Landlord & Tenant

AppDiv, First Dept

(4-1 decision; memorandum opinion; dissenting opinion by Friedman, J.)

In a landlord's proceeding to a remove a rent-stabilized tenant on the ground that she no longer maintained the apartment as her primary residence, the landlord appealed from the Appellate Term's reversal of the Civil Court's award of possession to him. The Appellate Division affirmed, holding that the landlord had not established that the tenant had moved her primary residence to Florida.

Husband and wife moved into the subject apartment in 1959 and raised their children in the apartment, which they have never sublet. In 1995, the couple purchased a condominium in Florida, and the husband adopted the Florida condominium as his primary residence. The husband and wife filed joint tax returns listing the Florida condominium as their residence, and the couple does not file New York State income tax returns. Nevertheless, the wife has three active bank accounts in New York, votes in New York (albeit sometimes by absentee ballot), and is registered with Social Security in New York. Although their New York apartment has not been sublet, and remains fully furnished, the couple does not maintain cable television or an answering machine in New York, and they do retain both at the Florida condominium (with the wife's voice on the answering machine). On these facts, the landlord brought this summary proceeding seeking possession of the apartment. The Civil Court granted the landlord's petition, but the tenant successfully appealed to the Appellate Division, which held that the wife maintained her primary residence at the New York apartment.

In affirming, the Appellate Division majority relied on the couple's long-term history in the apartment, and on the devastating impact eviction would have on the wife and her family, who return to their childhood home to visit. The court held that filing of tax returns was merely one of several factors to consider in determining the wife's primary residence, and noted that it was entirely proper for husband and wife to maintain separate primary residences. The couple's decision to spend winters in Florida should not, in the majority's view, deprive the wife of her New York residence.

Justice Friedman, dissenting, emphasized the trial court's assessment of witness credibility, and noted indications in the record that husband and wife were seeking to tailor their testimony to establish that wife resided in New York for at least 183 days per year. He also emphasized the incongruity of concluding that husband's primary residence was Florida and the wife's was New York despite the couple's testimony that they spent only 1 week apart each year.

COMMENT

To prevent the abuse of rent regulation laws, the Rent Stabilization Code provides that a landlord may refuse to renew a lease when the apartment is not occupied by the tenant as his primary residence. 9 N.Y.C.R.R. ' 2524.4(c). In seeking a judgment declaring that the tenant is not entitled to a renewal, the landlord must establish by a preponderance of the evidence that the tenant maintained his primary residence elsewhere. See 318 E.93 L.L.C. v. Ward, 276 A.D.2d 277 (court found for tenant when the evidence presented equally supported both landlord and tenant's position). While the Code lists the types of evidence that are indicative of primary residence, such as the address listed on a tax return, motor vehicle registration, driver's license, voters registration, or other document filed with a public agency, the Code indicates that no single factor is determinative. 9 N.Y.C.R.R. ' 2520.6(u). In the absence of statutory guidance on the evidence required to establish a tenant's primary residence the court generally protects tenants' right to renew by focusing on the factors which establish a physical connection with the apartment in question, rather than on factors which indicate that the tenant resides elsewhere. See Village Dev. Assocs. v. Walker, 282 A.D.2d 369 (court focused on tenant's voter registration, bank accounts, and mail received at apartment in New York, to find for tenant, who had filed a tax return at an address in New Jersey); Four Winds Assocs. v. Rachlin, 248 A.D.2d 352 (court focused on fact that tenant paid taxes, had a drivers license, received ongoing medical care, and kept her clothes in New York, to find for tenant, who owned a condominium in Florida); see also, 23 Jones St. Assocs. v. Keebler-Beretta, 284 A.D.2d 109; West 157th Street Assocs. v. Sassoonian, 156 A.D.2d 137. Only when the evidence overwhelmingly shows that the tenant has consistently maintained primary residence elsewhere do landlords prevail. See Claridge Gardens v. Menotti, 160 A.D.2d 544 (court found for landlord when evidence showed that tenant had resided in Scotland for 13 years during the lease term); Berwick Land Corp. v. Mucelli, 249 A.D.2d 18 (court found for landlord when evidence showed that tenant had not resided in apartment for 19 years, and then had not resided in the apartment for the first 16 months of the most recent 24-month renewal period).

