Landlord & Tenant

AppDiv, First Dept

(Opinion by Tom, J.)

In tenants' article 78 proceeding challenging DHCR's denial of their rent overcharge complaint, tenants appealed from Supreme Court's denial of their petition. The Appellate Division reversed and granted the petition, holding that landlord's relocation of a wall did not create a new apartment entitling landlord to collect “first rent” on the apartment.

Tenant leased the subject rent-stabilized apartment in 1996 at a rent stated to be $1950 per month with a discount to $1200 if tenants paid by the 15th of each month. The lease also provided that renewal leases would employ $1950 as the basis for rent increases. Just before tenants moved into the apartment, landlord had relocated a wall adjacent to the bedroom in the apartment, decreasing the space in the subject apartment by 86 square feet and increasing the space in the next-door apartment. Three years later, in 1999, tenants brought this rent overcharge complaint, contending that their predecessor had paid $673.33 in rent, and that the rent in their lease exceeded the legal regulated rent for the apartment. Landlord contended that the apartment was a “newly created unit” for which landlord was entitled to a market rent as a “first rent.” DHCR agreed, and tenant brought this article 78 proceeding challenging DHCR's determination.

In granting the petition and remanding to DHCR for determination of the overcharge complaint, the Appellate Division held that relocation of the wall did not, by itself, result in creation of a new unit for which landlord could set a rent independent of past rental history. Here, the court noted that landlord had actually made tenants' apartment smaller, and the court could find no basis by which DHCR could determine that landlord was entitled to market rents merely because landlord had reduced the size of the apartment. Instead, landlord is entitled to first rent only when alternations eliminate any rational basis for carrying forward an apartment's rental history. Because that situation did not occur in this case, landlord was not entitled to recover first rent.

COMMENT

DHCR developed the “first rent” doctrine to deal with a problem created by the rent stabilization law: when a landlord renovates space in a way that significantly reconfigures the apartments, using past rental history as a basis for future rents can lead to arbitrary results. Thus, if a landlord combines three studio apartments into two one-bedroom apartments, the '”first rent” doctrine allows the landlord to seek market rents, for the newly created units.

In determining which renovations qualify, the DHCR employs an administratively efficient bright-line test: Do the alterations significantly change the rent-stabilized apartment's perimeter wall? If so, then the altered unit will receive “new apartment” status, thus allowing the landlord to receive market rent. On review, courts have upheld DHCR's conclusion that alteration of perimeter walls is necessary to qualify for first rents. For example, in 300 West 49th Street Associates v. New York State Division of Housing and Community Renewal, 212 A.D.2d 250, the landlord documented substantial alterations to the apartment that did not include changes to the outer perimeter. Consistent with its policy, DHCR did not grant the unit “new apartment” status. In an Article 78 proceeding, the court upheld the commissioners finding, and remarked that granting 'new apartment status would be “in contravention of the intent and purpose of the Rent Stabilization Law and would lead to the type of profiteering and disruptive practices the rent regulations sought to prevent.” Id. at 254.

In Devlin, however, the court concluded that change in location of the perimeter walls is not sufficient to justify an award of first rents. The court reasoned, that although the alterations met the DHCR's requirements, granting “new apartment” status would allow landlords to manipulate the rent-stabilization system.

Thus, compliance with the DHCR's test is necessary for the finding of “first rent,” and then the courts proceed to examine whether granting “first rent” will be consistent with the rent stabilization laws. In Devlin, the court suggests that if a landlord were to convert a two-bedroom apartment into two studio apartments, “first rent” would be appropriate, as the rental history of the prior unit is irrelevant. However, it seems inconsistent with statutory policy, that by dividing one unit into two, the landlord can now ask for market price for both units, as this provides a landlord with the opportunity to manipulate the rent regulation system. Perhaps a better solution to the court's hypothetical would be to require that the total rent received from the two newly created units not exceed the rent of the old unit.

Claim to Succession Rights Fails for Lack of Documentary Evidence

3201-13 Park Realty, LLC v. Hernandez

NYLJ 9/4/03, p. 19, col. 5

Civil Ct., Bronx Cty

(Fiorella, J.)

In landlord's holdover proceeding to recover possession of an apartment from the son of a deceased tenant, the son claimed succession rights under 9 NYCRR sec. 2523.5(b)(1). The court awarded landlord possession, holding that the son had not submitted any documentary evidence to support his succession claim.

Tenant of record died in August 2001. His son, the current occupant of the apartment, alleges that he moved into the apartment in August 2000. Moreover, the son contends that his mother lived in the apartment from the inception of the tenancy to the present day. As a result, the son asserted succession rights both on his own behalf and on behalf of his mother. The landlord contends that the mother left the apartment in September 2001 to live with her daughter, and submitted the mother's employment records, which list the daughter's address, to support that contention.

