Landlord & Tenant

Out-of-Possession Landlord Liable for Injuries Even Though Contractor Was Hired Without Landlord's Consent

Sanatass v. Consolidated

Investing Co.

NYLJ 4/25/08, p. 26, col. 5

Court of Appeals

(5-2 decision; majority opinion by Graffeo, J.; dissenting opinion by Smith, J.)

In an action by injured worker against landlord for injuries suffered in a worksite injury, worker appealed from a divided Appellate Division's affirmance of the Supreme Court's grant of landlord's motion to dismiss the complaint. The Court of Appeals reversed and reinstated the complaint, holding that section 240 of the Labor Law makes out-of-possession landlords liable for workplace injuries even when the contractor was hired without landlord's consent and in violation of the lease.

Landlord's lease agreement with tenant prohibited any changes to the premises without landlord's consent and required that tenant obtain landlord's prior written consent for all renovations, installations and alterations. The lease also required tenant to obtain insurance naming landlord as additional insured. Nevertheless, tenant hired a contractor to install a commercial air conditioning unit without ever seeking landlord's approval. In the course of the installation, a worker was nearly crushed when a manual material lift failed. The worker brought this personal injury action against landlord (among others), alleging a violation of section 240(1) of the Labor Law. The Supreme Court awarded summary judgment to landlord, and a divided Appellate Division affirmed, holding that landlord was not liable because the installation was performed without landlord's consent and in violation of the terms of the lease. The injured worker appealed.

In reversing, the Court of Appeals majority emphasized that Labor Law section 240(1) imposes absolute liability on owners and their agents for any breach of statutory duty that has proximately caused injury. The court held that landlord could escape liability only when neither the landlord nor the tenant invited the contractor to perform work on the premises. In this case, because the tenant employed the contractor to perform the work on the premises, there was significant nexus to impose absolute liability on the owner.

Judge Smith, dissenting for himself and Judge Read, emphasized that landlord could have done nothing more than it did to prevent the accident in this case, and suggested that the majority's result effectively treated the landlord as an insurer, contrary to the court's expressions in earlier cases.

 

Asbestos Removal Costs Do Not Qualify As Operating Expenses

P.A. Building Co. v. City of New York

NYLJ 5/2/08, p. 26, col. 1

Court of Appeals

(5-2 decision; majority opinion by Read, J.; dissenting opinion by Smith, J.)

In an action by landlord against the City of New York as tenant for amounts due under a rent escalation clause of a commercial lease, the
city appealed from the Appellate Division's order affirming Supreme Court's determination that asbestos removal costs were costs associated with the operation, maintenance, and repair of the building. The Court of Appeals modified, holding that within the meaning of the lease, asbestos removal costs were not included as operating expenses, and could not be included in determining the city's liability under the lease's rent escalation clause.

Landlord leased space in its office building to the city. By the terms of the lease, the city agreed to pay base rent, together with a pro rata share of any increase in the building's actual operating expenses. In 1985, seven years after execution of the initial lease, the city enacted Local Law 76, which established procedures for renovation or demolition projects that disturbed asbestos.

Pursuant to the escalation clause, landlord billed the city for a portion of increased building expenses attributable to asbestos abatement. When a protracted legal dispute developed over landlord's charges under the escalation clause, the city contested landlord's effort to include asbestos removal costs as operating expenses within the meaning of the lease's escalation clause. The Supreme Court and the Appellate Division both held that landlord was entitled to include asbestos removal costs as operating expenses, and the city appealed.

In modifying the Appellate Division's order, the Court of Appeals majority concluded that an asbestos hazard was not a condition in need of repair within the ordinary meaning of that word. Moreover, the court cited the lease provision including as operating expenses all costs 'generally recognized as constituting Operating Expenses of a building … ' and noted that at the time the lease was executed, asbestos removal was not generally recognized as an operating expense, because there was not yet any requirement that asbestos be removed.

