Landlord & Tenant

Tenant Entitled to Restoration After Fire Destroys Building

Quiles v. Term Equities

NYLJ 9/1/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Lehner, J.)

In an action by rent-regulated tenants for wrongful eviction, the landlord contended that no wrongful eviction claim would lie where the subject building was severely damaged by fire and vacated because of an imminent danger to tenants. The court disagreed, holding that tenants were entitled to be restored to their apartments upon restoration of the housing accommodation to habitable condition.

In 1998, the subject building was vacated because of fire damage. Six tenants, four of them rent-stabilized and two rent-controlled, applied to DHCR for a reduction in rent. DHCR issued an order reducing the rent to $1.00 per month. The owner had objected that the rent laws do not require an owner to rebuild a residential building on a site where the prior building has been destroyed by fire, but DHCR indicated that it was not deciding what rights tenants would have upon reconstruction, but only that tenants were entitled to the rent reduction to $1.00 per month. DHCR also indicated that if a landlord razed a fire-damaged building for economic reasons, prior tenants' rights to the apartment might survive the building's destruction. In 2000, the landlord applied for an alteration building, seeking to create seven apartments on each floor in lieu of the four that had previously existed. The tenants then instituted proceedings in Civil Court to have their apartments restored to their original configuration. That proceeding was discontinued without prejudice to the determination in this action. Meanwhile, the tenants brought this action for wrongful eviction, seeking $750,000 each in actual damages, which they request to have trebled pursuant to RPAPL section 853. The tenants moved for summary judgment on the issue of liability.

In granting the summary judgment motion, the court relied heavily on DHCR's determination reducing each tenant's rent to $1.00 per month and directing that they be restored after reconstruction of their units. The court concluded that this determination had a rational basis. Because the landlord never applied for a certificate of eviction, he was not entitled to deny tenants the right to return to their units after restoration. Because he re-let the premises to new tenants, the landlord violated this right, entitling tenants to summary judgment on the liability portion of their wrongful eviction claim. The court concluded that whether tenants were entitled to treble damages was not before the court on the tenants' motion for summary judgment on the issue of liability.

COMMENT

When a New York rent-regulated building is damaged by fire, the landlord must repair or rebuild the building unless the landlord can establish economic infeasibility by proving that the cost of repair would exceed the value of the building. See Bernard v. Scharf, 246 A.D.2d 171, rev'd on grounds of mootness 93 N.Y.2d 842, where the court held that the landlord was not obligated to repair a building valued at $1 million, when the landlord's proof established that the cost of repair would be $4 million. By contrast, in Eyedent v. Vickers, 150 AD2d 202, where the landlord provided no concrete proof of the value of the building, the court rejected the infeasibility defense. See also Gonzalez v. Navarro, NYLJ 8/10/04, p.21.

When a landlord is obligated to rebuild, rent-regulated tenants have the right to constructively occupy their apartments after a fire has damaged their building. “Constructive occupancies” are court orders, after the government has ordered the building vacated for renovations, allowing rent-regulated tenants to continue paying $1.00 per month to secure their tenancies once the building becomes habitable again. See Fernandez v. New York State Division of Housing & Community Renewal, 193 Misc2d 511. As the court explained in Fernandez, restoration of the building to habitable condition does not, by itself, entitle landlord to increase the rent payable by a constructive occupant who retakes possession. If, however, a landlord makes major capital improvements or individual apartment improvements, landlord can recoup its investment by increasing the monthly rent by 1/40th of the total costs attributable to the particular apartment, if the landlord obtained written consent for the increases. Id. at 514; see also 9 NYCRR sec. 2522.4(a)(1); NYCRR sec. 2502.4(a)(2)(ii).

When the landlord has substantially rehabilitated the building so a tenant's original apartment no longer exists, the landlord is generally entitled to recover market rents, but not from a tenant who has been in constructive occupancy. Fernandez is illustrative. The landlord reconfigured the building to increase the number of apartments per floor from six to eight. The tenant, who had remained in constructive occupancy during the reconfiguration, took possession of a new apartment with half her square footage, but the landlord increased the rent from $432 to $750, contending that it was entitled to “first rents” because the reconfiguration had changed the apartment's perimeter walls. The court sustained tenant's rent overcharge petition, annulling DHCR's determination that landlord was entitled to “first rents.” Id. at 518.