In awarding possession to the landlord, the court emphasized that tenant had failed to establish that he lived in the apartment with his father for the 2 years preceding the father's death. As a result, the son did not qualify for succession rights under the statute. The court went on to note that the son had produced no documentary evidence to support his contention that he resided with his father, nor to support his contention that his mother resided in the apartment after the father's death. The court observed that the mother testified both that she lived in the subject apartment, and also that she lived with her daughter. On those facts, the court drew a negative inference with respect to the son's claims, and awarded possession to landlord.

COMMENT

Rent Stabilization Code ' 2523.5(b)(1) requires that, in order to qualify for a renewal lease, a family member of a deceased tenant must have resided in the apartment as a “primary resident” for a period of no less than 2 years immediately prior to the death of the named tenant. Although some courts have suggested, as does the court in 3201-13 Park Realty, that documentary evidence is necessary to prove residence, other cases establish that documentary evidence is unnecessary.

In rejecting a nephew's claim that he resided with named tenant, the court in 300 East 34th Street v. Habeeb, 683 NYS2d 17, focused on the absence of documentary evidence. The court emphasized the absence of a “paper trail” of residency, but perhaps more important was the paper trail connecting the nephew to his parents' address; he used that address for income tax purposes, voter registration, and his driver's license.

Courts have held that testimonial evidence is sufficient to confirm primary residence. Thus, in 23 Jones Street Associates v. Keebler-Beretta, tenant's wife claimed that she lived with her husband in the subject apartment until the husband's death, even though she did not receive mail at the apartment and often used another address as a mailing address. Several witnesses testified that they observed the wife going in and out of the apartment with laundry and groceries. A friend of the wife visited the apartment every few months to do repairs and testified that he saw her clothes and belongings there. The court held that this credible testimonial evidence was sufficient to establish the wife's claim, even in the absence of any documentary evidence.

Landlord May Not Recover Possession for Family Use When Zoning Requires Occupation by Artists

Schwartz v. Seidman

NYLJ 10/1/03, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Bedford, J.)

In landlord's proceeding to recover possession of a rent-stabilized apartment to permit occupation by his brother, tenant challenged landlord's right to install his brother as a tenant. The court dismissed the proceeding, contending that the brother's occupancy would violate zoning regulations which limit occupation to artists.

Landlord acquired the subject building in 1994. The building, located in SoHo, has three commercial units and four residential joint living-work quarters for artists. Tenant occupies one of the residential apartments at a monthly rent of $761. The local zoning regulation and the certificate of occupancy required that at least one member of the household of joint living-work quarters for artists be occupied by an artist certified by the City of New York's Department of Cultural Affairs. In 2001, landlord sent tenant a notice of non-renewal to permit occupation of tenant's unit by landlord's brother and nephew. Landlord then brought this proceeding pursuant to Rent Stabilization Code sec. 2524.4(a), which permits an owner to recover possession of premises for use by his family. Tenant objected, contending that occupation by the brother and the nephew would violate the zoning resolution and the certificate of occupancy.

In dismissing landlord's proceeding, the court acknowledged that the zoning resolution had been amended in 1987 to permit occupation not only by artists, but by any person who is entitled to occupancy by any other provision of law (New York City Zoning Resolution, Art. I., ch. 2., sec 12-10(c)). Landlord had argued that this provision established that occupation by landlord's family members, as provided in the Rent Stabilization Code, would not violate the zoning resolution. The court, however, disagreed, concluding that the amendment was designed only to prevent eviction of family members of artists or registered non-artists. Here, neither the brother nor the nephew qualified for protection under the ordinance. Although the court acknowledged that the artist-only provision in the ordinance has not generally been enforced, the court refused to permit landlord to recover possession for a use inconsistent with the regulation.

Acceptance of Rent Waives Right to Object to Lease Renewal

Addie Realty Properties, Inc. v. P & C Beverages, Inc.

NYLJ 9/24/03, p. 19, col. 4

Civil Ct, Kings Cty

(Sweeny, J.)

In a commercial holdover proceeding, landlord contended that tenant had not effectively exercised an option to renew, entitling landlord to possession of the premises. After trial, the court held that landlord had waived its right to object to tenant's lease renewal, resulting in a 5-year extension of the lease term.