Judge Smith, dissenting for himself and Judge Jones, agreed that asbestos removal costs were unforeseen at the time the lease was executed, but emphasized that the very purpose of the rent escalation clause was to protect against unforeseen developments that make running a building more expensive. In his view, regulatory changes like the one that mandated asbestos abatement, were among those developments contemplated by the rent escalation clause.

 

DHCR Lacks Authority to Excuse Tenant From Payment of Rent Arrears

Matter of IG Second Generation Partners LP v. New York State

Division of Housing And Community Renewal

NYLJ 5/7/08, p. 26, col. 1

Court of Appeals

(5-2 decision; majority opinion by Pigott, J.; dissenting opinion by Read, J.)

In landlord's article 78 proceeding challenging DHCR's determination cancelling tenant's rent arrears, DHCR appealed from the Appellate Division's affirmance of Supreme Court's grant of landlord's petition. The Court of Appeals affirmed, holding that once DHCR determined a fair market rent appeal in landlord's favor, DHCR lacked authority to excuse tenant from payment of rent arrears resulting from the determination in the fair market rent appeal.

Tenant's initial lease began on May 1, 1990, and specified a rent of
$830. Because tenant was the first after the preceding rent-controlled tenant vacated the premises, tenant had a right to file a fair market rent appeal. Five years later, a district rent administrator at DHCR determined that appeal in tenant's favor, setting the rent at $556.82 per month. The landlord filed a petition for administrative review. In the meantime, landlord collected the rent set by DHCR, indicating that it was doing so without prejudice to its right to collect the full lease rent if DHCR overturned the determination of the district rent administrator. Five years later, in 2000, DHCR granted the owner's petition in part, setting the fair market rent at $798.07. Tenant brought an article 78 proceeding challenging that determination, and Supreme Court, at the agency's request, remitted for further consideration. In 2004, the agency determined that the fair market rent was actually $1078.30 ' more than the amount set by landlord in the initial lease. At the same time, however, DHCR determined that tenant would be obligated to pay that rent only prospectively, effectively canceling $19,000 in rent arrears. DHCR cited undue hardship to the tenant as the basis for its decision. Landlord then brought this article 78 proceeding. The Supreme Court granted the petition and remitted to DHCR to calculate the exact amount owed. A divided Appellate Division affirmed, but granted DHCR leave to appeal.

In affirming, the Court of Appeals held that no statute or regulation permits DHCR to forgive rent arrears owed by a tenant as a consequence of its determination in a fair market rent appeal. The court held that the fact that a tenant owes substantial back rent as a result of a DHCR determination is insufficient to support a finding of undue hardship. As a result, DHCR had no equitable authority to excuse tenant from payment of those arrears. The court emphasized that several renewal leases had put tenant on notice of its potential liability for back rent, and that tenant had never submitted evidence of its inability to pay rent arrears.

Judge Read, dissenting for herself and Judge Ciparick, emphasized that an agency's interpretation of regulations administers is entitled to considerable deference. In this case, she conceded that the DHCR's interpretation of the applicable regulations was not the only possible interpretation of those regulations, but it was not an irrational or unreasonable one.

 

FHAA May Require Landlord To Accept Section 8 Vouchers

Freeland v. Sisao

NYLJ 4/10/08, p. 24, col. 3

U.S. Dist. Ct., E.D.N.Y.

(Sifton, J.)

In tenant's action alleging that landlord violated the federal Fair Housing Act Amendments Act (FHAA) by failing to accept her Section 8 subsidized housing voucher to reasonably accommodate her disability, landlord moved to dismiss for failure to state a claim. The court denied the motion, holding that landlord might be required to accept the voucher as a reasonable accommodation for tenant's disability.

Tenant is confined to her home because of congestive heart failure and morbid obesity. Tenant receives Social Security Disability payments of $735 per month, and her monthly rent is $793.37. In 2006, the New York City Housing Authority issued a Section 8 housing voucher to tenant, and tenant asked landlord to accept the voucher. One of landlord's partners, after consulting with another partner, declined to accept the voucher. Landlord brought a summary nonpayment proceeding, and tenant responded with this action alleging that landlord had violated the FHAA.

