Landlord & Tenant

Offer of Preferential Rent Does Not Preclude Demand Of Full Rent

764 Madison Avenue LLC v. Risse

NYLJ 9/10/07, p. 18, col. 1

Civil Ct. (Wendt, J.)

In landlord's summary holdover proceeding based on tenant's refusal to sign renewal leases for the subject rent-stabilized apartments, tenant moved to dismiss on the ground that the lease renewal offer included a provision for illegal rent. The court denied the motion, concluding that landlord's prior offer of preferential rent for one of the two subsequently combined apartments did not preclude landlord from demanding the full legal rent upon renewal.

Tenant began occupancy of apartment 4F in 1978. In 1991, landlord rented apartment 4R to tenant, pursuant to a lease which gave tenant permission to combine the two apartments, and which offered tenant a 'preferential rent' for apartment 4R. At two-year intervals, landlord issued renewal leases for apartment 4R. Each renewal lease recited both the legal regulated rent and the preferential rent charged to tenant. By contrast, the leases for apartment 4F have not offered tenant preferential rent. In October 2006, landlord offered tenant two separate renewal leases for the two apartments. The offer for apartment 4R did not offer a preferential rent, but instead offered the premises at the maximum legal regulated rent. Tenant did not sign the renewal lease. Instead, tenant contended that when the two apartments were combined in 1991, the combined apartment had to be treated as a new single unit, and the maximum combined legal rent was the rent for apartment 4F plus the preferential rent for apartment 4R. On that basis, tenant contended that landlord's renewal lease provided for an illegal rent.

In rejecting tenant's argument, the court noted that in 2003, the Rent Stabilization Law was amended to permit a landlord to raise the preferential rent on any apartment to the previously established legal regulated rent, even with respect to existing tenants. The court rejected the argument that the new law did not apply to combined apartments like the ones involved in this case.

Acceptance of J-51 Benefits Does Not Preclude Luxury Decontrol

Roberts v. Tishman Speyer Properties LP

NYLJ 8/29/07, p. 27, col.1

Supreme Ct., N.Y. Cty

(Lowe, J.)

In a purported class action by a group of tenants in Stuyvesant Town and Peter Cooper Village, tenants sought damages for rent overcharges and a declaration that their apartments would continue to be rent-stabilized for so long as the owners of the buildings receive J-51 tax benefits. The court dismissed the action, concluding that acceptance of J-51 benefits did not preclude landlord from taking advantage of the luxury decontrol provisions in the Rent Stabilization Law and Code.

The subject buildings have been subject to rent stabilization law since 1974. In 1992, the then-owner of the buildings began accepting J-51 tax benefits. By the terms of its enactment, the J-51 program did 'not apply … to any existing dwelling which is not subject to the provisions of … the city rent stabilization law or to the private housing finance law.' NYC Administrative Code sec. 11-243(j)(1). In 1993, the legislature enacted the Rent Regulation Reform Act (RRRA), which provided for luxury deregulation of certain apartments. The statute provided that the luxury decontrol provisions 'shall not apply to housing accommodations which became subject to this law '. by virtue of receiving tax benefits … ' [pursuant to the J-51 program] Subsequently, the state Division of Housing and Community Renewal (DHCR) interpreted that language to preclude luxury decontrol only of those units where receipt of J-51 benefits is the sole reason that the accommodation is subject to rent regulation; luxury decontrol would be available with respect to units that had been subject to rent stabilization before landlord began accepting J-51 benefits. In 2000, DHCR amended the Rent Stabilization Code in accordance with its prior interpretation. Nevertheless, tenants in this action challenge DHCR's interpretation, and contend that landlord may not take advantage of the luxury decontrol provisions of the RRRA.

In dismissing their action, the court started by emphasizing that these buildings were subject to rent stabilization before landlord began participating in the J-51 program. The court then noted that DHCR's interpretation of the rent stabilization law was consistent with the purpose of the luxury decontrol law, which was to avoid providing benefits to high-income tenants. The court then noted that DHCR's interpretation of the statute was entitled to deference, and was consistent with ordinary principles of statutory interpretation. As a result, the court concluded that landlord was entitled to avail itself of the luxury decontrol provisions of the rent stabilization law.