In 1992, landlord and tenant entered into a lease for a 5-year term. The lease also gave tenant three successive options to renew, each time at increased rent in accordance with a formula based on the Consumer Price Index. In addition, the lease required tenant to exercise the option to renew by registered mail sent during a window period not more than 180 days nor less than 90 days before the end of the preceding lease term. Finally, the right to renew was contingent upon tenant's faithful performance of all lease covenants. Tenant did not send the required registered letter renewing the lease, although tenant testified that tenant hand delivered a notice of renewal to landlord. During the lease term, however, tenant was late with rent payment on 27 occasions, and tenant had also permitted the premises to fall into repair, forcing landlord to serve a notice to cure and leading to repairs made by tenant. Nevertheless, at the expiration of the preceding lease term, landlord permitted tenant to remain in the premises, and notified tenant that the rent would be increased in accordance with the lease formula. In February 2003, 8 months after the expiration of the prior lease extension, landlord served tenant with a notice of termination, and then brought this holdover proceeding.

In dismissing the proceeding, the court held that landlord, by accepting rent at the increased rate for seven months, had acted as if the lease had been extended for 5 years. Never during this period did landlord lead tenant to believe that tenant was merely a month-to-month tenant. As a result, the court held that landlord had waived its right to object to the lease renewal, entitling tenant to renewal for a 5-year term.

COMMENT

Where a tenant who holds a lease renewal option has defaulted during the original lease term, the landlord can refuse to renew the lease only if landlord has provided notice of nonrenewal before landlord accepts rent payments for the option period.

Thus, in Atkins Waste Materials v. May, 34 N.Y.2d 422, the Court of Appeals held that despite tenant's lease violations, landlord waived his right to refuse tenant's request to exercise his lease renewal option because the landlord had accepted rent for three months of the option period before notifying tenant of his intention to refuse tenant's exercise of the renewal option. In Atkins, the tenant sent a lease renewal request one month before the expiration of his lease.

By contrast, in Jefpaul Garage Corp. v. Presbyterian Hosp., 474 N.Y.S.2d 458, the Court of Appeals found no waiver because landlord accepted rent payments for the option period only after rejecting tenant's renewal request. Acceptance of rent payments did not result in a waiver because landlord's timely rejection assured that before tenant sent the payments, he was aware of the landlord's refusal to renew and was not misled to believe that landlord was willing to waive tenant's default.

Relocation of Perimeter Wall Does Not Entitle Landlord to 'First Rent'

Devlin v. New York State Division of Housing and Community Renewal

NYLJ 9/24/03, p. 18, col. 1

AppDiv, First Dept

(Opinion by Tom, J.)

In tenants' article 78 proceeding challenging DHCR's denial of their rent overcharge complaint, tenants appealed from Supreme Court's denial of their petition. The Appellate Division reversed and granted the petition, holding that landlord's relocation of a wall did not create a new apartment entitling landlord to collect “first rent” on the apartment.

Tenant leased the subject rent-stabilized apartment in 1996 at a rent stated to be $1950 per month with a discount to $1200 if tenants paid by the 15th of each month. The lease also provided that renewal leases would employ $1950 as the basis for rent increases. Just before tenants moved into the apartment, landlord had relocated a wall adjacent to the bedroom in the apartment, decreasing the space in the subject apartment by 86 square feet and increasing the space in the next-door apartment. Three years later, in 1999, tenants brought this rent overcharge complaint, contending that their predecessor had paid $673.33 in rent, and that the rent in their lease exceeded the legal regulated rent for the apartment. Landlord contended that the apartment was a “newly created unit” for which landlord was entitled to a market rent as a “first rent.” DHCR agreed, and tenant brought this article 78 proceeding challenging DHCR's determination.

In granting the petition and remanding to DHCR for determination of the overcharge complaint, the Appellate Division held that relocation of the wall did not, by itself, result in creation of a new unit for which landlord could set a rent independent of past rental history. Here, the court noted that landlord had actually made tenants' apartment smaller, and the court could find no basis by which DHCR could determine that landlord was entitled to market rents merely because landlord had reduced the size of the apartment. Instead, landlord is entitled to first rent only when alternations eliminate any rational basis for carrying forward an apartment's rental history. Because that situation did not occur in this case, landlord was not entitled to recover first rent.

COMMENT

DHCR developed the “first rent” doctrine to deal with a problem created by the rent stabilization law: when a landlord renovates space in a way that significantly reconfigures the apartments, using past rental history as a basis for future rents can lead to arbitrary results. Thus, if a landlord combines three studio apartments into two one-bedroom apartments, the '”first rent” doctrine allows the landlord to seek market rents, for the newly created units.

