Landlord & Tenant

Court of Appeals

(Opinion by G. B. Smith, J.)

In landlord's article 78 proceeding challenging DHCR's conclusion that landlord was not entitled to apply for an adjustment of initial legal regulated rent, DHCR and a tenant's coalition appealed from the Appellate Division's reversal of Supreme Court's dismissal of the proceeding. The Court of Appeals modified, holding that landlord was eligible to apply for adjustments only for those apartments vacated after June 30, 1971, because as to apartments continuously occupied since before that date, the apartments became subject to rent stabilization under the terms of the Rent Stabilization Law of 1969 and not the Emergency Tenant Protection Act of 1974.

The buildings were built in 1967 and 1968 pursuant to the Private Housing Finance Law, more commonly known as the Mitchell-Lama Law. In 1998, landlord withdrew the buildings from the Mitchell-Lama program, and the apartments became subject to rent stabilization. The preceding rent for each apartment because the “initial regulated rent” for the apartment pursuant to section 26-512(b)(3) of the Rent Stabilization Law and section 2521.1(j) of the Rent Stabilization Code. Landlord then applied to DHCR for rent adjustments, alleging “unique or peculiar circumstances” which had resulted in an initial legal regulated rent substantially different from generally prevailing rents in the area. (Rent Stabilization Law, section 26-513(a)). The statute, however, makes such adjustments available only to accommodations that became subject to rent stabilization under the Emergency Tenant Protection Act of 1974, not to accommodations which had previously become subject to rent stabilization law under the 1969 Rent Stabilization Law. DHCR denied landlord's application, contending that the buildings had become subject to rent stabilization in 1969, and were not, therefore, entitled to the adjustments. Supreme Court agreed when it dismissed landlord's article 78 petition. The Appellate Division, however, reversed, holding that because the buildings were exempt from the rent stabilization law because of their coverage under the Private Housing Finance Law, they because subject to rent stabilization under the ETPA, not under the Rent Stabilization Law of 1969. DHCR and a tenants' group appealed.

In modifying, the Court of Appeals first held that the issue was one of pure statutory construction, and therefore not an issue on which deference to the agency enforcing the statute was appropriate. The court then held that these buildings would have been subject to rent stabilization even if the ETPA had never been enacted. That is, the 1969 statute subjected to rent stabilization all multiple dwellings containing six or more units that were completed after 1947, except those subject to rent regulation under the private housing finance law or any other state law. The court reasoned that upon expiration of coverage under the Private Housing Finance Law, the units would automatically have been covered under the 1969 statute, without any need for enactment of the ETPA. Hence, the court rejected the Appellate Division's conclusion that any units exempted under the 1969 statute were subjected to rent stabilization by the ETPA.

The court then noted, however, that in 1971, the legislature enacted the vacancy decontrol law, which removed from rent regulation any units vacated after June 30, 1971. Hence, without further legislation, any units in the subject buildings vacated after that date would not have been subject to rent regulation. Such further legislation came in 1974, in the form of the ETPA, which modified the vacancy decontrol law by subjecting to rent stabilization any units vacated after June 30, 1971, except those in buildings constructed after Jan. 1, 1974. The court concluded, therefore, that units in the subject buildings vacated after June 30, 1971, because subject to rent stabilization as a result of the ETPA, and that as to those units, the landlord was entitled to apply for adjustments in the initial legal regulated rent. As a result, the court modified the Appellate Division's order only with respect to those apartment that had not been vacated since June 30, 1971.

Tenant Entitled to Preliminary Injunction Against Enforcement of Relocation Agreement

Valdez v. Northeast Brooklyn Housing Development Corp.

NYLJ 6/1/05, p. 21, col. 1

Supreme Ct., Kings Cty

(Johnson, J.)

In an action by tenant to enjoin landlord from interfering with her possessory right in her apartment, tenant sought a preliminary injunction. The court granted a preliminary injunction to preserve the status quo, holding that tenant was entitled to that relief even without establishing a likelihood of success on the merits.

