Landlord & Tenant

DHCR May Permit Correction of Technical Defects in Tenants' PAR

Matter of 427 West 51st Street Owners Corp. v. DHCR

NYLJ 11/19/04, p. 18, col. 5

Court of Appeals

(Opinion by Read, J.)

In a landlord's article 78 proceeding challenging a rent reduction ordered by DHCR, the landlord appealed from the Appellate Division's affirmance of the Supreme Court's dismissal of the proceeding. The Court of Appeals affirmed, holding that the DHCR Commissioner had discretion to permit correction of technical defects in a timely-filed petition for administrative review (PAR).

When 51 rent-stabilized tenants sought a rent reduction based on a diminution in building services, DHCR granted a rent reduction for most of the alleged changes, but concluded that the cutback in basement access was de minimis, and warranted no reduction. A tenants' representative filed a PAR, and the DHCR concluded that there was insufficient evidence to support the conclusion that the basement cutback was de minimis. The DHCR remanded, and after a hearing, ordered a rent reduction. At that point, the landlord filed a PAR, alleging that the tenants' representative who appealed the original order had not submitted sufficient evidence of authorization to act on behalf of most of the tenants. Only six of the 51 tenants had signed the authorization; for the rest, the representative submitted reproduced signatures from the original complaint. The DHCR agreed with the landlord that the tenants whose signatures did not appear had not properly appealed the original order, and revoked the reduction order with respect to those tenants. When tenants brought an article 78 proceeding challenging the revocation, the DHCR permitted tenants to correct the omission by returning a signed form authorizing the tenants' association to represent them on the already decided PAR. Thirty-five tenants returned the signed form, and the DHCR granted those tenants a reduction. The landlord then brought this article 78 proceeding.

In upholding the DHCR's determination, the Court of Appeals held that the Rent Stabilization Code vests in the DHCR Commissioner discretion to permit correction of technical defects. The court also noted that an agency's interpretation of its own regulations is entitled to deference. Moreover, the court noted that the deficient authorization in this case did not prejudice the landlord in any way, and that landlord did not question the authorization until after the hearing had been held and an order adverse to its interests had been issued. On these facts, the court concluded that DHCR had reasonably afforded tenants an opportunity to cure the deficiency in authorization.

Lease Does Not Establish Unmistakable Intent That Tenant Indemnify Landlord

Sterns Department Stores, Inc. v. Little Neck Dental

NYLJ 11/1/04, p. 32, col. 3

AppDiv, Second Dept

(memorandum opinion)

In an action for damages for injury to property, a landlord appealed from the Supreme Court's denial of the landlord's motion for summary judgment on its cross claim for indemnification against a tenant. The Appellate Division affirmed, holding that the lease did not establish an unmistakable intent that the tenant indemnify the landlord for damages caused by the landlord's own negligence.

The plaintiff tenant, which operates a department store in a shopping center, sustained damages when a water pipe burst. Plaintiff tenant brought this action against both the shopping center owner and the tenant of a neighboring unit. A jury returned a verdict for $238,462, apportioning 40% of the fault to the landlord and its managing agent, and the remaining 60% to the neighboring tenant. The landlord cross-claimed against the neighboring tenant, seeking contractual indemnification. The Supreme Court denied the landlord's summary judgment motion.

In affirming, the Appellate Division cited language in the lease providing that tenant would “not be liable for claims occasioned by the negligent acts or omissions of Landlord, its agents, contractors, employees or invitees.” The court concluded that this language did not establish an obligation by tenant to indemnify landlord for acts of landlord's own negligence. As a result, the Supreme Court had properly denied the landlord's summary judgment motion.

COMMENT

General Obligations Law 5-321 voids any covenant in a lease that exempts the landlord from liability for damages to tenant as a result of the landlord's negligence. Hogeland v. Sibley, Lindsay & Curr Co., 42 N.Y.2d 153, 161, construed the statute to apply only to direct exculpation of landlord from liability, rather than to “indemnification clauses” which require tenants to repay landlords for damages paid to third parties as a result of landlord's negligence. In Hogeland itself, however, the lease at issue required tenant to purchase insurance to cover landlord's liability in case landlord or tenant was negligent. 42 N.Y.2d 153. The Court reasoned that the lease did not violate General Obligations Law 5-321 because landlord was not exempting itself from his own negligence, but rather the parties had used insurance to allocate losses between themselves. Hogeland at 161.