Tenant Entitled to Restoration After Fire Destroys Building

Quiles v. Term Equities

NYLJ 9/1/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Lehner, J.)

In an action by rent-regulated tenants for wrongful eviction, the landlord contended that no wrongful eviction claim would lie where the subject building was severely damaged by fire and vacated because of an imminent danger to tenants. The court disagreed, holding that tenants were entitled to be restored to their apartments upon restoration of the housing accommodation to habitable condition.

In 1998, the subject building was vacated because of fire damage. Six tenants, four of them rent-stabilized and two rent-controlled, applied to DHCR for a reduction in rent. DHCR issued an order reducing the rent to $1.00 per month. The owner had objected that the rent laws do not require an owner to rebuild a residential building on a site where the prior building has been destroyed by fire, but DHCR indicated that it was not deciding what rights tenants would have upon reconstruction, but only that tenants were entitled to the rent reduction to $1.00 per month. DHCR also indicated that if a landlord razed a fire-damaged building for economic reasons, prior tenants' rights to the apartment might survive the building's destruction. In 2000, the landlord applied for an alteration building, seeking to create seven apartments on each floor in lieu of the four that had previously existed. The tenants then instituted proceedings in Civil Court to have their apartments restored to their original configuration. That proceeding was discontinued without prejudice to the determination in this action. Meanwhile, the tenants brought this action for wrongful eviction, seeking $750,000 each in actual damages, which they request to have trebled pursuant to RPAPL section 853. The tenants moved for summary judgment on the issue of liability.

In granting the summary judgment motion, the court relied heavily on DHCR's determination reducing each tenant's rent to $1.00 per month and directing that they be restored after reconstruction of their units. The court concluded that this determination had a rational basis. Because the landlord never applied for a certificate of eviction, he was not entitled to deny tenants the right to return to their units after restoration. Because he re-let the premises to new tenants, the landlord violated this right, entitling tenants to summary judgment on the liability portion of their wrongful eviction claim. The court concluded that whether tenants were entitled to treble damages was not before the court on the tenants' motion for summary judgment on the issue of liability.

COMMENT

When a New York rent-regulated building is damaged by fire, the landlord must repair or rebuild the building unless the landlord can establish economic infeasibility by proving that the cost of repair would exceed the value of the building. See Bernard v. Scharf, 246 A.D.2d 171, rev'd on grounds of mootness 93 N.Y.2d 842, where the court held that the landlord was not obligated to repair a building valued at $1 million, when the landlord's proof established that the cost of repair would be $4 million. By contrast, in Eyedent v. Vickers, 150 AD2d 202, where the landlord provided no concrete proof of the value of the building, the court rejected the infeasibility defense. See also Gonzalez v. Navarro, NYLJ 8/10/04, p.21.

When a landlord is obligated to rebuild, rent-regulated tenants have the right to constructively occupy their apartments after a fire has damaged their building. “Constructive occupancies” are court orders, after the government has ordered the building vacated for renovations, allowing rent-regulated tenants to continue paying $1.00 per month to secure their tenancies once the building becomes habitable again. See Fernandez v. New York State Division of Housing & Community Renewal, 193 Misc2d 511. As the court explained in Fernandez, restoration of the building to habitable condition does not, by itself, entitle landlord to increase the rent payable by a constructive occupant who retakes possession. If, however, a landlord makes major capital improvements or individual apartment improvements, landlord can recoup its investment by increasing the monthly rent by 1/40th of the total costs attributable to the particular apartment, if the landlord obtained written consent for the increases. Id. at 514; see also 9 NYCRR sec. 2522.4(a)(1); NYCRR sec. 2502.4(a)(2)(ii).

When the landlord has substantially rehabilitated the building so a tenant's original apartment no longer exists, the landlord is generally entitled to recover market rents, but not from a tenant who has been in constructive occupancy. Fernandez is illustrative. The landlord reconfigured the building to increase the number of apartments per floor from six to eight. The tenant, who had remained in constructive occupancy during the reconfiguration, took possession of a new apartment with half her square footage, but the landlord increased the rent from $432 to $750, contending that it was entitled to “first rents” because the reconfiguration had changed the apartment's perimeter walls. The court sustained tenant's rent overcharge petition, annulling DHCR's determination that landlord was entitled to “first rents.” Id. at 518.