Before commencing renovation of the building in which tenant maintained an apartment, landlord secured from tenant a relocation agreement, by the terms of which tenant agreed to move out of her apartment for a year. The agreement provided that at the completion of the work in tenant's apartment, tenant would have the right to move back to the same apartment cluster. Before signing the relocation agreement, tenant had received a notice of non-displacement that guaranteed that tenant would be able to lease her current apartment “or another suitable, decent, safe and sanitary apartment in the same building/complex” at the completion of the rehabilitation. When the new manager of the complex decided to relocate tenant to a building at a different address, tenant brought this action, contending that the new building is located in a less desirable neighborhood in a high crime area. Landlord responded by contending that the new building is one of 16 buildings in the same housing cluster or complex, and by noting that most of the apartments in tenant's original building have been converted into one-bedroom apartments; tenant's former three-bedroom apartment no longer exists.

In awarding tenant a preliminary injunction from taking steps to terminate or otherwise interfere with tenant's possessory interest in tenant's former apartment, the court held that preliminary injunctive relief is available when necessary to prevent a subsequent judgment from becoming ineffectual, even if the party seeking the injunction has not demonstrated a likelihood of success on the merits. Here, the court concluded that an ambiguity in the meaning of the words “complex” and “cluster” prevented the court from holding that tenant had demonstrated a likelihood of success, but nevertheless held injunctive relief appropriate to preserve the status quo.

Late Trading May Permit Eviction of Commercial Tenant

Solow Building Company II LLC v. Bank of America Securities, LLC

NYLJ 5/18/05, p. 18, col. 3

Civil Ct., N.Y. Cty

(Kenney, J.)

In commercial landlord's summary holdover proceeding premised “late trading” by one of tenant's brokers, tenant moved to dismiss for failure to state a claim. The court denied the motion, holding that a trial was necessary to evaluate landlord's contention that late trading constituted an illegal trade, manufacture or other business.

Landlord leased commercial space to tenant in 1996. The total space leased by tenant amounts to 640,000 square feet. In 2003, Sihpol, a broker once employed by tenant, surrendered himself for arraignment on charges involving violations of the securities law. In particular, the indictment against Sihpol alleges that he engaged in late trading after the close of the market but at the previous day's price. Landlord and tenant became involved in disputes over unrelated issues, but landlord ultimately served notice to cure and a notice of termination based on tenant's use of the premises for illegal activities (RPAPL 715(1); RPL 231). Those notices were followed by the instant holdover proceeding. Tenant responded with an action in Supreme Court seeking declaratory and injunctive relief and damages. That action is ongoing. Meanwhile, tenant moved to dismiss landlord's summary proceeding, and, in the alternative, to stay any trial pending resolution of the criminal charges against Sihpol.

In refusing to dismiss, the court acknowledged that RPAPL 715(1) and RPL 231 have most often been used to remove tenants engaged in illegal activities involving alcohol, narcotics, prostitution and gambling. The court nevertheless concluded that tenant's alleged acquiescence in Sihpol's activities might provide the basis for tenant's eviction under the statutes, but held that the question could only be resolved after trial. The court did, however, grant tenant's motion to stay the trial, holding that Sihpol should be presumed innocent until the close of his criminal trial.

COMMENT

Both RPAPL 715(1) and RPL 231 by their terms authorize termination of a lease when a tenant is engaged in any illegal trade, business, or manufacture. RPAPL 715 (2) and (3) address prior convictions of gambling and prostitution offenses, and courts have generally used the statutes to remove a tenant involved in these illegal activities. City of New York v. Goldman, 78 Misc.2d 693; 410 Lenox Ave Apts. Inc., v. Community II Supermarket Inc., 135 Misc.2d 628. In addition, courts consistently apply the statutes to cases involving drug dealing. RRW Realty Corp. v Flores, 179 Misc.2d 757.