Although subsequent New York cases have followed Hogeland in holding that a lease provision requiring tenant to purchase insurance for damages to third parties, does not violate General Obligations Law 5-321 (see, e.g. Schumacher v. Lutheran Community Services, Inc., 177 A.D.2d 568), a series of Second Department cases has held unenforceable a lease provision requiring tenant to purchase insurance to cover landlord's liability for negligence toward tenant. See, e.g. Glens Falls Insurance Co. v. City of New York, 293 AD2d 568; Radius, Ltd v. Newhouse, 213 AD2d 614. These courts would also hold unenforceable a lease provision requiring tenant to hold landlord harmless from liability for damages to tenant. See A to Z Applique Die Cutting, Inc. v. 319 McKibbin Street Corp., 232 AD2d 512.

Landlord's Failure to Comply With HPD Regulations Does Not Warrant Eviction of Tenant

Verdell v. Lincoln Amsterdam House, Inc.

NYLJ 11/3/04, p. 18, col.1.

Supreme Ct., N.Y. Cty

(Lippman, J.).

A tenant in a Mitchell-Lama building brought this action to annul a certificate of eviction issued by New York City's Department of Housing Preservation and Development (HPD). The court granted the petition, holding that tenant could not be evicted based solely on the failure of the building's owner to comply with HPD's regulations.

In 1995, the tenant, who was then living in an apartment in the subject building with her family, asked the building's owner to put her on a waiting list for her own apartment in the building. The owner's managing agent improperly placed the tenant on an internal transfer list designed for existing tenants seeking different apartments in the same building. Later, in 2001, the managing agent discovered the error and transferred the tenant to the external waiting list, where applications enjoy priority based on chronological priority. In 2002, the owner informed the tenant that an apartment would shortly be available, the tenant signed an occupancy agreement, and, on May 1, 2002, she moved into an apartment. The following month, HPD notified the owner that it had improperly permitted the tenant to take occupancy pursuant to an internal transfer, and directed the owner to reclaim the apartment and offer it to the next eligible applicant on the waiting list. (In fact, however, the owner had already moved the tenant to the external list, and had placed her in the apartment from the external waiting list). In response to HPD's notice, the owner commenced an administrative proceeding to remove the tenant. The notice to tenant stated that HPD regulations had been violated in connection with her placement in the apartment. At the hearing, HPD's Director of Administrative Services testified that the owner had improperly placed the tenant on the internal list, that her subsequent placement on the external list was also improper because that list had been closed as of 1992, and that the owner had improperly failed to submit the tenant's application to HPD, even though it was required to submit all applications – internal and external – to HPD for review. Based on this testimony, HPD issued a certificate of eviction, and commenced a summary holdover proceeding which was stayed pending resolution of the tenant's article 78 proceeding.

In granting the tenant's petition to annul the certificate of eviction, the court noted first that the tenant had been entirely blameless in the matter; the difficulties had arisen because the owner had repeatedly violated HPD regulations without suffering consequences. The court then noted that HPD had not demonstrated that any other applicant was entitled to the apartment. HPD had argued that the external list was closed, and the court emphasized that if HPD was correct on that point, there would have been no other eligible applicant on the waiting list who could properly be placed in the apartment. As a result, the court concluded that it was irrational for HPD to remove tenant from the apartment solely because of owner's violation of numerous HPD regulations.

Corporation, Not Individual Shareholders, Was Tenant Under Lease

150 Broadway N.Y. Associates v. Bodner

NYLJ 11/10/04, p. 18, col. 1

AppDiv, First Dept

(Opinion by Friedman, J.)

In a landlord's action against the shareholders of the tenant, a professional corporation, for damages resulting from the tenant's early surrender, shareholders appealed from Supreme Court's denial of their motion to dismiss the complaint. The Appellate Division reversed and dismissed the complaint, rejecting landlord's contention that the individual shareholders, and not the corporation, were the tenants pursuant to the lease.

In September 2000, the landlord entered into a lease to expire on Oct. 31, 2005. The lease designated the tenant as “Bodner & Waldinger”, without the use of the abbreviation P.C., although it is established that Bodner and Waldinger are the sole shareholders of a professional corporation named “Bodner & Waldinger, P.C.” All rent was paid through April 30, 2003, but the law firm had vacated and surrendered the space as of that date, as provided in a surrender notice of that date executed on behalf of the professional corporation. The landlord then brought this action against the individual shareholders, contending that the omission of the “P.C.” abbreviation established that the shareholders were the tenants under the lease. The tenants moved to dismiss, but the Supreme Court denied their motion.