In determining which renovations qualify, the DHCR employs an administratively efficient bright-line test: Do the alterations significantly change the rent-stabilized apartment's perimeter wall? If so, then the altered unit will receive “new apartment” status, thus allowing the landlord to receive market rent. On review, courts have upheld DHCR's conclusion that alteration of perimeter walls is necessary to qualify for first rents. For example, in 300 West 49th Street Associates v. New York State Division of Housing and Community Renewal, 212 A.D.2d 250, the landlord documented substantial alterations to the apartment that did not include changes to the outer perimeter. Consistent with its policy, DHCR did not grant the unit “new apartment” status. In an Article 78 proceeding, the court upheld the commissioners finding, and remarked that granting 'new apartment status would be “in contravention of the intent and purpose of the Rent Stabilization Law and would lead to the type of profiteering and disruptive practices the rent regulations sought to prevent.” Id. at 254.

In Devlin, however, the court concluded that change in location of the perimeter walls is not sufficient to justify an award of first rents. The court reasoned, that although the alterations met the DHCR's requirements, granting “new apartment” status would allow landlords to manipulate the rent-stabilization system.

Thus, compliance with the DHCR's test is necessary for the finding of “first rent,” and then the courts proceed to examine whether granting “first rent” will be consistent with the rent stabilization laws. In Devlin, the court suggests that if a landlord were to convert a two-bedroom apartment into two studio apartments, “first rent” would be appropriate, as the rental history of the prior unit is irrelevant. However, it seems inconsistent with statutory policy, that by dividing one unit into two, the landlord can now ask for market price for both units, as this provides a landlord with the opportunity to manipulate the rent regulation system. Perhaps a better solution to the court's hypothetical would be to require that the total rent received from the two newly created units not exceed the rent of the old unit.

Claim to Succession Rights Fails for Lack of Documentary Evidence

3201-13 Park Realty, LLC v. Hernandez

NYLJ 9/4/03, p. 19, col. 5

Civil Ct., Bronx Cty

(Fiorella, J.)

In landlord's holdover proceeding to recover possession of an apartment from the son of a deceased tenant, the son claimed succession rights under 9 NYCRR sec. 2523.5(b)(1). The court awarded landlord possession, holding that the son had not submitted any documentary evidence to support his succession claim.

Tenant of record died in August 2001. His son, the current occupant of the apartment, alleges that he moved into the apartment in August 2000. Moreover, the son contends that his mother lived in the apartment from the inception of the tenancy to the present day. As a result, the son asserted succession rights both on his own behalf and on behalf of his mother. The landlord contends that the mother left the apartment in September 2001 to live with her daughter, and submitted the mother's employment records, which list the daughter's address, to support that contention.

In awarding possession to the landlord, the court emphasized that tenant had failed to establish that he lived in the apartment with his father for the 2 years preceding the father's death. As a result, the son did not qualify for succession rights under the statute. The court went on to note that the son had produced no documentary evidence to support his contention that he resided with his father, nor to support his contention that his mother resided in the apartment after the father's death. The court observed that the mother testified both that she lived in the subject apartment, and also that she lived with her daughter. On those facts, the court drew a negative inference with respect to the son's claims, and awarded possession to landlord.

COMMENT

Rent Stabilization Code ' 2523.5(b)(1) requires that, in order to qualify for a renewal lease, a family member of a deceased tenant must have resided in the apartment as a “primary resident” for a period of no less than 2 years immediately prior to the death of the named tenant. Although some courts have suggested, as does the court in 3201-13 Park Realty, that documentary evidence is necessary to prove residence, other cases establish that documentary evidence is unnecessary.

In rejecting a nephew's claim that he resided with named tenant, the court in 300 East 34th Street v. Habeeb, 683 NYS2d 17, focused on the absence of documentary evidence. The court emphasized the absence of a “paper trail” of residency, but perhaps more important was the paper trail connecting the nephew to his parents' address; he used that address for income tax purposes, voter registration, and his driver's license.

Courts have held that testimonial evidence is sufficient to confirm primary residence. Thus, in 23 Jones Street Associates v. Keebler-Beretta, tenant's wife claimed that she lived with her husband in the subject apartment until the husband's death, even though she did not receive mail at the apartment and often used another address as a mailing address. Several witnesses testified that they observed the wife going in and out of the apartment with laundry and groceries. A friend of the wife visited the apartment every few months to do repairs and testified that he saw her clothes and belongings there. The court held that this credible testimonial evidence was sufficient to establish the wife's claim, even in the absence of any documentary evidence.

Landlord May Not Recover Possession for Family Use When Zoning Requires Occupation by Artists

Schwartz v. Seidman

NYLJ 10/1/03, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Bedford, J.)

