Partial Constructive Eviction From Parking Spaces, Nonwaiver Clauses, and Limits on CPLR 3211(b): Clarifying Tenant Defenses in Commercial Lease Disputes

Introduction

In Diversified Building Co., LLC v. Nader Enterprises, LLC, 2025 NY Slip Op 06047 (2d Dep’t Nov. 5, 2025), the Appellate Division, Second Department, substantially narrowed a trial court’s order that had struck multiple affirmative defenses and counterclaims in a commercial lease dispute involving a parking lot. The litigation arose after the landlord declared a default, purported to cancel the lease, and then sought ejectment, back rent, and use-and-occupancy. The tenant defended and counterclaimed, asserting that the landlord itself had encroached on the leasehold by renting out specific parking spaces to third parties.

On appeal, the Second Department reinstated key defenses and counterclaims—including waiver despite a nonwaiver clause, partial constructive eviction and breach of the covenant of quiet enjoyment relating to the disputed parking spaces, improper notice of default, trespass, and breach of contract—while affirming dismissal of impossibility, frustration of purpose, an implied covenant claim, and a segment of an unjust enrichment claim. The decision provides important guidance on:

• What can and cannot be stricken under CPLR 3211(b) at the pleadings stage;
• How partial constructive eviction and quiet enjoyment operate when a landlord leases part of a tenant’s space to third parties;
• The limited effect of nonwaiver clauses on waiver defenses;
• The rigor required for lease-termination notices when the proper address is uncertain;
• The viability of trespass claims where a landlord directs third-party entry onto leased premises; and
• Why quasi-contract is unavailable where a valid lease governs the subject matter.

Summary of the Opinion

The Second Department modified the Supreme Court’s order by reinstating the tenant’s:

• Second affirmative defense (failure to state a cause of action)—cannot be stricken via CPLR 3211(b);
• Third affirmative defense (waiver)—a nonwaiver clause does not automatically defeat waiver;
• Both “sixth” affirmative defenses—partial constructive eviction and breach of the covenant of quiet enjoyment with respect to the landlord-rented parking spaces;
• Ninth affirmative defense (improper notice of default)—record did not establish a proper address for notice;
• Second counterclaim (trespass)—plausible where a party directs third-party entry onto another’s possessory interest; and
• Third counterclaim (breach of contract)—statute of limitations not established on the motion.

The Court affirmed dismissal of:

• Seventh and eighth affirmative defenses (impossibility and frustration of purpose)—insufficient as pleaded;
• Fourth counterclaim (breach of the implied covenant of good faith and fair dealing)—duplicative or otherwise legally deficient; and
• So much of the first counterclaim (unjust enrichment) as sought recovery tied to the landlord’s rental of the disputed parking spaces—barred by the existence of a valid lease covering the same subject matter.

The Court also held that collateral estoppel from a prior nonpayment proceeding did not bar the tenant’s defenses or counterclaims about the landlord’s third-party rental of the parking spaces because that issue had not been raised or litigated in the prior proceeding.

Analysis

Procedural Posture and Governing Standards

The case arises from a 2003 commercial lease of a parking lot. In December 2020, the landlord (plaintiff) declared a default and lease cancellation, alleging nonpayment and failure to provide insurance proof. The tenant remained in possession. The landlord sued for ejectment, unpaid rent, and use-and-occupancy. The tenant’s answer asserted multiple defenses and counterclaims centered on the landlord’s conduct in renting portions of the leased parking lot to third parties (the “subject parking spaces”).

The Supreme Court granted the landlord’s CPLR 3211(b) motion to strike several affirmative defenses and a CPLR 3211(a) motion to dismiss several counterclaims. On appeal, the Second Department emphasized the stringent standard for striking defenses under CPLR 3211(b): the moving plaintiff bears the burden to show the defense “is not stated or has no merit.” On such motions, courts accept the defense’s factual assertions as true and deny dismissal where any doubt exists about availability of the defense.