In reversing, the Appellate Division relied primarily on two riders to the lease. The first of these included a representation that “[t]he persons executing this Lease on behalf of the Tenant hereby jointly and severally represent … that the Tenant is a duly organized and validly existing corporation…” The second included a guarantee, signed separately by Bodner and Waldinger, of the tenant's performance of the lease, limited to the performance of obligations that “accrue up to the date that Tenant vacates the demised premises … and gives written notice to Owner that it is surrendering possession of the premises.” The Appellate Division reasoned that these two clauses would have meaning only if the corporation were the tenant. In particular, the court noted the implausibility of a reading that would make Bodner and Waldinger guarantors of their own debt. As a result, the court concluded that the contract was unambiguous, and that Bodner and Waldinger were entitled to summary judgment.

Landlord Not Entitled to Withdraw from Section 8 Program

M1849 LLC v. Inniss

NYLJ 11/10/04, p.20, col. 3

Civil Ct., Bronx Cty

(Alpert, J.)

In a landlord's proceeding to collect rent from a rent-stabilized tenant, the tenant moved to dismiss. The court granted the motion, holding that the landlord was not entitled to withdraw from the federal “Section 8″ subsidy program.

The tenant moved into the subject rent-stabilized apartment in 1975, and became eligible for a Section 8 subsidy from the New York City Housing Authority in 1978. In that year, the landlord entered into the first of a series of Housing Assistance Payment (HAP) contracts with NYCHA, by the terms of which the landlord agreed to accept partial rent payment from the NYCHA. In 2003, the landlord notified both the tenant and NYCHA that it wished to withdraw from the Section 8 program, and that if the tenant wished to remain in the apartment, he would have to pay the full rent. When the tenant did not pay the full rent, the landlord brought this proceeding.

In dismissing the proceeding, the court relied on the Rent Stabilization Code, which provides that a landlord must offera rent-stabilized tenants renewal leases “on the same terms and conditions as the expired lease.” Rent Stabilization Code, sec. 2522[g][1]. The court concluded that refusal to accept Section 8 payments constituted a change in the conditions of the lease, and was therefore barred by the Rent Stabilization Code. To reach that conclusion, the court held that the 1996 amendments to the federal Housing Act, which permit a landlord to terminate participation in the Section 8 program, did not pre-empt state law, and did not, therefore, permit the landlord to change the conditions of the tenant's rent stabilized lease.

COMMENT

See Comment after following case.

Landlord Entitled to Withdraw from Section 8 Program

Cosmopolitan Associates, LLC v. Ortiz

NYLJ 11/12/04, p. 20, col. 1

Civil Ct, Queens Cty

(Waithe, J.)

In a landlord's nonpayment proceeding to collect rent from a rent-stabilized tenant, the tenant moved to dismiss. The court denied the motion, holding that the landlord was entitled to withdraw from the “Section 8″ subsidy program.

The NYCHA was paying a portion of the tenant's rent pursuant to the Section 8 subsidy program when the landlord purported to withdraw from that program. The landlord then brought this proceeding to collect rent that had previously been paid by NYCHA. The tenant moved to dismiss the proceeding.

In denying the tenant's motion, the court relied on the 1996 amendment to the federal statute, which terminated the prior statutory requirement that a landlord continue to accept Section 8 payments from any tenant who had been making Section 8 payments. The court noted that the amendments were designed to encourage landlord participation in Section 8, because many landlords had found participation unattractive. Two provisions of the old statute — the requirement that a landlord who accepts Section 8 subsidies for one tenant must accept those subsidies from all tenants, combined with the “endless lease” requirement — led many landlords to conclude that the benefits of participation were outweighed by the costs. The 1996 amendments, according to the court, were designed to make Section 8 more attractive to landlords, and thus to benefit prospective tenants. The court went on to hold that the Rent Stabilization Code did not require the landlord to continue accepting Section 8 tenants, reasoning that the tenant's rent-stabilized lease did include any language requiring continued participation in Section 8. As a result, the court awarded the landlord rent arrears for the period after the landlord withdrew from the Section 8 program.