Salvation Army Exempt from Rent Regulations

Parkside-Ten Eyck Tenants Association v. Salvation Army, Inc.

NYLJ 9/13/07, p. 27, col. 3

Supreme Ct., N.Y. Cty

(Tingling, J.)

In an action by tenants for a declaratory judgment requiring landlord Salvation Army to offer rent-stabilized renewal leases, the Salvation Army sought summary judgment declaring the residential leases exempt from the renewal obligations of the Emergency Tenant Protection Act (ETPA) and the Rent Stabilization Code. The court granted the Salvation Army's motion, holding that the statutes entitled landlord to terminate the leases.

Section 2520.11(j) of the Rent Stabilization Code exempts 'housing accommodations in buildings operated exclusively for charitable purposes on a non-profit basis.' Section 5(a)(1) of the ETPA includes a similar exemption. For more than 40 years, the Salvation Army has been operating the subject buildings to provide housing to women of low to moderate means. In 2006, however, the Salvation Army put the subject buildings up for sale and notified tenants that they would have to vacate within six months. Tenants then brought this action, contending that because the Salvation Army was attempting to sell the buildings, they were no longer being used exclusively or primarily for charitable purposes. Moreover, tenants argued that a number of rooms had been rented to university students for profit, again making the charitable exemptions inapplicable.

In rejecting tenants' arguments, the court noted that the test for applicability of the charitable exemption was whether accommodations are operated primarily for charitable purposes. The court noted that at the time the Salvation Army ordered tenants to vacate, it was clear that the primary use was for charitable purposes. Moreover, even if the Salvation Army profited from rentals within the building, that profit would not preclude the Salvation Army from relying on the charitable exemption , because the Army is entitled to generate profit to fund its charitable operations. As a result, the court awarded the Salvation Army a declaration that the residences are exempt from the rent stabilization laws.

Offer of Preferential Rent Does Not Preclude Demand Of Full Rent

764 Madison Avenue LLC v. Risse

NYLJ 9/10/07, p. 18, col. 1

Civil Ct. (Wendt, J.)

In landlord's summary holdover proceeding based on tenant's refusal to sign renewal leases for the subject rent-stabilized apartments, tenant moved to dismiss on the ground that the lease renewal offer included a provision for illegal rent. The court denied the motion, concluding that landlord's prior offer of preferential rent for one of the two subsequently combined apartments did not preclude landlord from demanding the full legal rent upon renewal.

Tenant began occupancy of apartment 4F in 1978. In 1991, landlord rented apartment 4R to tenant, pursuant to a lease which gave tenant permission to combine the two apartments, and which offered tenant a 'preferential rent' for apartment 4R. At two-year intervals, landlord issued renewal leases for apartment 4R. Each renewal lease recited both the legal regulated rent and the preferential rent charged to tenant. By contrast, the leases for apartment 4F have not offered tenant preferential rent. In October 2006, landlord offered tenant two separate renewal leases for the two apartments. The offer for apartment 4R did not offer a preferential rent, but instead offered the premises at the maximum legal regulated rent. Tenant did not sign the renewal lease. Instead, tenant contended that when the two apartments were combined in 1991, the combined apartment had to be treated as a new single unit, and the maximum combined legal rent was the rent for apartment 4F plus the preferential rent for apartment 4R. On that basis, tenant contended that landlord's renewal lease provided for an illegal rent.

In rejecting tenant's argument, the court noted that in 2003, the Rent Stabilization Law was amended to permit a landlord to raise the preferential rent on any apartment to the previously established legal regulated rent, even with respect to existing tenants. The court rejected the argument that the new law did not apply to combined apartments like the ones involved in this case.

Acceptance of J-51 Benefits Does Not Preclude Luxury Decontrol

Roberts v. Tishman Speyer Properties LP

NYLJ 8/29/07, p. 27, col.1

Supreme Ct., N.Y. Cty

(Lowe, J.)