In denying landlord's motion for summary judgment, the court acknowledged that in Salute v. Stratford Greens Garden Apartments, 136 F.3d 293, the Second Circuit had rejected tenants' contention that landlords had violated the FHAA by failing to accept Section 8 voucher to accommodate their disabilities. But the court noted that the United States Supreme Court's opinion in US Airways, Inc. v. Barnett, 535 US 291, an employment discrimination case, had cast doubt on the vitality of Salute, and held that tenant might be able to establish that landlord's refusal to accept tenant's Section 8 voucher was based on discriminatory rather than economic reasons. As a result, the court denied landlord's summary judgment motion.

COMMENT

The Supreme Court's reasoning in US Airways, Inc. v. Barnett, 535 US 391, undermines the holding in Salute that the FHAA does not require a landlord to make reasonable accommodations for a disabled tenant's
economic needs. Under 42 U.S.C. '3604(f)(3)(B) of the FHAA, unlawful discrimination includes 'a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodation may be necessary to afford such person equal opportunity to use and enjoy a dwelling.' Salute held that accommodation of one's personal economic needs was outside the scope of the FHAA's reasonable accommodation requirement, even where the disabled person's poverty is the direct result of the disability. In Barnett, however, the Supreme Court held that for purposes of the Americans with Disabilities Act (ADA), a 'reasonable accommodation' is required for the immediate manifestations of the disability as well as the practical needs caused by the disability. In Barnett, a disabled airline cargo handler filed a suit under the ADA claiming that his employer violated the ADA's 'reasonable accommodation' requirement. The airline refused to provide the disabled employee with an exception to the company's seniority system so that he could remain in a less physically demanding position. The Supreme Court rejected the airline's position and permitted Barnett to pursue his claim. Thus, in contrast to Salute, Barnett suggests that a disabled person's request to accommodate an economic need may qualify as a 'reasonable accommodation' in cases where the economic need resulted from the practical impact of the disability.

The Ninth Circuit in Giebeler v. M & B Associates, 343 F.3d 1143, held that Barnett's construction of reasonable accommodation applies in the FHAA context. The court in Giebeler concluded that a disabled tenant's request for an exception to a no-cosigner policy fell within the meaning of 'reasonable accommodation' under FHAA. The disabled tenant could not meet the income requirements because his disability prevented him from working. The court found a direct causal link between the tenant's impairment, his inability to work and his inability to comply with the building's minimum income requirements. Thus, the Ninth Circuit concluded that relaxing the building's income policy was necessary in order to accommodate the practical economic needs caused by his disability.

Feeland's indication that landlords may have to accept Section 8 vouchers as a reasonable accommodation is consistent with Barnett and Giebeler. Barnett and Giebeler suggest that where tenants can demonstrate that their disability prevented them from working and earning a living, Section 8 vouchers may be a 'reasonable accommodation' under the FHAA because the accommodation stems from a disability-created need. Moreover, under recently enacted legislation by the New York City Council, Feeland's construction of the FHAA becomes unnecessary, at least within New York City. On March 26, 2008, the New York City Council passed legislation which bars landlords from rejecting prospective tenants based on their lawful source of income, including having governmental subsidies such as Section 8 federal housing assistance. Both the New Jersey Supreme Court and the Connecticut Supreme Court have concluded that the Section 8 statute does not expressly or impliedly preempt state legislation requiring landlords to honor Section 8 vouchers because there is no express peremptory language in the Section 8 statute and because the federal statute does not 'occupy the field' to the point of leaving no room for a state to supplement federal law. See Franklin Tower One v. N.M, 157 N.J. 602, (1999); Commission on Human Rights and Opportunities v. Sullivan Associates, 250 Conn. 763 (Conn. 1999).