COMMENT

The federal Section 8 legislation allows landlords to discontinue their acceptance of Section 8 rent subsidy payments after the Section 8 contract between the landlord and the housing authority expires. New York's rent stabilization law requires landlords to offer renewals to tenants on the same terms and conditions as the original lease. This conflict has prompted landlords to argue that the Section 8 legislation preempts rent stabilization laws and therefore that landlords may eliminate the Section 8 subsidy on renewal. Although New York courts have definitively resolved the preemption issue, several courts have indicated in dicta that the Section 8 legislation does not preempt rent stabilization laws. See Fishel v. New York City Conciliation and Appeals Board, 123 Misc.2d 841; Tann Realty v. Thompson, 112 Misc.2d 392.

Even if the Section 8 legislation were to preempt the rent stabilization laws, several courts have held that if the parties expressly include language in the lease agreeing to accept Section 8 subsidies, that contract language becomes a material term that must be offered when the rent stabilized lease is offered for renewal. The apparent rationale is that the federal statute does not pre-empt contract provisions between landlord and tenant, even if the statute pre-empts New York statutes. See Fishel v. New York City Conciliation and Appeals Board, supra; see also Kouznetski v. Verga Associates, NYLJ July 10, 2002. In Fishel, the court found that language in the lease specifying the amount to be paid by the tenant and the amount to be paid by the Housing Authority, was a material term that was required to be included on renewal. In Kouznetski, the court found that an addendum which provided that “[o]wner will accept Section 8 subsidy to tenant” was a material term which had to be offered on renewal.

While the courts in Ortiz and Inniss agreed that the Section 8 legislation did not preempt the rent stabilization code, they disagreed on whether the Section 8 subsidy constituted a material term when the original lease does not refer to Section 8 payments. In Ortiz, the court focused on the lack of any language in the original lease relating to Section 8 and ruled that the subsidy did not constitute a material term of the original lease. This interpretation permits a landlord to avoid permanent participation in Section 8 simply by omitting any reference to the Section 8 subsidy into the original lease. Seeking to avoid this result, the court in Inniss reasoned that despite the lack of any express language in the original lease, the Section 8 subsidy by its nature constituted a material term and condition of the lease which the rent stabilization laws required the landlord to offer on renewal.

Psychological Condition Does Not Warrant Pet Exemption

Matter of Contello Towers Corp.

NYLJ 11/17/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Schmidt, J.)

A Mitchell-Lama landlord brought this article 78 proceeding to review a determination by the City's Department of Housing Preservation and Development (HPD) denying lthe andlord's application for a certificate of eviction. The court granted the petition, holding that the psychological condition of the tenant's daughter did not require the landlord to exempt the tenant from the building's no-pet policy.

The landlord's occupancy agreement with the tenant, signed in 2001, prohibited the tenant from keeping dogs or cats in the apartment. At the time of the tenant's move into the apartment, in January 2002, the tenant's daughter exhibited anxious and depressed behavior, leading the daughter's therapist to suggest that tenant purchase a dog. When the landlord discovered the dog, the landlord sent the tenant a notice of intent to evict, and notified the tenant of her rights in the eviction proceeding. HPD's hearing officer denied the landlord a certificate of eviction, concluding that the landlord was required to exempt the tenant from its no-pet policy as an accommodation for her daughter, a disabled tenant. The landlord then brought this article 78 proceeding.

In granting the petition, the court started by noting the various definitions of disability in federal, state, and city statutes requiring accommodation of persons with disabilities. The court concluded, however, that the tenant had not established that her daughter qualified as a person with a disability under any of those statutes. In particular, the tenant did not establish that her daughter's emotional difficulties (poor performance in school, sleeping difficulties, etc) constituted an impairment that limited her major life activities. The court also noted that the tenant had not produced documentary evidence to support her contention that the daughter was performing poorly in school. The court went on to hold that even if the daughter was suffering from a disability, there was no evidence in the record that permitting an exception to the no-pet policy was necessary to accommodate the daughter's condition. The court noted that the daughter's therapist testified at the hearing that she never would have suggested a dog if she had known of the building's policy, and cited the landlord's psychiatric expert, who testified that no specific recommendation in the literature or clinic practice requires a dog for a child with adjustment disorder. As a result, the court concluded that the landlord was entitled to a certificate of eviction.

