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Under New York law, where a lease requires a tenant to obtain the prior written consent of the landlord to sublet or assign leased premises, a landlord may refuse consent arbitrarily, unless the lease contains a clause specifically stating that the landlord may not unreasonably withhold such consent.
In 1992, the Office of Foreign Missions (“OFM”) of the United States Department of State leased the building formerly used as a residence by the Deputy Consul General of the Islamic Republic of Iran to defendant Jeffrey E. Epstein. In 1996, Epstein has sublet the building to defendant Ivan S. Fisher, purportedly without the Government’s consent. Fisher, in turn, sublet a portion of the building to several subtenants. In 1996, the Government purported to terminate Epstein’s lease and brought the present action to eject Epstein and Fisher from the building. The Government later amended its complaint to assert a claim for ejectment against the subtenants as well. The Government also sought to recover back rent from Epstein and Fisher. Defendants argued that OFM orally consented to Epstein's proposed sublet of the premises to Fisher, and that it did not properly terminate Epstein's lease because it breached an implied covenant of good faith and fair dealing by unreasonably withholding written consent to Epstein's request to sublet to Fisher.
Could the Government unreasonably withhold its written consent to the original lessees’ sublease request?
The court noted that in contract disputes, the court would begin by examining the language of the contract itself to determine the parties’ intent. In the case at bar, the lease clearly provided that Epstein was required to obtain the advance written consent of OFM to sublet the Premises to Fisher. The Assignment and Sublet Clause expressly stated that the tenant may sublet all or part of the Premises, or assign the lease or permit any other person to use the Premises with the advance written permission of Landlord. Accordingly, OFM could not have orally consented to Epstein's proposed sublet to Fisher, as a matter of law. Moreover, the court held that under New York law - the law applicable in the present case since there was no federal statutory or common-law of landlord and tenant - where a lease required a tenant to obtain the prior written consent of the landlord to sublet or assign leased premises, a landlord may refuse consent arbitrarily, unless the lease contained a clause specifically stating that the landlord may not unreasonably withhold such consent. The Assignment and Sublet Clause in the lease between OFM and Epstein required Epstein to obtain prior written consent of OFM to a proposed sublet, but it contained no provision prohibiting OFM from unreasonably withholding such written consent. Accordingly, the court granted the Government’s motion for summary judgment on its claim of ejectment.