The Appellate Divisions generally defer to the trial court's primary residence determination unless it is obvious that the trial court's conclusion is not based on a “fair interpretation of the evidence.” See 304 East 34th St. Co. v. Habeeb, 248 A.D.2d 50. In Habeeb, the Appellate Division overturned the Appellate Term's reversal of the Civil Court's decision, stating that the primary residence determination made by the Civil Court in favor of the tenant was based upon a fair interpretation of the evidence presented. The Appellate Division has indicated that the practice of deferring to the trial court is especially important when the primary residence determination turns on assessing the credibility of the testimony of witnesses. See Claridge Gardens, 160 A.D.2d 544 (in refusing to overturn the Civil Court's ruling for the landlord, the court stated that the attempts by the tenant to explain why he did not primarily reside in the apartment in question for 13 years was a question of fact and credibility for the trial court to decide). The Glenbriar court took a position that was inconsistent with this general practice of deference, and held for tenant despite the presence of sufficient facts to support the trial court's finding for the landlord.

Lease Provisions Waive Constructive Eviction Claim for Post-9/11 Conditions

Trinity Centre, LLC v. all Street Correspondents, Inc.

NYLJ 9/28/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Acosta, J.)

In an action by a commercial landlord seeking rent from the tenant and tenant's guarantor, the landlord moved for summary judgment. The court granted the motion on the issue of liability, holding that provisions in the lease waived any constructive eviction claim for conditions arising out of the terrorist attack of 9/11.

On Aug. 4, 2000, the tenant executed a 5-year lease for commercial space on the 17th floor of 111 Broadway. One of the tenant's principals executed a guaranty of the tenant's obligations. The lease provided that the tenant waive the provisions of section 227 of the Real Property Law, and agree that the provisions of the lease would govern instead. The lease provided that in the event of damage to the space by fire or casualty, tenant could not terminate the lease, but was instead relieved of the obligation to pay rent until the premises were restored. The lease also required landlord to make repairs with all reasonable expedition, and provided that the tenant's liability for rent would resume 5 days after notice from the landlord that the premises were substantially ready for the tenant's occupancy. The lease also provided that notice to tenant was to be by registered or certified mail, return receipt requested. After the attack of 9/11, electrical, telephone and internet service to the building were disrupted. On Oct. 6, 2001, the landlord sent the tenant a letter indicating a plan to have the building in full operation on Oct. 10, and instructing tenant to plan to resume the tenancy at that time. Landlord sent the notice by certified mail, but did not send it “return receipt requested.” On Oct. 22, the tenant vacated the space, and on Nov. 19, gave notice to the landlord that it had vacated the premises. The landlord rejected surrender of the lease on several occasions. On Jan. 17, 2002, the landlord served a 10-day notice seeking payment of rent appears, and then brought this action seeking rent from the tenant and from the guarantor. The landlord sought summary judgment.

In granting the landlord's motion on the issue of liability, the court noted first that access restrictions imposed by the City and the United States Army did not constitute an actual eviction. The court then held that tenant had waived any claim for constructive eviction in the event of a casualty. Here, such a casualty occurred, and the lease provisions became operative. Issues about when the premises became habitable were at best issues of fact that might have an impact on damages, but not on liability. In addition, the court rejected the tenant's argument that the landlord's improper notice excused the tenant from further performance, holding instead that questions about defects in the notice raised issues of fact about when the tenants became obligated to resume paying under the lease. As a result, there were no material questions about the tenant's liability.