However, the statutes themselves do not limit their application to those illegal activities detrimental to other tenants and the neighborhood, so courts have been willing to apply them to other unlawful businesses. One court held since that neither statute places any restrictions on the types of illegal businesses they proscribe, the prohibition against illegal use of premises applies to any enterprise that violates the New York Penal Code. In 1165 Broadway Corp. v. Dayana of N.Y. Sportswear, Inc., 166 Misc.2d 939, the court applied the statutes to a proceeding to terminate a lease where the premises were used to manufacture counterfeit trademark goods. Likewise, in Cohen v. Carrol, 63 Misc.2d 222, the court held that a landlord was entitled to possession because the subtenants were in the business of distributing obscene materials in violation of the Penal Code. Courts have applied the statutes even where the illegal business is not in violation of the Penal Code. In 47 East 74th Street Corp. v. Simon, 188 Misc. 885, the Appellate Term held that running a boarding house in a building restricted to private dwellings, in violation of the Multiple Dwellings Law, is an illegal business and will void a lease.

Not every unlawful activity will trigger application of the statute. Because the statutes refer to illegal businesses and trades, courts will generally decline to apply the statutes to a non-commercial activity. Thus, the commission of a crime unrelated to an illegal business in a leased premises is not cause for eviction. In 1895 Grand Concourse Associates, Petitioner, v. Theresa Ramos, 179 Misc. 2d 508, the personal use of cocaine in an apartment, without evidence of distribution, was not sufficient to trigger application of the statutes. Similarly, in Sherbal v. Epstein, 191 Misc. 543, the court held that the occupancy of a two-family home by three families, in violation of the Multiple Dwellings Law, did not constitute an illegal trade or business by the tenant, and hence did not authorize the landlord to evict the tenant.

There must also be a continuous use of the premises for illegal purposes for the statutes to apply. However, courts reach disparate conclusions about the amount of activity required to indicate customary and habitual use. Some courts have held that one or two incidents of criminal use do not establish the use of the premises for an illegal business. In Tenement House Department of City of New York v. McDevitt, 215 N.Y. 160, the arrests of two tenants of a tenement building for prostitution on the same day, each for their first offense, was not sufficient to infer the use of the entire building for purposes of prostitution. Likewise, in Janowitz v. Jenkins, 8 Misc. 2d 1077, a tenant's second conviction for possession of a lottery policy slip, did not indicate that his apartment was used for an illegal gambling business. However, other courts have inferred the use of a building for an unlawful trade with only evidence of an atmosphere of criminal use. In Kellner v. Cappellini, 135 Misc.2d 750, the presence of drug paraphernalia, as well as testimony from several neighbors regarding the reputation of the building, was sufficient to establish the use of an apartment building for the sale of drugs.

In Solow Building Co, landlord is seeking an eviction based on the alleged illegal activities of one employee of a business. It is unclear whether the unlawful activities of one employee will establish the use of a leased premises for an unlawful trade. Unlike Kellner, landlord will have difficulty establishing a general atmosphere of criminal activity surrounding the business. Also, like McDevitt, where not every tenant of the tenement house engaged in prostitution, not every employee of Banc of America Securities is accused of violating securities law. However, unlike McDevitt, the violations here appear to be ongoing.

Proposed amendments to RPAPL 715 and RPL 231 will entitle a landlord to possession when a leased premises is used “for purposes of prostitution, illegal gambling, illegal possession, manufacture or sale of a controlled substance or marijuana, or for any other illegal trade, activity, business, or manufacture.” The inclusion of the prohibition against any other illegal activity may broaden a landlord's right to possession, no longer limiting it to commercial unlawful activity. However, courts may also read the proposed amendment as limiting the statute's application to the areas of prostitution, gambling, and drug possession, manufacture, and dealing.

