Landlord & Tenant

'Minor' Roommate Overcharge Held Curable

156-158 Second Ave. LLC v. Delfino

NYLJ 3/21/08, p. 30, col. 1

Civil Ct., N.Y. Cty

(Cohen, J.)

In a holdover proceeding, landlord sought possession of a rent-stabilized apartment based on tenant's overcharge of his roommate. The court dismissed the petition, holding that landlord's failure to serve a notice to cure mandated dismissal.

Tenant first rented the three-bedroom rent-stabilized apartment in 1993. Tenant renewed most recently in 2005 at a rent of $2,556.79. Both of tenant's roommates moved out of his apartment in 2005, and tenant then rented to successor roommates who were willing to pay more than half the rent in consideration of the right to occupy two of the three bedrooms. The most recent of these roommates paid $1,500 a month to tenant. Tenant fell into rent arrears in the summer of 1996, and landlord brought a nonpayment proceeding. The parties entered into a stipulation of settlement, but tenant defaulted under the stipulation, and brought six orders to show cause to stay execution of the warrant of eviction. In December 2006, on one of tenant's orders to show cause, tenant first discussed the rent-sharing arrangement, and the court informed tenant that the arrangement might violate Rent Stabilization Code section 2525.7. The parties entered into a new stipulation of settlement of the nonpayment proceeding.

In June 2007, landlord served a 10-day notice of termination of the tenancy, based on tenant's concession that his roommate had been paying $1,500 per month. Landlord contended that this arrangement constituted profiteering, and that because profiteering is an incurable offense, no notice to cure was necessary. The court dismissed the proceeding, holding that because the overcharge in this case was minor (amounting to a 17.33% overcharge), tenant's offense was curable. As a result, landlord's failure to serve a notice to cure required dismissal of the proceeding.

COMMENT

Under Rent Stabilization Code ' 2525.7, the tenant of a rent-stabilized apartment is prohibited from charging his roommate for more than that roommate's proportional share of the tenant's total rent. Although the statute does not specify a remedy, courts hold that a tenant who violates this statute by overcharging his roommate to an extent that rises to the level of 'rent profiteering' forfeits his tenancy rights and may be evicted without an opportunity to cure the violation. Thus, in West 148 LLC v Yonke, 11 Misc. 3d 40, where a tenant of a rent-stabilized apartment operated his extra rooms as a bed and breakfast and charged guests double the proportional share of the rent-stabilized rental amount, the court permitted the landlord to evict the tenant because the tenant was using the apartment for rent profiteering. Where regulated loft tenants engage in rent profiteering, courts by analogy look at ' 2525.7 to permit eviction. Hence, in BLF Realty Holding Corp. v. Kasher, 299 A.D.2d 87, where the tenant of a rent-controlled loft divided the premises into two distinct units and charged the subtenants triple the lawful rent, the court upheld landlord's eviction of tenant because the tenant's rent arbitrage scheme constituted rent profiteering. Although rent profiteering is not a curable violation, a tenant whose overcharging does not rise to the level of profiteering must receive notice of the violation and a ten-day cure period before the landlord commences eviction proceedings. Accordingly, in Roxborough Apts. Corp. v. Becker, 11 Misc. 3d 99, where the tenant overcharged his roommates by 7.5% more than their proportional share, the court ruled that this violation did not rise to the level of rent profiteering and thus did not allow eviction because the tenant did not receive notice of the violation and an opportunity to cure it. Such a tenant can cure the violation and thereby avoid eviction by returning the overcharged amounts to the overcharged roommate. Similarly, in 54 Greene St. Realty Corp. v. Shook, 8 A.D.3d 168, where the landlord failed to give the tenant notice and a cure period prior to commencing eviction proceedings, the court dismissed the landlord's eviction action on the condition that the tenant refund to the roommate all rents paid in excess of the 50% proportional share of the total rent-stabilized rental amount. The litigated cases thus far involve ' 2525.7 violations that are either of a very minor degree, in which case the tenant will receive an opportunity to cure the violation, or of a substantially high degree, in which case the tenant will be evicted without an opportunity to cure. Violations that are of an intermediate degree have not yet been litigated.