Successor Owner Has Private Right of Action to Recover Security Deposits

Gerel Corp. v. Prime Eastside Holdings, LLC

NYLJ 10/26/04, p. 18, col. 1

AppDiv, First Dept

(Opinion by Sullivan, J.)

In an action by building owners to recover damages from a defaulting net lessee for failure to turn over tenants' security deposits, net lessee appealed from Supreme Court's grant of summary judgment to building owners. The Appellate Division affirmed, holding that General Obligations Law section 7-105 creates a private right of action for successor owners to recover security deposits paid by tenants.

In 2001, owners of three separate mixed-use buildings entered into 50-year net leases with Prime as the net lessee. The net leases obligated Prime to provided and replenish letters of credit to secure its rent obligations. At the time the net leases were signed, owners turned over tenant security deposits to Prime. By 2002, however, Prime had defaulted on its leasehold obligations, and subsequently failed to replenish the letters of credit. Based on these defaults, Prime surrendered the properties back to owners, but returned to owners only a fraction of the security deposits originally turned over to Prime by the owners. Prime asserted a right to setoff against monies it was allegedly owed for prepaid taxes and water charges. Owners then brought this action for unpaid rent and for return of the security deposits. Supreme Court granted owners' summary judgment motion with respect to the security deposits, holding that General Obligations Law, section 7-105, which requires an owner to turn over security deposits to a grantee upon transfer of ownership, creates a private right of action for successor owners. Prime, the net lessee, appealed, contending that the statute provides only a criminal penalty, and not a private right of action.

In affirming, the Appellate Division relied on both legislative history and decisional law to conclude that the statute does create a private right of action on behalf of successor owners. In particular, the court noted the importance of the private right of action in helping to assure that tenants would be able to assure return of their deposits from the current owners. Indeed, the court indicated that because section 7-103(1) of the General Obligations Law makes security deposits trust funds, the current owners had not only a right, but a fiduciary duty to seek and obtain return of the security deposits.

Tenant with Husband in Florida Has Primary Residence in New York

Glenbriar Co. v. Lipsman

NYLJ 10/25/04, p. 27, col. 2

AppDiv, First Dept

(4-1 decision; memorandum opinion; dissenting opinion by Friedman, J.)

In a landlord's proceeding to a remove a rent-stabilized tenant on the ground that she no longer maintained the apartment as her primary residence, the landlord appealed from the Appellate Term's reversal of the Civil Court's award of possession to him. The Appellate Division affirmed, holding that the landlord had not established that the tenant had moved her primary residence to Florida.

Husband and wife moved into the subject apartment in 1959 and raised their children in the apartment, which they have never sublet. In 1995, the couple purchased a condominium in Florida, and the husband adopted the Florida condominium as his primary residence. The husband and wife filed joint tax returns listing the Florida condominium as their residence, and the couple does not file New York State income tax returns. Nevertheless, the wife has three active bank accounts in New York, votes in New York (albeit sometimes by absentee ballot), and is registered with Social Security in New York. Although their New York apartment has not been sublet, and remains fully furnished, the couple does not maintain cable television or an answering machine in New York, and they do retain both at the Florida condominium (with the wife's voice on the answering machine). On these facts, the landlord brought this summary proceeding seeking possession of the apartment. The Civil Court granted the landlord's petition, but the tenant successfully appealed to the Appellate Division, which held that the wife maintained her primary residence at the New York apartment.

In affirming, the Appellate Division majority relied on the couple's long-term history in the apartment, and on the devastating impact eviction would have on the wife and her family, who return to their childhood home to visit. The court held that filing of tax returns was merely one of several factors to consider in determining the wife's primary residence, and noted that it was entirely proper for husband and wife to maintain separate primary residences. The couple's decision to spend winters in Florida should not, in the majority's view, deprive the wife of her New York residence.

