Landlord & Tenant

Supreme Ct., Kings Cty

(Clemente, J.).

In an action by a loft landlord for breach of a lease agreement, the landlord moved for an order holding tenants in contempt of court for failure to pay use and occupancy, and for summary judgment on its claims for a declaration that tenants had no right to use any portion of the building's roof and no right to use or paint common areas not expressly made subject to the lease. The court denied the landlord's demand for use and occupancy, but granted summary judgment on the other two claims.

The subject buildings were commercial lofts until tenants entered into loft leases during the period between 1996 and 1998. After executing those leases, the tenants converted their lofts into residential units and sublet the living space to residential tenants. The building, however, does not have a residential certificate of occupancy, nor is it registered as a multiple dwelling. When the landlord brought this action for breach of the leases, the court, in 2000, concluded that the building was a de facto horizontal multiple dwelling, but held that issues of fact remained about whether landlord knew of the residential use of the premises. While discovery proceeded, the court, on July 18, 2002, ordered tenants to pay use and occupancy during the pendency of the action. On Nov. 5, 2003, however, the court found that landlord did have knowledge of tenants' residential use, and concluded that tenants were entitled to the protections afforded by the Rent Stabilization Law and the Emergency Tenant Protection Act. At that point tenant stopped paying rent, prompting the landlord's motion to hold tenants in contempt for violation of the 2002 order to pay use and occupancy.

In denying the landlord's contempt motion, the court emphasized that the landlord may not collect rent for use and occupancy when the landlord has failed to obtain a proper certificate of occupancy or multiple dwelling registration. Once the court concluded that the landlord had knowingly permitted residential use, no use and occupancy was due, and the tenants could not be held in contempt for violating a court order. At the same time, the court rejected the tenants' argument that they were entitled to reimbursement for use and occupancy paid before the 2003 order. The court granted the landlord's motion for an order declaring that the tenants had no right to use the building's roof, noting that a roof does not pass by implication with the demise of any part of the building. Here, the leases made no express provision giving a tenant a right to use the roof, and the court relied on the merger clause included in the leases to reject the tenants' contention that parol evidence should be admitted to determine whether the roof is part of the leasehold. The court also held that the leases did not entitle the tenants to paint or otherwise alter common areas, including exterior doors.

COMMENT

Multiple Dwelling Law section 301 requires an owner of property used as residential multiple dwelling units to obtain a residential certificate of occupancy (CO). In addition, MDL section 302 states “No rent shall be recovered by the owner of such premises for said period, and no action or special proceeding shall be maintained therefore, or for possession of said premises for nonpayment of such rent.” In ordinary cases where a landlord has not obtained a CO and has made no efforts to obtain a CO, the court will deny use and occupancy to the landlord as well. Commercial Hotel, Inc. v. White, 194 Misc.2d 26.

By contrast, where a landlord knowingly rented an interim multiple dwelling without a CO, but has made efforts to obtain a certificate of occupancy in compliance with the provisions of MDL section 284, the First Department has allowed use and occupancy to be paid into escrow until the landlord obtains the certificate. The court stated that compliance with the section 284 entitled the landlord to use and occupancy payments even in the absence of the CO. Cromwell v. Le-Sannom, 171 A.D. 2d 458. In another case, the landlord offered a residential lease knowing that the building lacked a residential CO, and did not make any effort to obtain this certification prior to seeking use and occupancy. The court ordered use and occupancy payments to be paid to the court while the landlord took necessary actions to legalize the premises. This availability of use and occupancy while landlord obtains a CO appears limited to cases in which absence of the CO poses no threat to health or safety. See Zane v. Kellner, 240 A.D. 2d 208.

Although MDL section302 precludes a landlord from reclaiming possession based on nonpayment of rent for any property lacking a CO, the court in East 82 LLC v. O'Gormley, 295 A.D.2d 173, held that an action for possession is not where the property could not be legalized. This action arose for the non-payment of rent where tenants occupied cellar apartments not covered by the residential CO.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.