Precedents Cited and Their Influence

• Shah v Mitra, 171 AD3d 971 (2d Dep’t 2019); Bank of Am., N.A. v 414 Midland Ave. Assoc., LLC, 78 AD3d 746 (2d Dep’t 2010); Wells Fargo Bank, N.A. v Rios, 160 AD3d 912 (2d Dep’t 2018)
  These authorities set the CPLR 3211(b) framework: the plaintiff bears the burden; defenses’ factual assertions are accepted as true; and doubts are resolved in favor of preserving defenses at the pleading stage. The Second Department applied these standards to reinstate multiple defenses—including waiver, constructive eviction/quiet enjoyment, and improper notice.
• Calixte v City of New York, 207 AD3d 431 (2d Dep’t 2022); Matter of Arcamone-Makinano v Perlmutter, 196 AD3d 479 (2d Dep’t 2021)
  Collateral estoppel applies only to issues actually litigated and necessarily decided. As the landlord’s third-party rental of specific parking spaces was not litigated in the prior nonpayment proceeding, estoppel did not bar the tenant’s defenses or counterclaims here.
• Lewis v US Bank N.A., 186 AD3d 694 (2d Dep’t 2020); Butler v Catinella, 58 AD3d 145 (2d Dep’t 2008)
  A “failure to state a cause of action” defense cannot be stricken via CPLR 3211(b) because that would allow a plaintiff to test the sufficiency of its own pleading—procedurally improper. This compelled reinstatement of the tenant’s second affirmative defense.
• Stassa v Stassa, 123 AD3d 804 (2d Dep’t 2014); Long Is. Med. & Gastroenterology Assoc., P.C. v Mocha Realty Assoc., LLC, 191 AD3d 857 (2d Dep’t 2021)
  Waiver is the voluntary and intentional relinquishment of a contractual right. A nonwaiver clause does not preclude a waiver finding. The landlord’s reliance on the nonwaiver clause alone was insufficient to strike the waiver defense.
• Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77 (1970)
  The seminal case defining actual and constructive eviction: a landlord’s wrongful act must deprive the tenant of beneficial enjoyment or possession; constructive eviction typically requires abandonment. The Second Department recognized this baseline but emphasized partial eviction principles in commercial settings.
• Great Am. Realty of E. Indus. Ct., LLC v Guzu, Inc., 187 AD3d 719 (2d Dep’t 2020); Joylaine Realty Co., LLC v Samuel, 100 AD3d 706 (2d Dep’t 2012); Johnson v Cabrera, 246 AD2d 578 (2d Dep’t 1998)
  These cases endorse the concept that a commercial tenant may be relieved of all or part of its rent obligation if actually or constructively evicted from all or part of the leasehold. They support the viability of a partial constructive eviction defense without requiring abandonment of the entire premises.
• 34-35th Corp. v 1-10 Indus. Assoc., LLC, 16 AD3d 579 (2d Dep’t 2005); Marchese v Great Neck Terrace Assoc., L.P., 138 AD3d 698 (2d Dep’t 2016)
  Breach of the covenant of quiet enjoyment requires actual or constructive eviction; constructive eviction claims traditionally involve abandonment. The Court held the landlord failed to show the tenant was not actually or constructively evicted from the portion of the leasehold at issue (the subject parking spaces).
• Eastside Exhibition Corp. v 210 E. 86th St. Corp., 18 NY3d 617 (2012)
  Not every landlord intrusion equals eviction; the interference must be more than trivial. The landlord failed to prove its third-party rental of spaces was not a more-than-trivial interference as a matter of law.
• Chinatown Apts. v Chu Cho Lam, 51 NY2d 786 (1980)
  A landlord’s termination right under a lease depends on proper service of an adequate notice of default in accordance with the lease. Because the record did not establish the proper notice address, the improper-notice defense could not be stricken.
• NY Kids Club 125 5th Ave., LLC v Three Kings, LLC, 133 AD3d 580 (2d Dep’t 2015)
  Cited by analogy; contrasted with situations where proper service is established. Here it was not.
• Shrage v Con Edison Co., 216 AD3d 1023 (2d Dep’t 2023); Ketcham v Newman, 141 NY 205 (1894)
  Trespass lies not only for physical entry but also for advising or directing third parties to enter another’s property. This supports the tenant’s trespass counterclaim where the landlord allegedly directed third parties to use the tenant’s leased spaces.
• Fairlane Fin. Corp. v Scipione, 174 AD3d 577 (2d Dep’t 2019); Garron v Bristol House, Inc., 162 AD3d 857 (2d Dep’t 2018)
  A movant seeking dismissal on statute of limitations grounds must establish the defense prima facie. The landlord did not do so; the breach-of-contract counterclaim thus survives.
• Cordero v Transamerica Annuity Serv. Corp., 39 NY3d 399 (2023); Singh v T-Mobile, 232 AD3d 662 (2d Dep’t 2024)
  These cases cabin claims for impossibility, frustration of purpose, and breach of the implied covenant of good faith and fair dealing. The tenant’s defenses of impossibility and frustration were properly dismissed; the implied covenant counterclaim was also properly dismissed as duplicative or legally insufficient under Court of Appeals guidance.
• Pierce Coach Line, Inc. v Port Wash. Union Free Sch. Dist., 213 AD3d 959 (2d Dep’t 2023); Yenrab, Inc. v 794 Linden Realty, LLC, 68 AD3d 755 (2d Dep’t 2009)
  Quasi-contract claims like unjust enrichment are unavailable where a valid contract governs the subject matter. The lease controlled the parties’ rights concerning the parking spaces, foreclosing unjust enrichment on that issue.