Justice Friedman, dissenting, emphasized the trial court's assessment of witness credibility, and noted indications in the record that husband and wife were seeking to tailor their testimony to establish that wife resided in New York for at least 183 days per year. He also emphasized the incongruity of concluding that husband's primary residence was Florida and the wife's was New York despite the couple's testimony that they spent only 1 week apart each year.

COMMENT

To prevent the abuse of rent regulation laws, the Rent Stabilization Code provides that a landlord may refuse to renew a lease when the apartment is not occupied by the tenant as his primary residence. 9 N.Y.C.R.R. ' 2524.4(c). In seeking a judgment declaring that the tenant is not entitled to a renewal, the landlord must establish by a preponderance of the evidence that the tenant maintained his primary residence elsewhere. See 318 E.93 L.L.C. v. Ward, 276 A.D.2d 277 (court found for tenant when the evidence presented equally supported both landlord and tenant's position). While the Code lists the types of evidence that are indicative of primary residence, such as the address listed on a tax return, motor vehicle registration, driver's license, voters registration, or other document filed with a public agency, the Code indicates that no single factor is determinative. 9 N.Y.C.R.R. ' 2520.6(u). In the absence of statutory guidance on the evidence required to establish a tenant's primary residence the court generally protects tenants' right to renew by focusing on the factors which establish a physical connection with the apartment in question, rather than on factors which indicate that the tenant resides elsewhere. See Village Dev. Assocs. v. Walker, 282 A.D.2d 369 (court focused on tenant's voter registration, bank accounts, and mail received at apartment in New York, to find for tenant, who had filed a tax return at an address in New Jersey); Four Winds Assocs. v. Rachlin, 248 A.D.2d 352 (court focused on fact that tenant paid taxes, had a drivers license, received ongoing medical care, and kept her clothes in New York, to find for tenant, who owned a condominium in Florida); see also, 23 Jones St. Assocs. v. Keebler-Beretta, 284 A.D.2d 109; West 157th Street Assocs. v. Sassoonian, 156 A.D.2d 137. Only when the evidence overwhelmingly shows that the tenant has consistently maintained primary residence elsewhere do landlords prevail. See Claridge Gardens v. Menotti, 160 A.D.2d 544 (court found for landlord when evidence showed that tenant had resided in Scotland for 13 years during the lease term); Berwick Land Corp. v. Mucelli, 249 A.D.2d 18 (court found for landlord when evidence showed that tenant had not resided in apartment for 19 years, and then had not resided in the apartment for the first 16 months of the most recent 24-month renewal period).

The Appellate Divisions generally defer to the trial court's primary residence determination unless it is obvious that the trial court's conclusion is not based on a “fair interpretation of the evidence.” See 304 East 34th St. Co. v. Habeeb, 248 A.D.2d 50. In Habeeb, the Appellate Division overturned the Appellate Term's reversal of the Civil Court's decision, stating that the primary residence determination made by the Civil Court in favor of the tenant was based upon a fair interpretation of the evidence presented. The Appellate Division has indicated that the practice of deferring to the trial court is especially important when the primary residence determination turns on assessing the credibility of the testimony of witnesses. See Claridge Gardens, 160 A.D.2d 544 (in refusing to overturn the Civil Court's ruling for the landlord, the court stated that the attempts by the tenant to explain why he did not primarily reside in the apartment in question for 13 years was a question of fact and credibility for the trial court to decide). The Glenbriar court took a position that was inconsistent with this general practice of deference, and held for tenant despite the presence of sufficient facts to support the trial court's finding for the landlord.

Lease Provisions Waive Constructive Eviction Claim for Post-9/11 Conditions

Trinity Centre, LLC v. all Street Correspondents, Inc.

NYLJ 9/28/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Acosta, J.)

In an action by a commercial landlord seeking rent from the tenant and tenant's guarantor, the landlord moved for summary judgment. The court granted the motion on the issue of liability, holding that provisions in the lease waived any constructive eviction claim for conditions arising out of the terrorist attack of 9/11.