Out-of-Possession Landlord Liable for Injuries Even Though Contractor Was Hired Without Landlord's Consent

Sanatass v. Consolidated

Investing Co.

NYLJ 4/25/08, p. 26, col. 5

Court of Appeals

(5-2 decision; majority opinion by Graffeo, J.; dissenting opinion by Smith, J.)

In an action by injured worker against landlord for injuries suffered in a worksite injury, worker appealed from a divided Appellate Division's affirmance of the Supreme Court's grant of landlord's motion to dismiss the complaint. The Court of Appeals reversed and reinstated the complaint, holding that section 240 of the Labor Law makes out-of-possession landlords liable for workplace injuries even when the contractor was hired without landlord's consent and in violation of the lease.

Landlord's lease agreement with tenant prohibited any changes to the premises without landlord's consent and required that tenant obtain landlord's prior written consent for all renovations, installations and alterations. The lease also required tenant to obtain insurance naming landlord as additional insured. Nevertheless, tenant hired a contractor to install a commercial air conditioning unit without ever seeking landlord's approval. In the course of the installation, a worker was nearly crushed when a manual material lift failed. The worker brought this personal injury action against landlord (among others), alleging a violation of section 240(1) of the Labor Law. The Supreme Court awarded summary judgment to landlord, and a divided Appellate Division affirmed, holding that landlord was not liable because the installation was performed without landlord's consent and in violation of the terms of the lease. The injured worker appealed.

In reversing, the Court of Appeals majority emphasized that Labor Law section 240(1) imposes absolute liability on owners and their agents for any breach of statutory duty that has proximately caused injury. The court held that landlord could escape liability only when neither the landlord nor the tenant invited the contractor to perform work on the premises. In this case, because the tenant employed the contractor to perform the work on the premises, there was significant nexus to impose absolute liability on the owner.

Judge Smith, dissenting for himself and Judge Read, emphasized that landlord could have done nothing more than it did to prevent the accident in this case, and suggested that the majority's result effectively treated the landlord as an insurer, contrary to the court's expressions in earlier cases.

 

Asbestos Removal Costs Do Not Qualify As Operating Expenses

P.A. Building Co. v. City of New York

NYLJ 5/2/08, p. 26, col. 1

Court of Appeals

(5-2 decision; majority opinion by Read, J.; dissenting opinion by Smith, J.)

In an action by landlord against the City of New York as tenant for amounts due under a rent escalation clause of a commercial lease, the
city appealed from the Appellate Division's order affirming Supreme Court's determination that asbestos removal costs were costs associated with the operation, maintenance, and repair of the building. The Court of Appeals modified, holding that within the meaning of the lease, asbestos removal costs were not included as operating expenses, and could not be included in determining the city's liability under the lease's rent escalation clause.

Landlord leased space in its office building to the city. By the terms of the lease, the city agreed to pay base rent, together with a pro rata share of any increase in the building's actual operating expenses. In 1985, seven years after execution of the initial lease, the city enacted Local Law 76, which established procedures for renovation or demolition projects that disturbed asbestos.

Pursuant to the escalation clause, landlord billed the city for a portion of increased building expenses attributable to asbestos abatement. When a protracted legal dispute developed over landlord's charges under the escalation clause, the city contested landlord's effort to include asbestos removal costs as operating expenses within the meaning of the lease's escalation clause. The Supreme Court and the Appellate Division both held that landlord was entitled to include asbestos removal costs as operating expenses, and the city appealed.

In modifying the Appellate Division's order, the Court of Appeals majority concluded that an asbestos hazard was not a condition in need of repair within the ordinary meaning of that word. Moreover, the court cited the lease provision including as operating expenses all costs 'generally recognized as constituting Operating Expenses of a building … ' and noted that at the time the lease was executed, asbestos removal was not generally recognized as an operating expense, because there was not yet any requirement that asbestos be removed.

