A few years ago, the Appellate Division, First Department, issued an interesting decision on "time is of the essence" provisions incorporated into landlord-tenant settlement agreements (or "stipulations of settlement"). Responding to a reluctance by lower courts to enforce these agreements as written, the appellate court concluded in 1029 Sixth LLC v. Riniv Corp., that when the document is subject to extensive negotiation and includes terms advantageous to both sides, the agreement must be honored despite any hardship or inconvenience that may be subsequently encountered by a party. As the court observed:
The parties having conditioned the tenants' right to the contemplated payments on the landlord's absolute right to obtain possession of the premises, broom clean, on the vacate date, their failure to so deliver possession undermines the tenants' claims to sympathy or the consideration of equity. Their references to hardworking families do not suffice; nor do claims of fiscal hardship...In a situation completely of their own making, they are the victims of a strict stipulation provision they agreed to in order to obtain the advantage of another provision favorable to themselves.Thus, when an agreement provides "time is of the essence," that language will typically signify that the agreement's performance obligations are steadfast, concrete, and immalleable.
If the insertion in the stipulation of the provisions requiring strict compliance with the requirement to vacate the premises turned out to be harsh, it was nevertheless an important, negotiated term of the agreement, and as such, must be enforced....
A recent case which further exemplifies this point, is 291 Pleasant Ave., LLC v. Morris, wherein the tenant, Deanna Morris, is reported to have had difficulty honoring the "time of the essence" payment terms of a settlement agreement reached within the context of holdover case. Apparently, Ms. Morris filed "no fewer than six orders to show cause seeking extensions and other relief." Ultimately, a Judge of the Housing Part of the New York County Civil Court denied the tenant additional time within which to make a required payment and authorized an eviction. On appeal, the Appellate Term, First Department, affirmed quoting from Mill Rock Plaza Associates v. Lively, another Appellate Division case:
"Strict enforcement of the parties' settlement stipulation...is warranted based upon the principle that the parties in a civil dispute are free to chart their own litigation course...."While stipulations are preferred dispute-resolution mechanisms, litigants must tread cautiously for noncompliance with the terms of these agreements can undoubtedly have dire consequences. (Are you willing to stipulate to that?)
For a copy of the Appellate Division's decision in 1029 Sixth LLC v. Riniv Corp, please click on the following link:
For a copy of the Appellate Term's decision in 291 Pleasant Ave., LLC v. Morris , please click on the following link: