The Appellate Division of the Supreme Court will decide on Thursday whether to uphold the eviction of fish market Simply Seafood from the South Street Seaport or reverse the decision, Simply Seafood’s attorney told Commercial Observer.
The fish market is “asking the appellate division to reverse the trial court which granted the landlord the right to evict the Fulton market,” said John L. O’Kelly, attorney for the fish market. “Before they took any action [the landlord] would give opportunity to cure these breaches but here they just sent him a note terminating his lease. He was the tenant with the longest lease left. They ambushed him.”
Mr. O’Kelly said the landlord, under the name South Street Seaport Limited Partnership, “would use the non-payments of the dues to force the tenants out to help clear the pier” so it could make way to demolish the structure. Seaport Limited Partnership is controlled by Howard Hughes Corporation since it spun off from General Growth Properties. Howard Hughes leases the site from the city and was planning to build 494-foot luxury high-rise where the fish market was as well as at the base of the seaport’s Pier 17 building. But Howard Hughes sent a letter to the mayor saying the development would be “significantly revised,” DNAinfo reported yesterday.
In September 1982 Simply Seafood signed a 15-year lease to occupy two locations at the Fulton Street Market for a fish store and clam bar, court documents indicate. When the tenant moved to a third-floor space in the Pier 17 Building at 89 South Street in February 1995, it signed a 15-year lease with a 10-year option to renew. The rent was 10 percent of the gross sales plus the cost of cooking gas, electricity and sales taxes.
The landlord said the tenant had a “history of failing to pay its rental and additional rental obligations,” in court papers. Due to it failing to pay $5,975.68, the landlord terminated the lease effective Nov, 29, 2005. Simply Seafood sought to renew its lease for another 10 years to no avail. A judge ruled in the landlord’s favor on Nov. 13, 2013.
This is just one of the legal battles being waged at South Street Seaport.
Fourteen former tenants of the Pier 17 Building, including Simply Seafood and Nathan’s Famous, are suing the current and original owners of the site and related parties for requiring them to pay merchant association dues even though the defendants knew the association was no longer in existence and was non-operable, according to a May New York Supreme Court lawsuit.
Howard Hughes, owner of the seaport since November 2010, and the seaport’s prior owner The Rouse Company, which GGP purchased in 2004, allegedly improperly required the former tenants to pay dues to the South Street Merchants Association from Oct. 6, 1998 through Nov. 13, 2013 as part of its leases. (On April 16, 2009, GGP filed for a Chapter 11 bankruptcy reorganization and on Nov. 8, 2010 exited bankruptcy. When Howard Hughes spun off in 2010, the seaport was part of the GGP portfolio and was one of the 34 assets for which Howard Hughes assumed responsibility, as Commercial Observer previously reported.)
“They were doing this countrywide,” said Mr. O’Kelly, who represents the plaintiffs in this case. “They deceived tenants throughout the country. At the seaport it was particularly damaging to the tenants because they were de-tenanting Pier 17” in order to raze it and replace it with a new development.
The landlord established the association in April 1986 “for the general promotion and welfare of the shopping center as a whole” and it was forfeited be Proclamation of the State of Maryland on Oct. 6, 1998, the suit says. Therefore, the suit claims, “The billing and attempts to collect the billing by defendants were improper.” The landlord was also expected to, and didn’t, contribute to the association annually in the amount of 20 percent of the what the tenants contributed, the plaintiffs charge. Individual dues were in the thousands per year per merchant, according to Mr. O’Kelly.
“By improperly billing the plaintiffs, along with certain similarly situated seaport tenants, for MA dues, which dues it then used largely to compensate itself, defendants maintained their own revenues while also providing a means to force the plaintiffs of business and off Pier 17 and so allow for its demolition/redevelopment,” the suit says. “This by initiating collection efforts and/or by commencing non-payment and/or eviction proceedings based, in whole or part, on the alleged non-payment of the improperly billed MA dues.”
Meanwhile, the landlord has counterclaims “for unpaid rent and liquidated damages” in a separate action by the plaintiffs against the defendants.
The defendants say in a motion filed last week that the May allegations by the plaintiffs are the same as in their March 2005 case (the trial concluded on Dec. 5, 2013) and the judge should wait until there is a final judgment in the defendants’ countersuit at a June 24 hearing before proceeding with the current case. The defendants say that in the old case, the allegations against the landlord “were all dismissed either prior [to] or after trial.” The court will address the defendants’ motion on June 22. Mr. O’Kelly noted that the former tenants only filed a suit about the merchants association last month because they only learned about the forfeiture during the July 2013 trial.
“These allegations have already been rejected and dismissed in a prior action,” a spokeswoman from Howard Hughes said. “The plaintiffs’ attempt to recycle their losing claims in this new action is both frivolous and legally baseless…”
Anthony Gill, attorney for the defendants, didn’t respond to requests for comment.