Landlord & Tenant

AppDiv, First Dept

(3-2 decision; majority opinion by Tom, J; dissenting opinion by Andrias, J.)

In an action by tenants to enforce the terms of a lease and rider incorporating the terms of a stipulated settlement agreement negotiated with landlord, landlord appealed from a Supreme Court order declaring the lease and rider enforceable. A divided Appellate Division reversed, holding that neither a tenant nor a landlord can enforce agreements that subvert protections afforded by the rent stabilization statute.

In 1981, tenants entered into a rent-stabilized lease for the subject apartment with landlord's predecessor. After current landlord acquired the building in 1991, landlord sought a DHCR determination that the apartment was not subject to rent stabilization. The parties entered into negotiations with respect to the rent-regulated status, and reached a settlement, incorporated into a rider to the lease commencing in 1995. The rider provided for payment of monthly rent higher than the lawful regulated rent and for tenant to have a perpetual right to renew the rent with a rent increase equal to the percentage authorized by the New York City Rent Guidelines Board. Subsequently, DHCR issued a determination that the premises were subject to rent regulation. In April 2002, landlord, seeking luxury deregulation of the apartment, sent tenants a DHCR income certification form because the rent now exceeded $2000 per month. Tenants brought this action seeking a declaration that the terms of the 1995 agreement were enforceable, thus barring luxury deregulation. Supreme Court awarded summary judgment to tenants.

In reversing, the Appellate Division majority started by noting that parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity of rent stabilization enforcement. Justice Tom, writing for the majority, relied on ' 2520.13 of the Rent Stabilization Code, which provides that an agreement by tenant to waive the benefit of a provision of the Code is void. The majority focused on the word 'void' in rejecting tenant's argument that in this case, the code provision was inapplicable because it was the tenant rather than the landlord who was seeking to enforce an agreement waiving a statutory protection. The majority emphasized that the law should be applied impartially, and that tenant should not be able to avail himself of the advantage of the statute when it furthers his interest, while avoiding its effect when the statute proves inconsistent with tenant's interests.

Justice Andrias, writing for the dissenters, concluded that the 1995 agreement should have been enforceable because nothing in the agreement deregulated the apartment. The dissenters found no basis for frustrating landlord and tenant from entering into an enforceable agreement giving tenant a perpetual right to renewal leases with rent increases that coincide with those set by the Rent Guidelines Board.

Commercial Tenant Lacks Standing to Challenge Assessment

Matter of Midway Shopping Center v. Town of Greenburgh

NYLJ 4/18/06, p. 20, col. 1

Supreme Ct., Westchester Cty

(Dickerson, J.)

In commercial tenant's proceeding pursuant to article 7 of the Real Property Tax Law, the school district and town sought to dismiss the petitions for lack of standing and lack of authority to bring the proceeding. The court granted the motions of the town and school district, holding that the lease did not confer on tenant standing to challenge tax assessments.

In 1982, commercial tenant entered into a 20-year lease covering 24.48% of a shopping center. The lease required tenant to pay a proportionate share of the real estate taxes due on the shopping center, and also conferred on tenant the right to require landlord, at tenant's expense, to contest or review the amount or validity of any such tax by appropriate legal proceedings. Begin-ning in 1997, tenant advised landlord that it was exercising its lease rights to require landlord to contest the amount of the real estate tax imposed on the leased premises. Landlord, however, took no steps to challenge the assessments, leading tenant to challenge the assessments before the Board of Assessment Review (BAR). Tenant followed similar procedures in subsequent years. Each time, the BAR denied the application for review of the real property tax assessment. Tenant then sought judicial review pursuant to article 7 of the Real Property Tax Law (RPTL).

In dismissing the petitions, the court concluded that tenant did not have standing to challenge the assessments. The court noted that the lease itself did not give the tenant the right to contest assessments in its own name, and that landlord had never given tenant authority to challenge the assessments directly.

COMMENT

A fractional lessee has standing to challenge a tax assessment if the lessee is obligated to pay all taxes levied against the lessor's undivided parcel. In Big 'V' Supermarkets v. Assessor of the Town of East Greenbush, 114 A.D. 2d 726, the court held that the lessee had standing to challenge the tax determination because it had agreed to pay all the assessed taxes. The lessee leased a portion of landlord's property and agreed in the lease, as an element of rent, to pay all taxes. The court allowed the lessee to challenge the assessor's assessment reasoning that standing to contest taxes is a benefit that comes along with the obligation to pay all the taxes.

A lessee who is only obligated to pay a portion of the taxes has standing to challenge a tax assessment if the lease authorizes the challenge. In Ames Department Store v. Assessor, 261 A.D. 2d 835, the court permitted a fractional lessee's challenge, concluding that he had standing pursuant to the lease agreement. The lessee occupied approximately 43% of a shopping mall and was obligated under the lease to pay a pro rata share of the property taxes. Additionally, the lease granted the lessee the right to contest the taxes. The court held that the lease provision conferred standing on the lessee.

In contradistinction, when the lessee is only obligated to pay taxes levied against a portion of the premises and did not contract for the right to challenge a tax assessment, the lessee will not have standing. In Matter of Waldbaum v. City of New York, 74 N.Y.2d 128, the Court of Appeals denied standing to a partial lessee that was obligated to pay a percentage of the taxes levied against the premises. When the assessment was increased the lessee initiated a proceeding. The court dismissed the proceeding because the lessee was not obligated to pay all the taxes levied against the premises assessed and did not have a contractual right to institute a proceeding.