DHCR May Permit Correction of Technical Defects in Tenants' PAR

Matter of 427 West 51st Street Owners Corp. v. DHCR

NYLJ 11/19/04, p. 18, col. 5

Court of Appeals

(Opinion by Read, J.)

In a landlord's article 78 proceeding challenging a rent reduction ordered by DHCR, the landlord appealed from the Appellate Division's affirmance of the Supreme Court's dismissal of the proceeding. The Court of Appeals affirmed, holding that the DHCR Commissioner had discretion to permit correction of technical defects in a timely-filed petition for administrative review (PAR).

When 51 rent-stabilized tenants sought a rent reduction based on a diminution in building services, DHCR granted a rent reduction for most of the alleged changes, but concluded that the cutback in basement access was de minimis, and warranted no reduction. A tenants' representative filed a PAR, and the DHCR concluded that there was insufficient evidence to support the conclusion that the basement cutback was de minimis. The DHCR remanded, and after a hearing, ordered a rent reduction. At that point, the landlord filed a PAR, alleging that the tenants' representative who appealed the original order had not submitted sufficient evidence of authorization to act on behalf of most of the tenants. Only six of the 51 tenants had signed the authorization; for the rest, the representative submitted reproduced signatures from the original complaint. The DHCR agreed with the landlord that the tenants whose signatures did not appear had not properly appealed the original order, and revoked the reduction order with respect to those tenants. When tenants brought an article 78 proceeding challenging the revocation, the DHCR permitted tenants to correct the omission by returning a signed form authorizing the tenants' association to represent them on the already decided PAR. Thirty-five tenants returned the signed form, and the DHCR granted those tenants a reduction. The landlord then brought this article 78 proceeding.

In upholding the DHCR's determination, the Court of Appeals held that the Rent Stabilization Code vests in the DHCR Commissioner discretion to permit correction of technical defects. The court also noted that an agency's interpretation of its own regulations is entitled to deference. Moreover, the court noted that the deficient authorization in this case did not prejudice the landlord in any way, and that landlord did not question the authorization until after the hearing had been held and an order adverse to its interests had been issued. On these facts, the court concluded that DHCR had reasonably afforded tenants an opportunity to cure the deficiency in authorization.

Lease Does Not Establish Unmistakable Intent That Tenant Indemnify Landlord

Sterns Department Stores, Inc. v. Little Neck Dental

NYLJ 11/1/04, p. 32, col. 3

AppDiv, Second Dept

(memorandum opinion)

In an action for damages for injury to property, a landlord appealed from the Supreme Court's denial of the landlord's motion for summary judgment on its cross claim for indemnification against a tenant. The Appellate Division affirmed, holding that the lease did not establish an unmistakable intent that the tenant indemnify the landlord for damages caused by the landlord's own negligence.

The plaintiff tenant, which operates a department store in a shopping center, sustained damages when a water pipe burst. Plaintiff tenant brought this action against both the shopping center owner and the tenant of a neighboring unit. A jury returned a verdict for $238,462, apportioning 40% of the fault to the landlord and its managing agent, and the remaining 60% to the neighboring tenant. The landlord cross-claimed against the neighboring tenant, seeking contractual indemnification. The Supreme Court denied the landlord's summary judgment motion.

In affirming, the Appellate Division cited language in the lease providing that tenant would “not be liable for claims occasioned by the negligent acts or omissions of Landlord, its agents, contractors, employees or invitees.” The court concluded that this language did not establish an obligation by tenant to indemnify landlord for acts of landlord's own negligence. As a result, the Supreme Court had properly denied the landlord's summary judgment motion.

COMMENT

General Obligations Law 5-321 voids any covenant in a lease that exempts the landlord from liability for damages to tenant as a result of the landlord's negligence. Hogeland v. Sibley, Lindsay & Curr Co., 42 N.Y.2d 153, 161, construed the statute to apply only to direct exculpation of landlord from liability, rather than to “indemnification clauses” which require tenants to repay landlords for damages paid to third parties as a result of landlord's negligence. In Hogeland itself, however, the lease at issue required tenant to purchase insurance to cover landlord's liability in case landlord or tenant was negligent. 42 N.Y.2d 153. The Court reasoned that the lease did not violate General Obligations Law 5-321 because landlord was not exempting itself from his own negligence, but rather the parties had used insurance to allocate losses between themselves. Hogeland at 161.