Legal Reasoning and Application

The Second Department’s analysis is anchored in the cautious approach courts must take when asked to summarily extinguish defenses and claims at the pleadings stage.

• Collateral estoppel inapplicable: The landlord’s earlier nonpayment proceeding did not litigate the core issue here—the landlord’s third-party rental of spaces from within the leased lot. Without identity of issues actually litigated and necessarily decided, the tenant was not estopped from asserting defenses and counterclaims tied to that conduct.
• Failure-to-state-a-cause-of-action defense cannot be stricken: A plaintiff cannot use CPLR 3211(b) to test its own pleading by striking the defendant’s “failure to state” defense. This is a procedural check long recognized in the Second Department; its reiteration here is a useful pleading-stage reminder.
• Waiver defense survives despite nonwaiver clause: The landlord argued the lease’s nonwaiver clause foreclosed any waiver theory. But New York law permits waiver despite nonwaiver provisions where conduct evidences an intentional relinquishment of a right. At this preliminary stage, and given the landlord’s limited argument, the defense could not be declared meritless as a matter of law.
• Partial constructive eviction and quiet enjoyment are plausibly alleged: The landlord conceded it rented out specific spaces within the tenant’s leased parking lot to third parties. That conduct can fit within the doctrine of partial constructive eviction in the commercial context, potentially relieving a tenant from some portion of rent if the deprivation is substantial and attributable to the landlord’s wrongful acts. Relatedly, breach of quiet enjoyment requires actual or constructive eviction; given the allegations and the landlord’s burden on the motion, the Court could not conclude as a matter of law that the interference was no more than trivial (Eastside Exhibition’s standard). The Court therefore restored both the constructive eviction defense and the quiet enjoyment defense (both styled as “sixth” affirmative defenses).
• Improper notice of default defense survives: The record lacked a written assignment of the lease to the defendant, and the lease required written changes and signatures for any variation of terms. No reliable proof established which address the parties agreed to for notices. Because proper notice is a condition precedent to termination (Chinatown Apts.), and the landlord did not conclusively establish compliance, the improper-notice defense could not be stricken.
• Trespass counterclaim reinstated: New York recognizes trespass liability for those who advise or direct third parties to enter land possessed by another. Since a commercial tenant enjoys the possessory interest in the leased premises, the landlord’s alleged authorization to third parties to use the tenant’s spaces states a viable trespass theory against the landlord.
• Breach of contract counterclaim reinstated—statute of limitations not established: A movant must make a prima facie showing on limitations. The landlord did not carry that burden. As a result, the breach-of-contract counterclaim survives.
• Impossibility and frustration defenses properly dismissed: These doctrines remain narrow. The pleadings did not support their application, and the Second Department affirmed dismissal—consistent with recent appellate scrutiny cabining these defenses.
• Implied covenant claim dismissed: The implied covenant cannot create obligations beyond the contract and cannot simply duplicate a breach claim. Under Cordero, such claims are often dismissed when they overlap with express contract terms. The trial court’s dismissal was affirmed.
• Unjust enrichment limited by the lease: Because a valid contract governed the rental and control of the parking spaces, the tenant could not pursue unjust enrichment for the landlord’s third-party rentals. That portion of the quasi-contract claim was properly dismissed; the decision does not address any remainder of the unjust enrichment claim beyond the appealed-from portion.

Impact and Practical Implications

The decision will reverberate in commercial landlord–tenant litigation, especially for non-traditional premises like parking lots and shared facilities where “partial” use is central to the bargain.

