Landlord & Tenant

Default Formula for Rent Overcharges

In re Cabrini Realty, LLC v. New York State Division of Housing and Community Renewal

NYLJ 4/26/04, p. 26, col. 1

AppDiv, First Dept

(memorandum opinion).

In a landlord's article 78 proceeding to annul DHCR's rent overcharge determination, the landlord appealed from the Supreme Court's order dismissing the proceeding. The Appellate Division reversed and granted the petition, holding that DHCR had applied an improper default formula to determine the initial base rent for the apartment.

In the course of a tenant's rent overcharge proceeding, DHCR was faced with an absence of any documentary evidence of the rental history of the apartment, and conflicting evidence about the occupancy of the apartment in the 5 years preceding the tenant's occupancy. As a result, DHCR decided to apply a “default” method for calculating lawful rent. The Rent Stabilization Code, as amended in 2000, provides that when the rent charged on the base date cannot be determined, DHCR shall determine based rent based on either 1) documented rents for comparable housing accommodations submitted by the owner, subject to rebuttal by tenant; or 2) data compiled by DHCR for regulated housing accommodations; or 3) if documentation under (1) or (2) is not available, the complaining tenant's rent reduced by the most recent guidelines adjustment. (Rent Stabilization Code, sec. 2522.6). In this case, however, DHCR did not use the Code's default method, applying instead a method derived from a 1994 Internal Processing Directive. The landlord challenged DHCR's right to depart from the code method. Supreme Court dismissed the petition, holding that the agency acted rationally by applying the old directive rather than starting anew under the code's method.

In reversing, the Appellate Division noted that neither DHCR nor the Supreme Court found that the tenant would suffer hardship or prejudice from application of the code provisions. The Appellate Division held that in the absence of a demonstration that application of the code provisions would cause prejudice or hardship, DHCR had no rational basis for departing from the code's provisions. As a result, the court granted the petition and remanded to DHCR for recalculation pursuant to the code provisions.

Out-of-Possession Landlord Not Liable for Injury

Ingargiola v. Waheguru Management, Inc.

NYLJ 4/2/04, p. 31, col. 1

AppDiv, Second Dept

(memorandum opinion)

In a personal injury action brought against a commercial landlord and his tenant, the landlord appealed from a Supreme Court order denying its motion for summary judgment dismissing the complaint and any cross-claims against him, and for summary judgment on his cross-claim against the tenant for contractual indemnification. The Appellate Division reversed and granted summary judgment, holding that neither the injured plaintiff nor the tenant had established any triable issues of fact warranting denial of the motion.

Plaintiff was injured while at a car wash operated by the tenant on premises owned by the landlord. By the terms of the lease, the tenant was responsible for maintenance and repair of the premises, and had agreed to indemnify the landlord for personal injury claims arising out of the tenant's negligence. The tenant also agreed to name the landlord as an additional insured on its general liability policy. The lease also gave the landlord the right to enter the premises during normal business hours. When the injury victim brought this action against the landlord and tenant, the landlord moved for summary judgment dismissing the complaint, for summary judgment dismissing any cross-claims asserted against him, and for summary judgment on his cross-claim for indemnification. The Supreme Court denied the motion, and the landlord appealed.

In reversing, the Appellate Division indicated that an out-of-possession landlord is not liable for personal injuries sustained on the premises unless he or she retains control of the premises or is contractually obligated to perform maintenance and repairs. The court also indicated that the landlord and tenant were free to allocate the risk of liability to third parties by procurement of insurance. Because the landlord in this case had relinquished control and was not obligated to repair, he was entitled to summary judgment dismissing the complaint. In addition, because of the indemnification clause in the lease,the landlord was entitled to summary judgment on his cross-claim for indemnification. Because the indemnification clause included a provision for attorneys' fees, expenses, costs and disbursements, the court remitted to the Supreme Court for a determination of the amounts to be awarded.

COMMENT

See the article by Stewart E. Sterk on page 1.