Although subsequent New York cases have followed Hogeland in holding that a lease provision requiring tenant to purchase insurance for damages to third parties, does not violate General Obligations Law 5-321 (see, e.g. Schumacher v. Lutheran Community Services, Inc., 177 A.D.2d 568), a series of Second Department cases has held unenforceable a lease provision requiring tenant to purchase insurance to cover landlord's liability for negligence toward tenant. See, e.g. Glens Falls Insurance Co. v. City of New York, 293 AD2d 568; Radius, Ltd v. Newhouse, 213 AD2d 614. These courts would also hold unenforceable a lease provision requiring tenant to hold landlord harmless from liability for damages to tenant. See A to Z Applique Die Cutting, Inc. v. 319 McKibbin Street Corp., 232 AD2d 512.

Landlord's Failure to Comply With HPD Regulations Does Not Warrant Eviction of Tenant

Verdell v. Lincoln Amsterdam House, Inc.

NYLJ 11/3/04, p. 18, col.1.

Supreme Ct., N.Y. Cty

(Lippman, J.).

A tenant in a Mitchell-Lama building brought this action to annul a certificate of eviction issued by New York City's Department of Housing Preservation and Development (HPD). The court granted the petition, holding that tenant could not be evicted based solely on the failure of the building's owner to comply with HPD's regulations.

In 1995, the tenant, who was then living in an apartment in the subject building with her family, asked the building's owner to put her on a waiting list for her own apartment in the building. The owner's managing agent improperly placed the tenant on an internal transfer list designed for existing tenants seeking different apartments in the same building. Later, in 2001, the managing agent discovered the error and transferred the tenant to the external waiting list, where applications enjoy priority based on chronological priority. In 2002, the owner informed the tenant that an apartment would shortly be available, the tenant signed an occupancy agreement, and, on May 1, 2002, she moved into an apartment. The following month, HPD notified the owner that it had improperly permitted the tenant to take occupancy pursuant to an internal transfer, and directed the owner to reclaim the apartment and offer it to the next eligible applicant on the waiting list. (In fact, however, the owner had already moved the tenant to the external list, and had placed her in the apartment from the external waiting list). In response to HPD's notice, the owner commenced an administrative proceeding to remove the tenant. The notice to tenant stated that HPD regulations had been violated in connection with her placement in the apartment. At the hearing, HPD's Director of Administrative Services testified that the owner had improperly placed the tenant on the internal list, that her subsequent placement on the external list was also improper because that list had been closed as of 1992, and that the owner had improperly failed to submit the tenant's application to HPD, even though it was required to submit all applications – internal and external – to HPD for review. Based on this testimony, HPD issued a certificate of eviction, and commenced a summary holdover proceeding which was stayed pending resolution of the tenant's article 78 proceeding.

In granting the tenant's petition to annul the certificate of eviction, the court noted first that the tenant had been entirely blameless in the matter; the difficulties had arisen because the owner had repeatedly violated HPD regulations without suffering consequences. The court then noted that HPD had not demonstrated that any other applicant was entitled to the apartment. HPD had argued that the external list was closed, and the court emphasized that if HPD was correct on that point, there would have been no other eligible applicant on the waiting list who could properly be placed in the apartment. As a result, the court concluded that it was irrational for HPD to remove tenant from the apartment solely because of owner's violation of numerous HPD regulations.

Corporation, Not Individual Shareholders, Was Tenant Under Lease

150 Broadway N.Y. Associates v. Bodner

NYLJ 11/10/04, p. 18, col. 1

AppDiv, First Dept

(Opinion by Friedman, J.)

In a landlord's action against the shareholders of the tenant, a professional corporation, for damages resulting from the tenant's early surrender, shareholders appealed from Supreme Court's denial of their motion to dismiss the complaint. The Appellate Division reversed and dismissed the complaint, rejecting landlord's contention that the individual shareholders, and not the corporation, were the tenants pursuant to the lease.

In September 2000, the landlord entered into a lease to expire on Oct. 31, 2005. The lease designated the tenant as “Bodner & Waldinger”, without the use of the abbreviation P.C., although it is established that Bodner and Waldinger are the sole shareholders of a professional corporation named “Bodner & Waldinger, P.C.” All rent was paid through April 30, 2003, but the law firm had vacated and surrendered the space as of that date, as provided in a surrender notice of that date executed on behalf of the professional corporation. The landlord then brought this action against the individual shareholders, contending that the omission of the “P.C.” abbreviation established that the shareholders were the tenants under the lease. The tenants moved to dismiss, but the Supreme Court denied their motion.