On Aug. 4, 2000, the tenant executed a 5-year lease for commercial space on the 17th floor of 111 Broadway. One of the tenant's principals executed a guaranty of the tenant's obligations. The lease provided that the tenant waive the provisions of section 227 of the Real Property Law, and agree that the provisions of the lease would govern instead. The lease provided that in the event of damage to the space by fire or casualty, tenant could not terminate the lease, but was instead relieved of the obligation to pay rent until the premises were restored. The lease also required landlord to make repairs with all reasonable expedition, and provided that the tenant's liability for rent would resume 5 days after notice from the landlord that the premises were substantially ready for the tenant's occupancy. The lease also provided that notice to tenant was to be by registered or certified mail, return receipt requested. After the attack of 9/11, electrical, telephone and internet service to the building were disrupted. On Oct. 6, 2001, the landlord sent the tenant a letter indicating a plan to have the building in full operation on Oct. 10, and instructing tenant to plan to resume the tenancy at that time. Landlord sent the notice by certified mail, but did not send it “return receipt requested.” On Oct. 22, the tenant vacated the space, and on Nov. 19, gave notice to the landlord that it had vacated the premises. The landlord rejected surrender of the lease on several occasions. On Jan. 17, 2002, the landlord served a 10-day notice seeking payment of rent appears, and then brought this action seeking rent from the tenant and from the guarantor. The landlord sought summary judgment.

In granting the landlord's motion on the issue of liability, the court noted first that access restrictions imposed by the City and the United States Army did not constitute an actual eviction. The court then held that tenant had waived any claim for constructive eviction in the event of a casualty. Here, such a casualty occurred, and the lease provisions became operative. Issues about when the premises became habitable were at best issues of fact that might have an impact on damages, but not on liability. In addition, the court rejected the tenant's argument that the landlord's improper notice excused the tenant from further performance, holding instead that questions about defects in the notice raised issues of fact about when the tenants became obligated to resume paying under the lease. As a result, there were no material questions about the tenant's liability.

Successor Owner Has Private Right of Action to Recover Security Deposits

Gerel Corp. v. Prime Eastside Holdings, LLC

NYLJ 10/26/04, p. 18, col. 1

AppDiv, First Dept

(Opinion by Sullivan, J.)

In an action by building owners to recover damages from a defaulting net lessee for failure to turn over tenants' security deposits, net lessee appealed from Supreme Court's grant of summary judgment to building owners. The Appellate Division affirmed, holding that General Obligations Law section 7-105 creates a private right of action for successor owners to recover security deposits paid by tenants.

In 2001, owners of three separate mixed-use buildings entered into 50-year net leases with Prime as the net lessee. The net leases obligated Prime to provided and replenish letters of credit to secure its rent obligations. At the time the net leases were signed, owners turned over tenant security deposits to Prime. By 2002, however, Prime had defaulted on its leasehold obligations, and subsequently failed to replenish the letters of credit. Based on these defaults, Prime surrendered the properties back to owners, but returned to owners only a fraction of the security deposits originally turned over to Prime by the owners. Prime asserted a right to setoff against monies it was allegedly owed for prepaid taxes and water charges. Owners then brought this action for unpaid rent and for return of the security deposits. Supreme Court granted owners' summary judgment motion with respect to the security deposits, holding that General Obligations Law, section 7-105, which requires an owner to turn over security deposits to a grantee upon transfer of ownership, creates a private right of action for successor owners. Prime, the net lessee, appealed, contending that the statute provides only a criminal penalty, and not a private right of action.

In affirming, the Appellate Division relied on both legislative history and decisional law to conclude that the statute does create a private right of action on behalf of successor owners. In particular, the court noted the importance of the private right of action in helping to assure that tenants would be able to assure return of their deposits from the current owners. Indeed, the court indicated that because section 7-103(1) of the General Obligations Law makes security deposits trust funds, the current owners had not only a right, but a fiduciary duty to seek and obtain return of the security deposits.