No Use and Occupancy When Landlord Lacks C of O

Gloveman Realty Corp. v. Jefferys

NYLJ 5/5/04, p. 21, col. 3

Supreme Ct., Kings Cty

(Clemente, J.).

In an action by a loft landlord for breach of a lease agreement, the landlord moved for an order holding tenants in contempt of court for failure to pay use and occupancy, and for summary judgment on its claims for a declaration that tenants had no right to use any portion of the building's roof and no right to use or paint common areas not expressly made subject to the lease. The court denied the landlord's demand for use and occupancy, but granted summary judgment on the other two claims.

The subject buildings were commercial lofts until tenants entered into loft leases during the period between 1996 and 1998. After executing those leases, the tenants converted their lofts into residential units and sublet the living space to residential tenants. The building, however, does not have a residential certificate of occupancy, nor is it registered as a multiple dwelling. When the landlord brought this action for breach of the leases, the court, in 2000, concluded that the building was a de facto horizontal multiple dwelling, but held that issues of fact remained about whether landlord knew of the residential use of the premises. While discovery proceeded, the court, on July 18, 2002, ordered tenants to pay use and occupancy during the pendency of the action. On Nov. 5, 2003, however, the court found that landlord did have knowledge of tenants' residential use, and concluded that tenants were entitled to the protections afforded by the Rent Stabilization Law and the Emergency Tenant Protection Act. At that point tenant stopped paying rent, prompting the landlord's motion to hold tenants in contempt for violation of the 2002 order to pay use and occupancy.

In denying the landlord's contempt motion, the court emphasized that the landlord may not collect rent for use and occupancy when the landlord has failed to obtain a proper certificate of occupancy or multiple dwelling registration. Once the court concluded that the landlord had knowingly permitted residential use, no use and occupancy was due, and the tenants could not be held in contempt for violating a court order. At the same time, the court rejected the tenants' argument that they were entitled to reimbursement for use and occupancy paid before the 2003 order. The court granted the landlord's motion for an order declaring that the tenants had no right to use the building's roof, noting that a roof does not pass by implication with the demise of any part of the building. Here, the leases made no express provision giving a tenant a right to use the roof, and the court relied on the merger clause included in the leases to reject the tenants' contention that parol evidence should be admitted to determine whether the roof is part of the leasehold. The court also held that the leases did not entitle the tenants to paint or otherwise alter common areas, including exterior doors.

COMMENT

Multiple Dwelling Law section 301 requires an owner of property used as residential multiple dwelling units to obtain a residential certificate of occupancy (CO). In addition, MDL section 302 states “No rent shall be recovered by the owner of such premises for said period, and no action or special proceeding shall be maintained therefore, or for possession of said premises for nonpayment of such rent.” In ordinary cases where a landlord has not obtained a CO and has made no efforts to obtain a CO, the court will deny use and occupancy to the landlord as well. Commercial Hotel, Inc. v. White, 194 Misc.2d 26.

By contrast, where a landlord knowingly rented an interim multiple dwelling without a CO, but has made efforts to obtain a certificate of occupancy in compliance with the provisions of MDL section 284, the First Department has allowed use and occupancy to be paid into escrow until the landlord obtains the certificate. The court stated that compliance with the section 284 entitled the landlord to use and occupancy payments even in the absence of the CO. Cromwell v. Le-Sannom, 171 A.D. 2d 458. In another case, the landlord offered a residential lease knowing that the building lacked a residential CO, and did not make any effort to obtain this certification prior to seeking use and occupancy. The court ordered use and occupancy payments to be paid to the court while the landlord took necessary actions to legalize the premises. This availability of use and occupancy while landlord obtains a CO appears limited to cases in which absence of the CO poses no threat to health or safety. See Zane v. Kellner, 240 A.D. 2d 208.

Although MDL section302 precludes a landlord from reclaiming possession based on nonpayment of rent for any property lacking a CO, the court in East 82 LLC v. O'Gormley, 295 A.D.2d 173, held that an action for possession is not where the property could not be legalized. This action arose for the non-payment of rent where tenants occupied cellar apartments not covered by the residential CO.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.