Claimant, a landlord, rented an apartment to a mentally ill woman who was a client, or "member," of defendant social service program. Claimant brought this small claims action to recover $5,000.00 in unpaid rent based on an alleged promise by defendant to pay 70% of the member's rent. The matter was tried before this Court on June 7, 2005. Both parties were represented by counsel, and each presented one witness. Based upon the evidence introduced at trial and having had the opportunity to observe the demeanor and credibility of the witnesses' testimony, the Court makes the following findings.

Thereafter, on January 29, 2001, claimant and A.B. signed a two-year renewal lease ("the first renewal") which ran from June 1, 2001 through May 30, 2003. Defendant wrote a letter to claimant dated February 16, 2001, reiterating the 30/70 arrangement, and stating in pertinent part that "Fountain House is aware of the new lease and will continue to take part in this agreement." Defendant sent another letter dated April 9, 2001, which included the following language: "Fountain House guarantees their portion of the rent as long as there is a valid lease." (emphasis added). On September 30, 2003, claimant and A.B. entered into a second and final renewal ("the second renewal") which ran from June 1, 2003 through May 31, 2005. No letter accompanied or followed the signing of the second renewal on September 30, 2003.

Almost two months after claimant and A.B. signed the second renewal, Fountain House discharged A.B. from the Fountain House Supported Housing Program. By letter dated November 25, 2003, Fountain House notified A.B. that she was being terminated from the program for various reasons effective December 1, 2003. The Court did not find credible defendant's claim that it had earlier orally notified claimant of its intention to withdraw from its agreement with claimant due to disciplinary proceedings against A.B. Rather, the Court finds that, even though defendant knew that it would cease paying its 70% to claimant if A.B. was discharged from the program, defendant never notified claimant of that contingency. Instead of notifying claimant before the second renewal was signed, claimant's only notice of this material change came in the form of a copy of defendant's November 25 letter to A.B. almost two months after the signing of the second renewal lease.

A.B. was discharged from the program in late November, 2003, and November 2003 was the last time Fountain House paid its portion of her rent to claimant. A.B. fell behind on her rent and was eventually evicted for non-payment in November 2004, with claimant obtaining a judgment against her in the amount of $5,967.49. In this action, claimant seeks judgment against the defendant for 70% of both its judgment against A.B. and of an additional four months' rent that accrued thereafter.^[FN2]

The parties agree that the interpretation of defendant's statement, in its May 22, 2000 letter, that "Fountain House will continue to pay as long as there is a valid lease," is at the heart of this dispute. As written, the duration of defendant's commitment is ambiguous, and claimant never requested clarification. Claimant urges that it should be read "as long as A.B. is living in the apartment, unless Fountain House gives plenty of notice to the contrary." Defendant urges that it means "as long as this lease is valid and A.B. remains a client of the agency." This Court finds that in the context presented here, when defendant wrote the words "as long as there is a valid lease" without limiting the scope to "this lease" or to the dates of the lease then being signed, or specifying "as long as A.B. is a participant in the housing program" or that a new letter would be required for [*3]each renewal, defendant allowed the impression that it would be bound beyond the original one-year lease.

Further, based on the testimony and demeanor of the witnesses, the Court finds that defendant deliberately used the ambiguous language "as long as there is a valid lease" in order to induce plaintiff to rent the apartment to A.B. This Court finds that defendant knew that claimant would have never accepted A.B., a mentally ill woman whom it already had rejected, if defendant had written what it would like this Court to find that defendant's promise to pay was conditioned upon A.B. being a member of defendant's program, that the promise was only good for that particular lease and would not extend to renewals unless a new promise, evidenced by a new letter, was given each time, and that if defendant dropped A.B. from the program, no notice need be given to claimant and defendant could stop paying at its will.

This Court must decide the legal significance of defendant's May 22, 2000 letter to claimant. The Court finds that defendant's commitment should properly be characterized as a guarantee. Defendant's obligation to pay was secondary, or collateral, to A.B.'s. See Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 276 AD2d 341, 343, 714 NYS2d 466, 468 [1st Dept 2000] ("A guarantee is an agreement to pay a debt owed by another that creates a secondary liability and thus is collateral to the contractual obligation."). The lease created a landlord-tenant relationship between claimant and A.B. only, and claimant could bring a non-payment proceeding only against A.B. Moreover, like a guarantee, defendant's commitment was made contemporaneously with the signing of the original lease, was a material inducement for claimant to enter the lease, and defendant, in its own April 9, 2001 letter to claimant, asserted that it "guarantees [its] portion of the rent." The consideration flowing to defendant was, as is typical with guarantees, claimant's consummation of the underlying contract in reliance on defendant's promise. See Michelin Mgt. Co., Inc. v. Mayaud, 307 AD2d 280, 762 NYS2d 108 [2nd Dept 2003]; Liberty Natl. Bank v. Gross, 201 AD2d 467, 607 NYS2d 419 [2nd Dept 1994]. Part of defendant's government-funded mission to help the mentally ill is to secure them suitable housing, and defendant fulfilled that mission by getting claimant to sign the lease with A.B.

The Court now addresses the legal consequences of defendant's ceasing to pay the guaranteed portion of A.B.'s rent. Under the rent stabilization regulations, a landlord must renew a rent-stabilized tenant's lease, but only "on the same terms and conditions as the expiring lease." 9 NYCRR § 2523.5(a). Thus, if, at renewal, one of the material terms or conditions of the original lease is no longer present, the landlord need not renew the lease. See Levine v. Segal, 174 Misc 2d 998, 1000, 669 NYS2d 135, 136 [App Term, 1st Dept 1997], aff'd, 256 AD2d 199, 682 NYS2d 375. One such material term is a guarantee by someone for the payment of rent. Id; see also Sambr, L.L.C. v. Brown, 2 Misc 3d 62, 63, 774 NYS2d 616, 617 [App Term, 1st Dept 2004]. Thus, where a guarantor fails to sign on to a tenant's renewal lease, the landlord is protected by being relieved from the obligation to renew the lease.