Judge Smith, dissenting for himself and Judge Jones, agreed that asbestos removal costs were unforeseen at the time the lease was executed, but emphasized that the very purpose of the rent escalation clause was to protect against unforeseen developments that make running a building more expensive. In his view, regulatory changes like the one that mandated asbestos abatement, were among those developments contemplated by the rent escalation clause.

 

DHCR Lacks Authority to Excuse Tenant From Payment of Rent Arrears

Matter of IG Second Generation Partners LP v. New York State

Division of Housing And Community Renewal

NYLJ 5/7/08, p. 26, col. 1

Court of Appeals

(5-2 decision; majority opinion by Pigott, J.; dissenting opinion by Read, J.)

In landlord's article 78 proceeding challenging DHCR's determination cancelling tenant's rent arrears, DHCR appealed from the Appellate Division's affirmance of Supreme Court's grant of landlord's petition. The Court of Appeals affirmed, holding that once DHCR determined a fair market rent appeal in landlord's favor, DHCR lacked authority to excuse tenant from payment of rent arrears resulting from the determination in the fair market rent appeal.

Tenant's initial lease began on May 1, 1990, and specified a rent of
$830. Because tenant was the first after the preceding rent-controlled tenant vacated the premises, tenant had a right to file a fair market rent appeal. Five years later, a district rent administrator at DHCR determined that appeal in tenant's favor, setting the rent at $556.82 per month. The landlord filed a petition for administrative review. In the meantime, landlord collected the rent set by DHCR, indicating that it was doing so without prejudice to its right to collect the full lease rent if DHCR overturned the determination of the district rent administrator. Five years later, in 2000, DHCR granted the owner's petition in part, setting the fair market rent at $798.07. Tenant brought an article 78 proceeding challenging that determination, and Supreme Court, at the agency's request, remitted for further consideration. In 2004, the agency determined that the fair market rent was actually $1078.30 ' more than the amount set by landlord in the initial lease. At the same time, however, DHCR determined that tenant would be obligated to pay that rent only prospectively, effectively canceling $19,000 in rent arrears. DHCR cited undue hardship to the tenant as the basis for its decision. Landlord then brought this article 78 proceeding. The Supreme Court granted the petition and remitted to DHCR to calculate the exact amount owed. A divided Appellate Division affirmed, but granted DHCR leave to appeal.

In affirming, the Court of Appeals held that no statute or regulation permits DHCR to forgive rent arrears owed by a tenant as a consequence of its determination in a fair market rent appeal. The court held that the fact that a tenant owes substantial back rent as a result of a DHCR determination is insufficient to support a finding of undue hardship. As a result, DHCR had no equitable authority to excuse tenant from payment of those arrears. The court emphasized that several renewal leases had put tenant on notice of its potential liability for back rent, and that tenant had never submitted evidence of its inability to pay rent arrears.

Judge Read, dissenting for herself and Judge Ciparick, emphasized that an agency's interpretation of regulations administers is entitled to considerable deference. In this case, she conceded that the DHCR's interpretation of the applicable regulations was not the only possible interpretation of those regulations, but it was not an irrational or unreasonable one.

 

FHAA May Require Landlord To Accept Section 8 Vouchers

Freeland v. Sisao

NYLJ 4/10/08, p. 24, col. 3

U.S. Dist. Ct., E.D.N.Y.

(Sifton, J.)

In tenant's action alleging that landlord violated the federal Fair Housing Act Amendments Act (FHAA) by failing to accept her Section 8 subsidized housing voucher to reasonably accommodate her disability, landlord moved to dismiss for failure to state a claim. The court denied the motion, holding that landlord might be required to accept the voucher as a reasonable accommodation for tenant's disability.

Tenant is confined to her home because of congestive heart failure and morbid obesity. Tenant receives Social Security Disability payments of $735 per month, and her monthly rent is $793.37. In 2006, the New York City Housing Authority issued a Section 8 housing voucher to tenant, and tenant asked landlord to accept the voucher. One of landlord's partners, after consulting with another partner, declined to accept the voucher. Landlord brought a summary nonpayment proceeding, and tenant responded with this action alleging that landlord had violated the FHAA.