In reversing, the Appellate Division relied primarily on two riders to the lease. The first of these included a representation that “[t]he persons executing this Lease on behalf of the Tenant hereby jointly and severally represent … that the Tenant is a duly organized and validly existing corporation…” The second included a guarantee, signed separately by Bodner and Waldinger, of the tenant's performance of the lease, limited to the performance of obligations that “accrue up to the date that Tenant vacates the demised premises … and gives written notice to Owner that it is surrendering possession of the premises.” The Appellate Division reasoned that these two clauses would have meaning only if the corporation were the tenant. In particular, the court noted the implausibility of a reading that would make Bodner and Waldinger guarantors of their own debt. As a result, the court concluded that the contract was unambiguous, and that Bodner and Waldinger were entitled to summary judgment.

Landlord Not Entitled to Withdraw from Section 8 Program

M1849 LLC v. Inniss

NYLJ 11/10/04, p.20, col. 3

Civil Ct., Bronx Cty

(Alpert, J.)

In a landlord's proceeding to collect rent from a rent-stabilized tenant, the tenant moved to dismiss. The court granted the motion, holding that the landlord was not entitled to withdraw from the federal “Section 8″ subsidy program.

The tenant moved into the subject rent-stabilized apartment in 1975, and became eligible for a Section 8 subsidy from the New York City Housing Authority in 1978. In that year, the landlord entered into the first of a series of Housing Assistance Payment (HAP) contracts with NYCHA, by the terms of which the landlord agreed to accept partial rent payment from the NYCHA. In 2003, the landlord notified both the tenant and NYCHA that it wished to withdraw from the Section 8 program, and that if the tenant wished to remain in the apartment, he would have to pay the full rent. When the tenant did not pay the full rent, the landlord brought this proceeding.

In dismissing the proceeding, the court relied on the Rent Stabilization Code, which provides that a landlord must offera rent-stabilized tenants renewal leases “on the same terms and conditions as the expired lease.” Rent Stabilization Code, sec. 2522[g][1]. The court concluded that refusal to accept Section 8 payments constituted a change in the conditions of the lease, and was therefore barred by the Rent Stabilization Code. To reach that conclusion, the court held that the 1996 amendments to the federal Housing Act, which permit a landlord to terminate participation in the Section 8 program, did not pre-empt state law, and did not, therefore, permit the landlord to change the conditions of the tenant's rent stabilized lease.

COMMENT

See Comment after following case.

Landlord Entitled to Withdraw from Section 8 Program

Cosmopolitan Associates, LLC v. Ortiz

NYLJ 11/12/04, p. 20, col. 1

Civil Ct, Queens Cty

(Waithe, J.)

In a landlord's nonpayment proceeding to collect rent from a rent-stabilized tenant, the tenant moved to dismiss. The court denied the motion, holding that the landlord was entitled to withdraw from the “Section 8″ subsidy program.

The NYCHA was paying a portion of the tenant's rent pursuant to the Section 8 subsidy program when the landlord purported to withdraw from that program. The landlord then brought this proceeding to collect rent that had previously been paid by NYCHA. The tenant moved to dismiss the proceeding.

In denying the tenant's motion, the court relied on the 1996 amendment to the federal statute, which terminated the prior statutory requirement that a landlord continue to accept Section 8 payments from any tenant who had been making Section 8 payments. The court noted that the amendments were designed to encourage landlord participation in Section 8, because many landlords had found participation unattractive. Two provisions of the old statute — the requirement that a landlord who accepts Section 8 subsidies for one tenant must accept those subsidies from all tenants, combined with the “endless lease” requirement — led many landlords to conclude that the benefits of participation were outweighed by the costs. The 1996 amendments, according to the court, were designed to make Section 8 more attractive to landlords, and thus to benefit prospective tenants. The court went on to hold that the Rent Stabilization Code did not require the landlord to continue accepting Section 8 tenants, reasoning that the tenant's rent-stabilized lease did include any language requiring continued participation in Section 8. As a result, the court awarded the landlord rent arrears for the period after the landlord withdrew from the Section 8 program.