Rent Adjustments upon Mitchell-Lama Conversions

Matter of KSLM-Columbus Apartments, Inc. v. New York State Division of Housing and Community Renewal (DHCR)

NYLJ 6/15/05, p. 19, col. 2

Court of Appeals

(Opinion by G. B. Smith, J.)

In landlord's article 78 proceeding challenging DHCR's conclusion that landlord was not entitled to apply for an adjustment of initial legal regulated rent, DHCR and a tenant's coalition appealed from the Appellate Division's reversal of Supreme Court's dismissal of the proceeding. The Court of Appeals modified, holding that landlord was eligible to apply for adjustments only for those apartments vacated after June 30, 1971, because as to apartments continuously occupied since before that date, the apartments became subject to rent stabilization under the terms of the Rent Stabilization Law of 1969 and not the Emergency Tenant Protection Act of 1974.

The buildings were built in 1967 and 1968 pursuant to the Private Housing Finance Law, more commonly known as the Mitchell-Lama Law. In 1998, landlord withdrew the buildings from the Mitchell-Lama program, and the apartments became subject to rent stabilization. The preceding rent for each apartment because the “initial regulated rent” for the apartment pursuant to section 26-512(b)(3) of the Rent Stabilization Law and section 2521.1(j) of the Rent Stabilization Code. Landlord then applied to DHCR for rent adjustments, alleging “unique or peculiar circumstances” which had resulted in an initial legal regulated rent substantially different from generally prevailing rents in the area. (Rent Stabilization Law, section 26-513(a)). The statute, however, makes such adjustments available only to accommodations that became subject to rent stabilization under the Emergency Tenant Protection Act of 1974, not to accommodations which had previously become subject to rent stabilization law under the 1969 Rent Stabilization Law. DHCR denied landlord's application, contending that the buildings had become subject to rent stabilization in 1969, and were not, therefore, entitled to the adjustments. Supreme Court agreed when it dismissed landlord's article 78 petition. The Appellate Division, however, reversed, holding that because the buildings were exempt from the rent stabilization law because of their coverage under the Private Housing Finance Law, they because subject to rent stabilization under the ETPA, not under the Rent Stabilization Law of 1969. DHCR and a tenants' group appealed.

In modifying, the Court of Appeals first held that the issue was one of pure statutory construction, and therefore not an issue on which deference to the agency enforcing the statute was appropriate. The court then held that these buildings would have been subject to rent stabilization even if the ETPA had never been enacted. That is, the 1969 statute subjected to rent stabilization all multiple dwellings containing six or more units that were completed after 1947, except those subject to rent regulation under the private housing finance law or any other state law. The court reasoned that upon expiration of coverage under the Private Housing Finance Law, the units would automatically have been covered under the 1969 statute, without any need for enactment of the ETPA. Hence, the court rejected the Appellate Division's conclusion that any units exempted under the 1969 statute were subjected to rent stabilization by the ETPA.

The court then noted, however, that in 1971, the legislature enacted the vacancy decontrol law, which removed from rent regulation any units vacated after June 30, 1971. Hence, without further legislation, any units in the subject buildings vacated after that date would not have been subject to rent regulation. Such further legislation came in 1974, in the form of the ETPA, which modified the vacancy decontrol law by subjecting to rent stabilization any units vacated after June 30, 1971, except those in buildings constructed after Jan. 1, 1974. The court concluded, therefore, that units in the subject buildings vacated after June 30, 1971, because subject to rent stabilization as a result of the ETPA, and that as to those units, the landlord was entitled to apply for adjustments in the initial legal regulated rent. As a result, the court modified the Appellate Division's order only with respect to those apartment that had not been vacated since June 30, 1971.

Tenant Entitled to Preliminary Injunction Against Enforcement of Relocation Agreement

Valdez v. Northeast Brooklyn Housing Development Corp.

NYLJ 6/1/05, p. 21, col. 1

Supreme Ct., Kings Cty

(Johnson, J.)