In denying landlord's motion for summary judgment, the court acknowledged that in Salute v. Stratford Greens Garden Apartments , 136 F.3d 293, the Second Circuit had rejected tenants' contention that landlords had violated the FHAA by failing to accept Section 8 voucher to accommodate their disabilities. But the court noted that the United States Supreme Court's opinion in US Airways, Inc. v. Barnett , 535 US 291, an employment discrimination case, had cast doubt on the vitality of Salute , and held that tenant might be able to establish that landlord's refusal to accept tenant's Section 8 voucher was based on discriminatory rather than economic reasons. As a result, the court denied landlord's summary judgment motion.

COMMENT

The Supreme Court's reasoning in US Airways, Inc. v. Barnett, 535 US 391, undermines the holding in Salute that the FHAA does not require a landlord to make reasonable accommodations for a disabled tenant's
economic needs. Under 42 U.S.C. '3604(f)(3)(B) of the FHAA, unlawful discrimination includes 'a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodation may be necessary to afford such person equal opportunity to use and enjoy a dwelling.' Salute held that accommodation of one's personal economic needs was outside the scope of the FHAA's reasonable accommodation requirement, even where the disabled person's poverty is the direct result of the disability. In Barnett, however, the Supreme Court held that for purposes of the Americans with Disabilities Act (ADA), a 'reasonable accommodation' is required for the immediate manifestations of the disability as well as the practical needs caused by the disability. In Barnett, a disabled airline cargo handler filed a suit under the ADA claiming that his employer violated the ADA's 'reasonable accommodation' requirement. The airline refused to provide the disabled employee with an exception to the company's seniority system so that he could remain in a less physically demanding position. The Supreme Court rejected the airline's position and permitted Barnett to pursue his claim. Thus, in contrast to Salute, Barnett suggests that a disabled person's request to accommodate an economic need may qualify as a 'reasonable accommodation' in cases where the economic need resulted from the practical impact of the disability.

The Ninth Circuit in Giebeler v. M & B Associates, 343 F.3d 1143, held that Barnett's construction of reasonable accommodation applies in the FHAA context. The court in Giebeler concluded that a disabled tenant's request for an exception to a no-cosigner policy fell within the meaning of 'reasonable accommodation' under FHAA. The disabled tenant could not meet the income requirements because his disability prevented him from working. The court found a direct causal link between the tenant's impairment, his inability to work and his inability to comply with the building's minimum income requirements. Thus, the Ninth Circuit concluded that relaxing the building's income policy was necessary in order to accommodate the practical economic needs caused by his disability.

Feeland's indication that landlords may have to accept Section 8 vouchers as a reasonable accommodation is consistent with Barnett and Giebeler. Barnett and Giebeler suggest that where tenants can demonstrate that their disability prevented them from working and earning a living, Section 8 vouchers may be a 'reasonable accommodation' under the FHAA because the accommodation stems from a disability-created need. Moreover, under recently enacted legislation by the New York City Council, Feeland's construction of the FHAA becomes unnecessary, at least within New York City. On March 26, 2008, the New York City Council passed legislation which bars landlords from rejecting prospective tenants based on their lawful source of income, including having governmental subsidies such as Section 8 federal housing assistance. Both the New Jersey Supreme Court and the Connecticut Supreme Court have concluded that the Section 8 statute does not expressly or impliedly preempt state legislation requiring landlords to honor Section 8 vouchers because there is no express peremptory language in the Section 8 statute and because the federal statute does not 'occupy the field' to the point of leaving no room for a state to supplement federal law. See Franklin Tower One v. N.M, 157 N.J. 602, (1999) ; Commission on Human Rights and Opportunities v. Sullivan Associates, 250 Conn. 763 (Conn. 1999) .