In a purported class action by a group of tenants in Stuyvesant Town and Peter Cooper Village, tenants sought damages for rent overcharges and a declaration that their apartments would continue to be rent-stabilized for so long as the owners of the buildings receive J-51 tax benefits. The court dismissed the action, concluding that acceptance of J-51 benefits did not preclude landlord from taking advantage of the luxury decontrol provisions in the Rent Stabilization Law and Code.

The subject buildings have been subject to rent stabilization law since 1974. In 1992, the then-owner of the buildings began accepting J-51 tax benefits. By the terms of its enactment, the J-51 program did 'not apply … to any existing dwelling which is not subject to the provisions of … the city rent stabilization law or to the private housing finance law.' NYC Administrative Code sec. 11-243(j)(1). In 1993, the legislature enacted the Rent Regulation Reform Act (RRRA), which provided for luxury deregulation of certain apartments. The statute provided that the luxury decontrol provisions 'shall not apply to housing accommodations which became subject to this law '. by virtue of receiving tax benefits … ' [pursuant to the J-51 program] Subsequently, the state Division of Housing and Community Renewal (DHCR) interpreted that language to preclude luxury decontrol only of those units where receipt of J-51 benefits is the sole reason that the accommodation is subject to rent regulation; luxury decontrol would be available with respect to units that had been subject to rent stabilization before landlord began accepting J-51 benefits. In 2000, DHCR amended the Rent Stabilization Code in accordance with its prior interpretation. Nevertheless, tenants in this action challenge DHCR's interpretation, and contend that landlord may not take advantage of the luxury decontrol provisions of the RRRA.

In dismissing their action, the court started by emphasizing that these buildings were subject to rent stabilization before landlord began participating in the J-51 program. The court then noted that DHCR's interpretation of the rent stabilization law was consistent with the purpose of the luxury decontrol law, which was to avoid providing benefits to high-income tenants. The court then noted that DHCR's interpretation of the statute was entitled to deference, and was consistent with ordinary principles of statutory interpretation. As a result, the court concluded that landlord was entitled to avail itself of the luxury decontrol provisions of the rent stabilization law.

Salvation Army Exempt from Rent Regulations

Parkside-Ten Eyck Tenants Association v. Salvation Army, Inc.

NYLJ 9/13/07, p. 27, col. 3

Supreme Ct., N.Y. Cty

(Tingling, J.)

In an action by tenants for a declaratory judgment requiring landlord Salvation Army to offer rent-stabilized renewal leases, the Salvation Army sought summary judgment declaring the residential leases exempt from the renewal obligations of the Emergency Tenant Protection Act (ETPA) and the Rent Stabilization Code. The court granted the Salvation Army's motion, holding that the statutes entitled landlord to terminate the leases.

Section 2520.11(j) of the Rent Stabilization Code exempts 'housing accommodations in buildings operated exclusively for charitable purposes on a non-profit basis.' Section 5(a)(1) of the ETPA includes a similar exemption. For more than 40 years, the Salvation Army has been operating the subject buildings to provide housing to women of low to moderate means. In 2006, however, the Salvation Army put the subject buildings up for sale and notified tenants that they would have to vacate within six months. Tenants then brought this action, contending that because the Salvation Army was attempting to sell the buildings, they were no longer being used exclusively or primarily for charitable purposes. Moreover, tenants argued that a number of rooms had been rented to university students for profit, again making the charitable exemptions inapplicable.

In rejecting tenants' arguments, the court noted that the test for applicability of the charitable exemption was whether accommodations are operated primarily for charitable purposes. The court noted that at the time the Salvation Army ordered tenants to vacate, it was clear that the primary use was for charitable purposes. Moreover, even if the Salvation Army profited from rentals within the building, that profit would not preclude the Salvation Army from relying on the charitable exemption , because the Army is entitled to generate profit to fund its charitable operations. As a result, the court awarded the Salvation Army a declaration that the residences are exempt from the rent stabilization laws.