In an action by tenant to enjoin landlord from interfering with her possessory right in her apartment, tenant sought a preliminary injunction. The court granted a preliminary injunction to preserve the status quo, holding that tenant was entitled to that relief even without establishing a likelihood of success on the merits.

Before commencing renovation of the building in which tenant maintained an apartment, landlord secured from tenant a relocation agreement, by the terms of which tenant agreed to move out of her apartment for a year. The agreement provided that at the completion of the work in tenant's apartment, tenant would have the right to move back to the same apartment cluster. Before signing the relocation agreement, tenant had received a notice of non-displacement that guaranteed that tenant would be able to lease her current apartment “or another suitable, decent, safe and sanitary apartment in the same building/complex” at the completion of the rehabilitation. When the new manager of the complex decided to relocate tenant to a building at a different address, tenant brought this action, contending that the new building is located in a less desirable neighborhood in a high crime area. Landlord responded by contending that the new building is one of 16 buildings in the same housing cluster or complex, and by noting that most of the apartments in tenant's original building have been converted into one-bedroom apartments; tenant's former three-bedroom apartment no longer exists.

In awarding tenant a preliminary injunction from taking steps to terminate or otherwise interfere with tenant's possessory interest in tenant's former apartment, the court held that preliminary injunctive relief is available when necessary to prevent a subsequent judgment from becoming ineffectual, even if the party seeking the injunction has not demonstrated a likelihood of success on the merits. Here, the court concluded that an ambiguity in the meaning of the words “complex” and “cluster” prevented the court from holding that tenant had demonstrated a likelihood of success, but nevertheless held injunctive relief appropriate to preserve the status quo.

Late Trading May Permit Eviction of Commercial Tenant

Solow Building Company II LLC v. Bank of America Securities, LLC

NYLJ 5/18/05, p. 18, col. 3

Civil Ct., N.Y. Cty

(Kenney, J.)

In commercial landlord's summary holdover proceeding premised “late trading” by one of tenant's brokers, tenant moved to dismiss for failure to state a claim. The court denied the motion, holding that a trial was necessary to evaluate landlord's contention that late trading constituted an illegal trade, manufacture or other business.

Landlord leased commercial space to tenant in 1996. The total space leased by tenant amounts to 640,000 square feet. In 2003, Sihpol, a broker once employed by tenant, surrendered himself for arraignment on charges involving violations of the securities law. In particular, the indictment against Sihpol alleges that he engaged in late trading after the close of the market but at the previous day's price. Landlord and tenant became involved in disputes over unrelated issues, but landlord ultimately served notice to cure and a notice of termination based on tenant's use of the premises for illegal activities (RPAPL 715(1); RPL 231). Those notices were followed by the instant holdover proceeding. Tenant responded with an action in Supreme Court seeking declaratory and injunctive relief and damages. That action is ongoing. Meanwhile, tenant moved to dismiss landlord's summary proceeding, and, in the alternative, to stay any trial pending resolution of the criminal charges against Sihpol.

In refusing to dismiss, the court acknowledged that RPAPL 715(1) and RPL 231 have most often been used to remove tenants engaged in illegal activities involving alcohol, narcotics, prostitution and gambling. The court nevertheless concluded that tenant's alleged acquiescence in Sihpol's activities might provide the basis for tenant's eviction under the statutes, but held that the question could only be resolved after trial. The court did, however, grant tenant's motion to stay the trial, holding that Sihpol should be presumed innocent until the close of his criminal trial.

COMMENT

Both RPAPL 715(1) and RPL 231 by their terms authorize termination of a lease when a tenant is engaged in any illegal trade, business, or manufacture. RPAPL 715 (2) and (3) address prior convictions of gambling and prostitution offenses, and courts have generally used the statutes to remove a tenant involved in these illegal activities. City of New York v. Goldman, 78 Misc.2d 693; 410 Lenox Ave Apts. Inc., v. Community II Supermarket Inc., 135 Misc.2d 628. In addition, courts consistently apply the statutes to cases involving drug dealing. RRW Realty Corp. v Flores, 179 Misc.2d 757.