COMMENT

The federal Section 8 legislation allows landlords to discontinue their acceptance of Section 8 rent subsidy payments after the Section 8 contract between the landlord and the housing authority expires. New York's rent stabilization law requires landlords to offer renewals to tenants on the same terms and conditions as the original lease. This conflict has prompted landlords to argue that the Section 8 legislation preempts rent stabilization laws and therefore that landlords may eliminate the Section 8 subsidy on renewal. Although New York courts have definitively resolved the preemption issue, several courts have indicated in dicta that the Section 8 legislation does not preempt rent stabilization laws. See Fishel v. New York City Conciliation and Appeals Board, 123 Misc.2d 841; Tann Realty v. Thompson, 112 Misc.2d 392.

Even if the Section 8 legislation were to preempt the rent stabilization laws, several courts have held that if the parties expressly include language in the lease agreeing to accept Section 8 subsidies, that contract language becomes a material term that must be offered when the rent stabilized lease is offered for renewal. The apparent rationale is that the federal statute does not pre-empt contract provisions between landlord and tenant, even if the statute pre-empts New York statutes. See Fishel v. New York City Conciliation and Appeals Board, supra; see also Kouznetski v. Verga Associates, NYLJ July 10, 2002. In Fishel, the court found that language in the lease specifying the amount to be paid by the tenant and the amount to be paid by the Housing Authority, was a material term that was required to be included on renewal. In Kouznetski, the court found that an addendum which provided that “[o]wner will accept Section 8 subsidy to tenant” was a material term which had to be offered on renewal.

While the courts in Ortiz and Inniss agreed that the Section 8 legislation did not preempt the rent stabilization code, they disagreed on whether the Section 8 subsidy constituted a material term when the original lease does not refer to Section 8 payments. In Ortiz, the court focused on the lack of any language in the original lease relating to Section 8 and ruled that the subsidy did not constitute a material term of the original lease. This interpretation permits a landlord to avoid permanent participation in Section 8 simply by omitting any reference to the Section 8 subsidy into the original lease. Seeking to avoid this result, the court in Inniss reasoned that despite the lack of any express language in the original lease, the Section 8 subsidy by its nature constituted a material term and condition of the lease which the rent stabilization laws required the landlord to offer on renewal.

Psychological Condition Does Not Warrant Pet Exemption

Matter of Contello Towers Corp.

NYLJ 11/17/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Schmidt, J.)

A Mitchell-Lama landlord brought this article 78 proceeding to review a determination by the City's Department of Housing Preservation and Development (HPD) denying lthe andlord's application for a certificate of eviction. The court granted the petition, holding that the psychological condition of the tenant's daughter did not require the landlord to exempt the tenant from the building's no-pet policy.

The landlord's occupancy agreement with the tenant, signed in 2001, prohibited the tenant from keeping dogs or cats in the apartment. At the time of the tenant's move into the apartment, in January 2002, the tenant's daughter exhibited anxious and depressed behavior, leading the daughter's therapist to suggest that tenant purchase a dog. When the landlord discovered the dog, the landlord sent the tenant a notice of intent to evict, and notified the tenant of her rights in the eviction proceeding. HPD's hearing officer denied the landlord a certificate of eviction, concluding that the landlord was required to exempt the tenant from its no-pet policy as an accommodation for her daughter, a disabled tenant. The landlord then brought this article 78 proceeding.

In granting the petition, the court started by noting the various definitions of disability in federal, state, and city statutes requiring accommodation of persons with disabilities. The court concluded, however, that the tenant had not established that her daughter qualified as a person with a disability under any of those statutes. In particular, the tenant did not establish that her daughter's emotional difficulties (poor performance in school, sleeping difficulties, etc) constituted an impairment that limited her major life activities. The court also noted that the tenant had not produced documentary evidence to support her contention that the daughter was performing poorly in school. The court went on to hold that even if the daughter was suffering from a disability, there was no evidence in the record that permitting an exception to the no-pet policy was necessary to accommodate the daughter's condition. The court noted that the daughter's therapist testified at the hearing that she never would have suggested a dog if she had known of the building's policy, and cited the landlord's psychiatric expert, who testified that no specific recommendation in the literature or clinic practice requires a dog for a child with adjustment disorder. As a result, the court concluded that the landlord was entitled to a certificate of eviction.