgment, the plaintiff must make a prima facia case showing entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact necessitating a trial.
Breach of Contract
To establish a prima facia case for breach of contract, the plaintiff must establish the existence of an agreement, performance under the contract, defendants' breach of the agreement, and damages.
Unjust Enrichment
Plaintiff must establish (1) defendants were enriched, (2) at plaintiff’s expense, and (3) that it is against equity and good conscience to permit defendants to retain what is sought to be recovered.
Breach of Implied Warranty of Good Faith and Fair Dealing
Plaintiff must establish the defendant acted in a manner that, although not expressly forbidden by any contractual provision, would deprive the plaintiff of the right to receive the benefits under their agreement.
Ruling
The court found NCTBP Calabrese raised sufficient triable issues of fact whereby Three Buds’ motions were denied. The triable issues include:
- Lease provisions requiring use of the premises is subject to “all rules, regulations, laws, ordinances, statutes and requirements of all government authorities,” concluding that casualty or other similar causes would prevent use.
- Three Buds had knowledge of ongoing excavation in an adjoining unit prior to lease execution.
- The condition precedent that NCTBP Calabrese regain possession of the premises and that governmental approvals were required.
- That no bad faith occurred but rather there were assorted issues outside of NCTBP Calabrese’s control, such as pandemic related disruptions and code enforcement matters; and
- NCTBP Calabrese showed good faith by, after telling Three Buds to stop sending rent checks due to the occupancy issue, placed rent checks in an interest-bearing account.
Three Buds appealed the court’s decision to the Appellate Division of the Supreme Court of the State of New York. That motion was denied on September 15, 2025.
Takeaways
Due diligence is critical prior to any rental or purchase agreement. Thoroughly inspect the premises, utilize professionals to ensure the premises is fit for, and authorized for, your desired use. Anticipate hurdles to overcome in regulated industries. Ensure all diligence and communications are documented.
