Silberstein v. Epstein

The New Howard Hotel property in Baltimore is subject to a lease for a term of ten years ending February 28, 1926. The lease contains no provision for its renewal. It was executed on March 21st, 1916, but provided for a term of ten years beginning on February 29th, 1916, which was the day succeeding the date of the expiration of a preceding term created by a lease of the property dated April 24th, 1906. In the earlier lease there was a covenant that the lessee should "have the privilege of renewing" the lease "for another term of ten years," at a higher specified rental. The question to be decided on this appeal from a decree, on a special case stated, for the specific performance of a contract of sale, is whether the lessee of the hotel would have a right to acquire the fee simple title to the property by redemption under the terms of section 93 of article 21 of the Code, which provides:

"All rents reserved by leases or sub-leases of land hereafter made in this State for a longer period than fifteen years shall be redeemable at any time after expiration of five years from date of such leases or sub-leases, at the option of the tenant, after a notice of one month to the landlord, for a sum of money equal to the capitalization of the rent reserved at a rate not exceeding six per centum."

If the lessee could successfully claim the right to redeem under the statute, the title to the property is not such as the contract involved in the case describes.

As the existing lease is for a term less than fifteen years and does not provide for its renewal, it is not within the operation of the statute quoted unless the present term be regarded and treated as a continuation of the term which the preceding lease created.

The recognized object of the statute, originally enacted in 1884, was to stop the practice, which was believed to be harmful to the public interests, of leasing property under covenants for long initial and renewal terms without right of redemption.Stewart v. Gorter, 70 Md. 242; Swan v. Kemp, 97 Md. 686;Brager v. Bigham, 127 Md. 157. It was to accomplish such a preventive purpose that all leases thereafter made for longer periods than fifteen years were declared to be redeemable upon the terms prescribed. The policy of the law, in regard to such leases, has been modified by the Acts of 1914, chapter 371, and of 1922, chapter 384, enacting and amending section 87 of article 21 of the Code, which, in its present form, states that the redemption provisions of the article "were not intended to apply and do not apply to leases or sub-leases of property leased exclusively for business, commercial, manufacturing, mercantile or industrial purposes, as distinguished from residence purposes, where the term of such lease or sub-lease, including all renewals provided for therein, shall not exceed ninety-nine years." This section, however, could not affect the lessee's right of redemption in this case, if it would otherwise exist, because the enactment was subsequent to the execution of the original lease upon which the assertion of the right must depend. Brager v.Bigham, supra.

In Stewart v. Gorter, supra, a lease creating a term of fourteen years and providing for its renewal for a similar term and with the same covenants, thus contracting for its indefinite renewal, was regarded as an obvious attempt to evade the statute and was held to be within its scope and effect. The Court also held that the right to redeem could not be barred or qualified by agreement. In Swan v. Kemp and Brager v. Bigham, supra, it was decided that the statute applied to leases of ground improved with buildings as well as to leases of unimproved land. The lease in Swan v. Kemp was for a term of ninety-nine years, and the one considered in Brager v. Bigham created a twenty-year term. In each instance the term in excess of the statutory limit of irredeemability was specified in a lease which was still in force. There was no question concerning the extension of the terms by renewal beyond the period mentioned in the statute. In Stewart v. Gorter, such a question was presented, but the continuing provision for successive renewals was plainly a scheme by which the statute was sought to be evaded. There are important differences between the present case and the three which we have cited. In this case the lease now in force specifies a term less than the statutory period and contains no renewal covenant. It is certain to terminate by its own limitations on February 28, 1926. The absence of any design to circumvent the redemption law is, therefore, clearly demonstrated. While the present lease was executed in recognition of the privilege to renew which was conferred upon the lessee by the original lease, there was no specific provision that the new lease should have the same covenants which the old lease contained, and in fact their stipulations were in certain respects materially different. The new lease not only omitted the renewal covenant, but it added a clause which amplified a provision in the first lease in reference to the payment of a mortgage on the leased property. Between the expiration of the old lease and the execution of the new one there was an interval of several weeks. The parties evidently acted upon the theory that they were making a distinct contract for the ensuing period. It was not in terms or apparent intent a mere continuance of the first agreement.

In the case of King v. Kaiser, 126 Md. 213, the principal question was whether a lease for five years which gave the lessee the option to renew it for a period of twenty years, at a higher rent, was in effect a lease for twenty-five years and, therefore, within the purview of section 1 of article 21 of the Code, requiring that conveyances of estates beyond seven years in duration should be executed, acknowledged and recorded as the Code provides. It was held that a renewal of the lease in pursuance of the exercise of such a privilege would involve the execution of a new lease, and that the provision for the renewal would not itself operate as an extension of the original term. The principle of that decision was applied also in the recent case of Sweeney v. Hagerstown Trust Company,144 Md. 612.

There has been a continuity of possession under the two leases considered in this case, but the contractual relations of the parties have not been identical during the two periods which the leases designate. The rights of the lessee during the present term must be ascertained from the separate and different agreement under which the property is now possessed. It is clear that no right of redemption can be predicated upon the existing lease since it does not exceed the statutory limitation. No effort to redeem would find support in the preceding lease because it has not survived, by any effective process of renewal, without change, the expiration of the specific term to which it was restricted. There is consequently no ground upon which the theory that the lessee may be entitled to procure the fee simple estate by redemption under the statute can be sustained. With this view the decree of the court below is in accord.

Decree affirmed, with costs.