'Minor' Roommate Overcharge Held Curable

156-158 Second Ave. LLC v. Delfino

NYLJ 3/21/08, p. 30, col. 1

Civil Ct., N.Y. Cty

(Cohen, J.)

In a holdover proceeding, landlord sought possession of a rent-stabilized apartment based on tenant's overcharge of his roommate. The court dismissed the petition, holding that landlord's failure to serve a notice to cure mandated dismissal.

Tenant first rented the three-bedroom rent-stabilized apartment in 1993. Tenant renewed most recently in 2005 at a rent of $2,556.79. Both of tenant's roommates moved out of his apartment in 2005, and tenant then rented to successor roommates who were willing to pay more than half the rent in consideration of the right to occupy two of the three bedrooms. The most recent of these roommates paid $1,500 a month to tenant. Tenant fell into rent arrears in the summer of 1996, and landlord brought a nonpayment proceeding. The parties entered into a stipulation of settlement, but tenant defaulted under the stipulation, and brought six orders to show cause to stay execution of the warrant of eviction. In December 2006, on one of tenant's orders to show cause, tenant first discussed the rent-sharing arrangement, and the court informed tenant that the arrangement might violate Rent Stabilization Code section 2525.7. The parties entered into a new stipulation of settlement of the nonpayment proceeding.

In June 2007, landlord served a 10-day notice of termination of the tenancy, based on tenant's concession that his roommate had been paying $1,500 per month. Landlord contended that this arrangement constituted profiteering, and that because profiteering is an incurable offense, no notice to cure was necessary. The court dismissed the proceeding, holding that because the overcharge in this case was minor (amounting to a 17.33% overcharge), tenant's offense was curable. As a result, landlord's failure to serve a notice to cure required dismissal of the proceeding.

COMMENT

Under Rent Stabilization Code ' 2525.7, the tenant of a rent-stabilized apartment is prohibited from charging his roommate for more than that roommate's proportional share of the tenant's total rent. Although the statute does not specify a remedy, courts hold that a tenant who violates this statute by overcharging his roommate to an extent that rises to the level of 'rent profiteering' forfeits his tenancy rights and may be evicted without an opportunity to cure the violation. Thus, in West 148 LLC v Yonke, 11 Misc. 3d 40, where a tenant of a rent-stabilized apartment operated his extra rooms as a bed and breakfast and charged guests double the proportional share of the rent-stabilized rental amount, the court permitted the landlord to evict the tenant because the tenant was using the apartment for rent profiteering. Where regulated loft tenants engage in rent profiteering, courts by analogy look at ' 2525.7 to permit eviction. Hence, in BLF Realty Holding Corp. v. Kasher , 299 A.D.2d 87, where the tenant of a rent-controlled loft divided the premises into two distinct units and charged the subtenants triple the lawful rent, the court upheld landlord's eviction of tenant because the tenant's rent arbitrage scheme constituted rent profiteering. Although rent profiteering is not a curable violation, a tenant whose overcharging does not rise to the level of profiteering must receive notice of the violation and a ten-day cure period before the landlord commences eviction proceedings. Accordingly, in Roxborough Apts. Corp. v. Becker, 11 Misc. 3d 99, where the tenant overcharged his roommates by 7.5% more than their proportional share, the court ruled that this violation did not rise to the level of rent profiteering and thus did not allow eviction because the tenant did not receive notice of the violation and an opportunity to cure it. Such a tenant can cure the violation and thereby avoid eviction by returning the overcharged amounts to the overcharged roommate. Similarly, in 54 Greene St. Realty Corp. v. Shook, 8 A.D.3d 168, where the landlord failed to give the tenant notice and a cure period prior to commencing eviction proceedings, the court dismissed the landlord's eviction action on the condition that the tenant refund to the roommate all rents paid in excess of the 50% proportional share of the total rent-stabilized rental amount . The litigated cases thus far involve ' 2525.7 violations that are either of a very minor degree, in which case the tenant will receive an opportunity to cure the violation, or of a substantially high degree, in which case the tenant will be evicted without an opportunity to cure. Violations that are of an intermediate degree have not yet been litigated.