In landlord's proceeding to recover possession of a rent-stabilized apartment to permit occupation by his brother, tenant challenged landlord's right to install his brother as a tenant. The court dismissed the proceeding, contending that the brother's occupancy would violate zoning regulations which limit occupation to artists.

Landlord acquired the subject building in 1994. The building, located in SoHo, has three commercial units and four residential joint living-work quarters for artists. Tenant occupies one of the residential apartments at a monthly rent of $761. The local zoning regulation and the certificate of occupancy required that at least one member of the household of joint living-work quarters for artists be occupied by an artist certified by the City of New York's Department of Cultural Affairs. In 2001, landlord sent tenant a notice of non-renewal to permit occupation of tenant's unit by landlord's brother and nephew. Landlord then brought this proceeding pursuant to Rent Stabilization Code sec. 2524.4(a), which permits an owner to recover possession of premises for use by his family. Tenant objected, contending that occupation by the brother and the nephew would violate the zoning resolution and the certificate of occupancy.

In dismissing landlord's proceeding, the court acknowledged that the zoning resolution had been amended in 1987 to permit occupation not only by artists, but by any person who is entitled to occupancy by any other provision of law (New York City Zoning Resolution, Art. I., ch. 2., sec 12-10(c)). Landlord had argued that this provision established that occupation by landlord's family members, as provided in the Rent Stabilization Code, would not violate the zoning resolution. The court, however, disagreed, concluding that the amendment was designed only to prevent eviction of family members of artists or registered non-artists. Here, neither the brother nor the nephew qualified for protection under the ordinance. Although the court acknowledged that the artist-only provision in the ordinance has not generally been enforced, the court refused to permit landlord to recover possession for a use inconsistent with the regulation.

Acceptance of Rent Waives Right to Object to Lease Renewal

Addie Realty Properties, Inc. v. P & C Beverages, Inc.

NYLJ 9/24/03, p. 19, col. 4

Civil Ct, Kings Cty

(Sweeny, J.)

In a commercial holdover proceeding, landlord contended that tenant had not effectively exercised an option to renew, entitling landlord to possession of the premises. After trial, the court held that landlord had waived its right to object to tenant's lease renewal, resulting in a 5-year extension of the lease term.

In 1992, landlord and tenant entered into a lease for a 5-year term. The lease also gave tenant three successive options to renew, each time at increased rent in accordance with a formula based on the Consumer Price Index. In addition, the lease required tenant to exercise the option to renew by registered mail sent during a window period not more than 180 days nor less than 90 days before the end of the preceding lease term. Finally, the right to renew was contingent upon tenant's faithful performance of all lease covenants. Tenant did not send the required registered letter renewing the lease, although tenant testified that tenant hand delivered a notice of renewal to landlord. During the lease term, however, tenant was late with rent payment on 27 occasions, and tenant had also permitted the premises to fall into repair, forcing landlord to serve a notice to cure and leading to repairs made by tenant. Nevertheless, at the expiration of the preceding lease term, landlord permitted tenant to remain in the premises, and notified tenant that the rent would be increased in accordance with the lease formula. In February 2003, 8 months after the expiration of the prior lease extension, landlord served tenant with a notice of termination, and then brought this holdover proceeding.

In dismissing the proceeding, the court held that landlord, by accepting rent at the increased rate for seven months, had acted as if the lease had been extended for 5 years. Never during this period did landlord lead tenant to believe that tenant was merely a month-to-month tenant. As a result, the court held that landlord had waived its right to object to the lease renewal, entitling tenant to renewal for a 5-year term.

COMMENT

Where a tenant who holds a lease renewal option has defaulted during the original lease term, the landlord can refuse to renew the lease only if landlord has provided notice of nonrenewal before landlord accepts rent payments for the option period.

Thus, in Atkins Waste Materials v. May, 34 N.Y.2d 422, the Court of Appeals held that despite tenant's lease violations, landlord waived his right to refuse tenant's request to exercise his lease renewal option because the landlord had accepted rent for three months of the option period before notifying tenant of his intention to refuse tenant's exercise of the renewal option. In Atkins, the tenant sent a lease renewal request one month before the expiration of his lease.

By contrast, in Jefpaul Garage Corp. v. Presbyterian Hosp., 474 N.Y.S.2d 458, the Court of Appeals found no waiver because landlord accepted rent payments for the option period only after rejecting tenant's renewal request. Acceptance of rent payments did not result in a waiver because landlord's timely rejection assured that before tenant sent the payments, he was aware of the landlord's refusal to renew and was not misled to believe that landlord was willing to waive tenant's default.