Rent-Stabilized Tenant May Not Enforce Stipulated Settlement Agreement

Drucker v. Mauro

NYLJ 4/27/06, p. 18, col. 1

AppDiv, First Dept

(3-2 decision; majority opinion by Tom, J; dissenting opinion by Andrias, J.)

In an action by tenants to enforce the terms of a lease and rider incorporating the terms of a stipulated settlement agreement negotiated with landlord, landlord appealed from a Supreme Court order declaring the lease and rider enforceable. A divided Appellate Division reversed, holding that neither a tenant nor a landlord can enforce agreements that subvert protections afforded by the rent stabilization statute.

In 1981, tenants entered into a rent-stabilized lease for the subject apartment with landlord's predecessor. After current landlord acquired the building in 1991, landlord sought a DHCR determination that the apartment was not subject to rent stabilization. The parties entered into negotiations with respect to the rent-regulated status, and reached a settlement, incorporated into a rider to the lease commencing in 1995. The rider provided for payment of monthly rent higher than the lawful regulated rent and for tenant to have a perpetual right to renew the rent with a rent increase equal to the percentage authorized by the New York City Rent Guidelines Board. Subsequently, DHCR issued a determination that the premises were subject to rent regulation. In April 2002, landlord, seeking luxury deregulation of the apartment, sent tenants a DHCR income certification form because the rent now exceeded $2000 per month. Tenants brought this action seeking a declaration that the terms of the 1995 agreement were enforceable, thus barring luxury deregulation. Supreme Court awarded summary judgment to tenants.

In reversing, the Appellate Division majority started by noting that parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity of rent stabilization enforcement. Justice Tom, writing for the majority, relied on ' 2520.13 of the Rent Stabilization Code, which provides that an agreement by tenant to waive the benefit of a provision of the Code is void. The majority focused on the word 'void' in rejecting tenant's argument that in this case, the code provision was inapplicable because it was the tenant rather than the landlord who was seeking to enforce an agreement waiving a statutory protection. The majority emphasized that the law should be applied impartially, and that tenant should not be able to avail himself of the advantage of the statute when it furthers his interest, while avoiding its effect when the statute proves inconsistent with tenant's interests.

Justice Andrias, writing for the dissenters, concluded that the 1995 agreement should have been enforceable because nothing in the agreement deregulated the apartment. The dissenters found no basis for frustrating landlord and tenant from entering into an enforceable agreement giving tenant a perpetual right to renewal leases with rent increases that coincide with those set by the Rent Guidelines Board.

Commercial Tenant Lacks Standing to Challenge Assessment

Matter of Midway Shopping Center v. Town of Greenburgh

NYLJ 4/18/06, p. 20, col. 1

Supreme Ct., Westchester Cty

(Dickerson, J.)

In commercial tenant's proceeding pursuant to article 7 of the Real Property Tax Law, the school district and town sought to dismiss the petitions for lack of standing and lack of authority to bring the proceeding. The court granted the motions of the town and school district, holding that the lease did not confer on tenant standing to challenge tax assessments.

In 1982, commercial tenant entered into a 20-year lease covering 24.48% of a shopping center. The lease required tenant to pay a proportionate share of the real estate taxes due on the shopping center, and also conferred on tenant the right to require landlord, at tenant's expense, to contest or review the amount or validity of any such tax by appropriate legal proceedings. Begin-ning in 1997, tenant advised landlord that it was exercising its lease rights to require landlord to contest the amount of the real estate tax imposed on the leased premises. Landlord, however, took no steps to challenge the assessments, leading tenant to challenge the assessments before the Board of Assessment Review (BAR). Tenant followed similar procedures in subsequent years. Each time, the BAR denied the application for review of the real property tax assessment. Tenant then sought judicial review pursuant to article 7 of the Real Property Tax Law (RPTL).

In dismissing the petitions, the court concluded that tenant did not have standing to challenge the assessments. The court noted that the lease itself did not give the tenant the right to contest assessments in its own name, and that landlord had never given tenant authority to challenge the assessments directly.

COMMENT

A fractional lessee has standing to challenge a tax assessment if the lessee is obligated to pay all taxes levied against the lessor's undivided parcel. In Big 'V' Supermarkets v. Assessor of the Town of East Greenbush, 114 A.D. 2d 726, the court held that the lessee had standing to challenge the tax determination because it had agreed to pay all the assessed taxes. The lessee leased a portion of landlord's property and agreed in the lease, as an element of rent, to pay all taxes. The court allowed the lessee to challenge the assessor's assessment reasoning that standing to contest taxes is a benefit that comes along with the obligation to pay all the taxes.

A lessee who is only obligated to pay a portion of the taxes has standing to challenge a tax assessment if the lease authorizes the challenge. In Ames Department Store v. Assessor, 261 A.D. 2d 835, the court permitted a fractional lessee's challenge, concluding that he had standing pursuant to the lease agreement. The lessee occupied approximately 43% of a shopping mall and was obligated under the lease to pay a pro rata share of the property taxes. Additionally, the lease granted the lessee the right to contest the taxes. The court held that the lease provision conferred standing on the lessee.

In contradistinction, when the lessee is only obligated to pay taxes levied against a portion of the premises and did not contract for the right to challenge a tax assessment, the lessee will not have standing. In Matter of Waldbaum v. City of New York, 74 N.Y.2d 128, the Court of Appeals denied standing to a partial lessee that was obligated to pay a percentage of the taxes levied against the premises. When the assessment was increased the lessee initiated a proceeding. The court dismissed the proceeding because the lessee was not obligated to pay all the taxes levied against the premises assessed and did not have a contractual right to institute a proceeding.