Case: Saks & Company v. Swiss Bank Corporation, 1995
WL 11044 (S.D.N.Y. 1995)
How did lease require landlord and tenant to resolve disagreements
over allocation of responsibility for real estate taxes?
Ground lease called for arbitration to determine allocation of real
estate taxes between landlord and tenant in case of dispute. In this
case, there were two allocations which were required in order to
establish the tax responsibility of the parties.
The tax lot assessed by the city included both ground underlying new
construction (partly leased by tenant) and ground underlying old
construction (none of the old contruction was leased by tenant.)
Before the landlord could apportion taxes to the tenant for its share
of the taxes on the new construction, the landlord had to establish
what portion of the taxes on the tax lot were attributable to the new
construction. Since the new construction was not separately assessed,
this was not a black and white issue. In fact, the tenant disagreed
with landlord's approach to this apportionment. which had to be
separated before the allocation could be made of the new construction.
The tenant wanted to address this issue in an arbitration under the
arbitration clause in the lease. The landlord argued that the
arbitration clause did not cover disputes relating to tax
apportionment as between the new construction and the old
construction. The landlord argued that the arbitration only included
disputes as between the landlord and tenant relating to the new
construction. The landlord had a low assessment on its old
construction which it did not want to risk having to share with the
tenant in case of an adverse ruling by the arbitrator.
The court analyzed the language of the lease and concluded
that the language of the arbitration clause was not limited as claimed
by landlord. It determined that the language of the clause applied to
the dispute regarding the allocation as between the old building and
the new building, thereby requiring arbitration of the entire real
estate tax dispute.