However, the statutes themselves do not limit their application to those illegal activities detrimental to other tenants and the neighborhood, so courts have been willing to apply them to other unlawful businesses. One court held since that neither statute places any restrictions on the types of illegal businesses they proscribe, the prohibition against illegal use of premises applies to any enterprise that violates the New York Penal Code. In 1165 Broadway Corp. v. Dayana of N.Y. Sportswear, Inc., 166 Misc.2d 939, the court applied the statutes to a proceeding to terminate a lease where the premises were used to manufacture counterfeit trademark goods. Likewise, in Cohen v. Carrol, 63 Misc.2d 222, the court held that a landlord was entitled to possession because the subtenants were in the business of distributing obscene materials in violation of the Penal Code. Courts have applied the statutes even where the illegal business is not in violation of the Penal Code. In 47 East 74th Street Corp. v. Simon, 188 Misc. 885, the Appellate Term held that running a boarding house in a building restricted to private dwellings, in violation of the Multiple Dwellings Law, is an illegal business and will void a lease.

Not every unlawful activity will trigger application of the statute. Because the statutes refer to illegal businesses and trades, courts will generally decline to apply the statutes to a non-commercial activity. Thus, the commission of a crime unrelated to an illegal business in a leased premises is not cause for eviction. In 1895 Grand Concourse Associates, Petitioner, v. Theresa Ramos, 179 Misc. 2d 508, the personal use of cocaine in an apartment, without evidence of distribution, was not sufficient to trigger application of the statutes. Similarly, in Sherbal v. Epstein, 191 Misc. 543, the court held that the occupancy of a two-family home by three families, in violation of the Multiple Dwellings Law, did not constitute an illegal trade or business by the tenant, and hence did not authorize the landlord to evict the tenant.

There must also be a continuous use of the premises for illegal purposes for the statutes to apply. However, courts reach disparate conclusions about the amount of activity required to indicate customary and habitual use. Some courts have held that one or two incidents of criminal use do not establish the use of the premises for an illegal business. In Tenement House Department of City of New York v. McDevitt, 215 N.Y. 160, the arrests of two tenants of a tenement building for prostitution on the same day, each for their first offense, was not sufficient to infer the use of the entire building for purposes of prostitution. Likewise, in Janowitz v. Jenkins, 8 Misc. 2d 1077, a tenant's second conviction for possession of a lottery policy slip, did not indicate that his apartment was used for an illegal gambling business. However, other courts have inferred the use of a building for an unlawful trade with only evidence of an atmosphere of criminal use. In Kellner v. Cappellini, 135 Misc.2d 750, the presence of drug paraphernalia, as well as testimony from several neighbors regarding the reputation of the building, was sufficient to establish the use of an apartment building for the sale of drugs.

In Solow Building Co, landlord is seeking an eviction based on the alleged illegal activities of one employee of a business. It is unclear whether the unlawful activities of one employee will establish the use of a leased premises for an unlawful trade. Unlike Kellner, landlord will have difficulty establishing a general atmosphere of criminal activity surrounding the business. Also, like McDevitt, where not every tenant of the tenement house engaged in prostitution, not every employee of Banc of America Securities is accused of violating securities law. However, unlike McDevitt, the violations here appear to be ongoing.

Proposed amendments to RPAPL 715 and RPL 231 will entitle a landlord to possession when a leased premises is used “for purposes of prostitution, illegal gambling, illegal possession, manufacture or sale of a controlled substance or marijuana, or for any other illegal trade, activity, business, or manufacture.” The inclusion of the prohibition against any other illegal activity may broaden a landlord's right to possession, no longer limiting it to commercial unlawful activity. However, courts may also read the proposed amendment as limiting the statute's application to the areas of prostitution, gambling, and drug possession, manufacture, and dealing.