• Reaffirmation of partial constructive eviction: The opinion confirms that tenants can plead partial constructive eviction and quiet enjoyment where the landlord’s conduct meaningfully invades a discrete portion of the leased premises. Practitioners should expect more partial-eviction defenses when landlords reallocate tenant space to third parties, particularly in multi-use properties.
• Nonwaiver clauses are not silver bullets: Landlords cannot rely on boilerplate nonwaiver provisions to defeat waiver allegations at the pleadings stage. Course-of-conduct evidence may sustain a waiver defense into discovery.
• Notice-of-default rigor: The case underscores the necessity of clear, written notice provisions—including designated addresses in the lease or a signed assignment confirming notice details. Absent that clarity, improper-notice defenses will often survive and can scuttle termination efforts.
• Trespass exposure for directing third-party entries: Landlords who invite third parties onto space under a tenant’s possessory control risk trespass claims. This is especially salient where landlords “double-lease” or license portions of a tenant’s space.
• Pleading-stage discipline under CPLR 3211(b): The Court’s opinion is a sharp reminder that striking defenses is disfavored unless the defense is plainly unavailable as a matter of law. Many defenses—waiver, notice, eviction, quiet enjoyment—are fact-intensive and will survive to discovery.
• Boundary-setting on overlapping claims: The affirmance dismissing impossibility, frustration, and implied covenant counterclaims reflects ongoing appellate discipline against duplicative or overbroad theories where the lease already governs, while keeping traditional contract and property claims (breach, trespass) intact when adequately pleaded.

Complex Concepts Simplified

• Collateral estoppel: A party is barred from relitigating an issue only if it was actually litigated and necessarily decided in a prior case. If the prior case did not address the same issue (here, third-party rental of specific spaces), estoppel does not apply.
• CPLR 3211(a) vs. 3211(b): 3211(a) allows dismissal of claims/counterclaims for defects like failure to state a claim or statute of limitations. 3211(b) allows striking defenses only if they are not stated or have no merit. On both, courts accept the non-movant’s facts as true at the pleading stage.
• Waiver and nonwaiver clauses: Waiver is the intentional relinquishment of a known right. Even if a lease says “no waivers,” conduct can still amount to waiver in New York; such clauses are not absolute shields.
• Constructive eviction (partial): When a landlord’s wrongful acts substantially and materially deprive a tenant of beneficial use of the premises—or a part of the premises—without physically expelling the tenant. In commercial settings, partial constructive eviction can support rent abatement for the affected portion, even if the tenant does not abandon the entire premises.
• Covenant of quiet enjoyment: The landlord’s implied promise not to disturb the tenant’s lawful possession and enjoyment. A breach requires actual or constructive eviction; for constructive eviction claims, some form of abandonment historically accompanies the claim, but New York recognizes practical partial-eviction scenarios in commercial contexts.
• “More than trivial” interference: Not every intrusion is an eviction. The interference must be material in degree (Eastside Exhibition).
• Notice of default: A condition precedent to termination. The lease usually prescribes how and where it must be sent. If the landlord cannot prove proper service to the agreed address, termination rights may fail.
• Trespass by direction: One can commit trespass not only by entering property but also by directing or authorizing others to enter property possessed by another (Ketcham v Newman).
• Impossibility and frustration: Narrow doctrines excusing performance only in exceptional circumstances (e.g., destruction of subject matter or unforeseeable events undermining the contract’s principal purpose not allocable by the contract). Often rejected at the pleading stage absent specific, compelling facts.
• Implied covenant of good faith and fair dealing: Ensures neither party does anything to destroy the other’s right to receive benefits of the contract, but cannot create new duties or replicate a breach claim. Frequently dismissed as duplicative if based on the same facts as an express breach claim (Cordero).
• Unjust enrichment vs. contract: Where a valid contract governs, quasi-contract remedies like unjust enrichment are generally barred for disputes arising out of the same subject matter.

Conclusion

Diversified Building Co., LLC v. Nader Enterprises, LLC sharpens several doctrinal edges in New York commercial lease litigation. Most notably, it underscores that a landlord’s intrusion into a tenant’s leased space—here, by renting specific parking spaces to third parties—can support partial constructive eviction and quiet enjoyment defenses at the pleading stage, and that a landlord cannot rely on nonwaiver clauses, conclusory assertions of triviality, or underdeveloped records of notice to summarily defeat such defenses. The opinion also reaffirms strict CPLR 3211(b) standards: failure-to-state-a-claim defenses should not be stricken, and fact-intensive defenses like waiver, notice, and eviction should proceed where plausible.

At the same time, the Court polices the boundaries of claims: impossibility and frustration remain narrow; implied covenant claims cannot expand contractual obligations; and unjust enrichment cannot bypass a governing lease. For landlords, the decision is a cautionary tale about re-leasing any portion of a tenant’s premises and about ensuring airtight notice provisions and proof. For tenants, it provides a durable roadmap to preserve possession-based defenses and property tort counterclaims when landlords unilaterally carve out and monetize parts of the leasehold.

In sum, the case meaningfully clarifies that partial encroachments on a tenant’s space in commercial settings can have full doctrinal consequence—supporting eviction-related defenses, rent abatement theories, and trespass claims—while simultaneously insisting on disciplined pleading and motion practice under CPLR 3211 and the primacy of the lease in delimiting available remedies.