Defendant cites Trump Management, Inc. v. Tuberman, 163 Misc 2d 921, 622 NYS2d 851 [Civ Ct, Kings County 1995] for the proposition that the guarantor of an initial rent-stabilized lease is not automatically liable for renewal leases. Unlike in the instant case, however, in Trump Management, the guarantee was found to be expressly limited to the initial lease. Here, the language of defendant's commitment is broader in scope. This Court recognizes that where the language of a guarantee is of indefinite duration, the guarantor "may revoke and end its future [*4]liability by reasonable notice to the principal." Levine v. Segal, 256 AD2d 199, 200, 682 NYS2d 375, 375 [1st Dept 1998]. Moreover, at least one court has held that even where the guarantee specifically includes renewals and amendments, revocation on reasonable notice is permitted. See also 29 Holding Corp. v. Diaz, 3 Misc 3d 808, 812, 775 NYS2d 807, 810 [Sup Ct, Bronx Cty 2004].

Reasonable notice to revoke a lease guarantee of a duration which is not specifically limited, as here, has been held to mean notice given when it is not "too late for [the landlord] to change its position accordingly to avoid a risk it had been unwilling to assume in the first place without the [g]uarantee." 131 Seventh Avenue South, L.L.C. v. Young, 6 Misc 3d 804, 808, 791 NYS2d 303, 305-06 [Civ Ct, NY County 2004]. Adopting this reasoning, the Court finds that in order to be relieved of liability during a lease extension, the guarantor would have to notify the landlord prior to the commencement of the statutory period for executing a renewal with the tenant. See 9 NYCRR § 2523.5(a) (providing that the landlord must notify the tenant named in the expiring lease "not more than 150 days and not less than 90 days prior to the end of the tenant's lease term . . . and offer to renew the lease. . .").

In sum, the Court finds that it is not the amount of time but the timing of the notice that matters. In 131 Seventh Avenue, the Court held that the guarantor's purported withdrawal came too late the letter was dated three days prior to the expiration of the lease. See 131 Seventh Avenue, 6 Misc 3d at 805, 808. The Court there contrasted those facts with Levine, in which "the plaintiff sought to recover from the guarantor unpaid rent accrued during a renewal period agreed to by the landlord after receiving notice of the guarantor's revocation," and the plaintiff's claims therefore failed. Id. at 806.

In the instant case, had defendant given notice of its withdrawal from its commitment in advance of claimant's period for renewing the lease again, claimant might have declined to renew the lease on account of the change in a material condition. If claimant had chosen that course and prevailed in any challenges thereto, it would have avoided the injury incurred here unpaid rent on the second renewal lease. Thus, claimant's injury may be viewed from two angles: First, claimant relied on defendant's guarantee when it executed the original lease which absent a legal basis for denying renewal claimant was thenceforth obligated to renew with A.B. Second, claimant relied on the continuing effect of defendant's guarantee timely revocation of which might have provided a basis for denying renewal when it executed the renewal sued upon here.

Finally, the Court notes that even if defendant's commitment was not a guarantee, defendant would be held liable under the doctrine of promissory estoppel. "The conclusion that a party's promise should be ignored as meaningless is at best a last resort." Cobble Hill Nursing Home v. Henry & Warren Corp., 74 NY2d 475, 483, 548 NYS2d 920, 923 [1989]. To establish a cause of action for promissory estoppel, a plaintiff must prove "(1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made, and (3) an injury sustained in reliance on the promise." Gurreri, Jr. v. Assocs. Ins. Co., 248 AD2d 356, 357, 669 NYS2d 629, 631 [2nd Dept 1998]. As to the first element, although the duration of defendant's promise is ambiguous, the existence of a binding commitment by defendant to pay for a period of time not terminable at will is abundantly clear. As to the second element, claimant credibly testified that it reasonably and foreseeably relied on defendant's commitment to pay 70% of A.B.'s rent when it signed the initial lease. Claimant also testified that it was induced to sign the lease based on defendant's promise; had defendant not so promised, claimant would not have rented the apartment to A.B. Claimant's testimony is corroborated by the fact that it initially rejected A.B. as a tenant and [*5]that defendant's May 22, 2000 letter is contemporaneous with the signing of the original lease. Defendant, experienced in placing its members in suitable housing, knew that the apartment was rent-stabilized and would be renewed absent certain narrow circumstances. Thus, defendant should reasonably have foreseen that claimant expected the arrangement to continue as long as A.B. was a tenant. As to the third element, defendant's failure to pay the amount sued upon here constitutes an injury to claimant that claimant would not have incurred had it not originally rented to A.B. or re-rented to her in reliance on defendant's promise.

Therefore, the Court finds that defendant is liable for 70% of the judgment in the eviction proceeding against A.B. which was the amount due and owing under the second renewal lease. Defendant is not liable, however, for the additional four months' rent that accrued after plaintiff obtained a warrant of eviction against A.B. because that terminated the landlord-tenant relationship and there was no longer a valid lease. See Centre Great Neck, L.L.C. v. Rite Aid Corp., 292 AD2d 484, 739 NYS2d 420 [2nd Dept 2002].

Accordingly, judgment is for claimant in the amount of $4,177.24 plus interest from March 1, 2004, costs and disbursements.

This is the Decision and Order of the Court.

Dated: July 29, 2005ARLENE P. BLUTH

Judge, Civil Court