Default Formula for Rent Overcharges

In re Cabrini Realty, LLC v. New York State Division of Housing and Community Renewal

NYLJ 4/26/04, p. 26, col. 1

AppDiv, First Dept

(memorandum opinion).

In a landlord's article 78 proceeding to annul DHCR's rent overcharge determination, the landlord appealed from the Supreme Court's order dismissing the proceeding. The Appellate Division reversed and granted the petition, holding that DHCR had applied an improper default formula to determine the initial base rent for the apartment.

In the course of a tenant's rent overcharge proceeding, DHCR was faced with an absence of any documentary evidence of the rental history of the apartment, and conflicting evidence about the occupancy of the apartment in the 5 years preceding the tenant's occupancy. As a result, DHCR decided to apply a “default” method for calculating lawful rent. The Rent Stabilization Code, as amended in 2000, provides that when the rent charged on the base date cannot be determined, DHCR shall determine based rent based on either 1) documented rents for comparable housing accommodations submitted by the owner, subject to rebuttal by tenant; or 2) data compiled by DHCR for regulated housing accommodations; or 3) if documentation under (1) or (2) is not available, the complaining tenant's rent reduced by the most recent guidelines adjustment. (Rent Stabilization Code, sec. 2522.6). In this case, however, DHCR did not use the Code's default method, applying instead a method derived from a 1994 Internal Processing Directive. The landlord challenged DHCR's right to depart from the code method. Supreme Court dismissed the petition, holding that the agency acted rationally by applying the old directive rather than starting anew under the code's method.

In reversing, the Appellate Division noted that neither DHCR nor the Supreme Court found that the tenant would suffer hardship or prejudice from application of the code provisions. The Appellate Division held that in the absence of a demonstration that application of the code provisions would cause prejudice or hardship, DHCR had no rational basis for departing from the code's provisions. As a result, the court granted the petition and remanded to DHCR for recalculation pursuant to the code provisions.

Out-of-Possession Landlord Not Liable for Injury

Ingargiola v. Waheguru Management, Inc.

NYLJ 4/2/04, p. 31, col. 1

AppDiv, Second Dept

(memorandum opinion)

In a personal injury action brought against a commercial landlord and his tenant, the landlord appealed from a Supreme Court order denying its motion for summary judgment dismissing the complaint and any cross-claims against him, and for summary judgment on his cross-claim against the tenant for contractual indemnification. The Appellate Division reversed and granted summary judgment, holding that neither the injured plaintiff nor the tenant had established any triable issues of fact warranting denial of the motion.

Plaintiff was injured while at a car wash operated by the tenant on premises owned by the landlord. By the terms of the lease, the tenant was responsible for maintenance and repair of the premises, and had agreed to indemnify the landlord for personal injury claims arising out of the tenant's negligence. The tenant also agreed to name the landlord as an additional insured on its general liability policy. The lease also gave the landlord the right to enter the premises during normal business hours. When the injury victim brought this action against the landlord and tenant, the landlord moved for summary judgment dismissing the complaint, for summary judgment dismissing any cross-claims asserted against him, and for summary judgment on his cross-claim for indemnification. The Supreme Court denied the motion, and the landlord appealed.

In reversing, the Appellate Division indicated that an out-of-possession landlord is not liable for personal injuries sustained on the premises unless he or she retains control of the premises or is contractually obligated to perform maintenance and repairs. The court also indicated that the landlord and tenant were free to allocate the risk of liability to third parties by procurement of insurance. Because the landlord in this case had relinquished control and was not obligated to repair, he was entitled to summary judgment dismissing the complaint. In addition, because of the indemnification clause in the lease,the landlord was entitled to summary judgment on his cross-claim for indemnification. Because the indemnification clause included a provision for attorneys' fees, expenses, costs and disbursements, the court remitted to the Supreme Court for a determination of the amounts to be awarded.

COMMENT

See the article by Stewart E. Sterk on page 1.