Landlord & Tenant

Rent Obligation Independent of Landlord's Obligation to Maintain

91 East Main Street Realty Corp. v. Angelic Creations by Lucia

NYLJ 4/30/09, p. 42, col. 2

AppTerm, 9th and 10th Districts

(memorandum opinion)

In a commercial summary nonpayment proceeding, tenant appealed from Justice Court's award of possession and back rent. The Appellate Term affirmed, holding that tenant's obligation to pay rent was independent of landlord's obligations to make repairs or provide essential services.

Landlord brought this nonpayment proceeding, which was adjourned twice at tenant's request, and a third time to permit tenant an additional opportunity to obtain counsel. Justice Court denied tenant's request for a fourth adjournment to permit tenant to obtain counsel, but permitted a friend of tenant's to assist in the litigation. Tenant conceded that it had not paid rent, but argued instead that landlord had breached the lease. Justice Court refused to permit tenant to raise claims of breach, informing tenant's principal that she could raise such claims in another forum. The court then awarded landlord possession and back rent, and the tenant appealed.

In affirming, the Appellate Term held that in the absence of a clear intention to the contrary, a commercial tenant's obligation to pay rent is independent of landlord's obligation to make repairs or provide essential services. Tenant never alleged that the parties intended to the contrary, so that landlord's alleged breaches did not excuse tenant's failure to pay rent. Accordingly, landlord was entitled to possession and back rent.

Documentation Sufficient to Sustain Major Capital Improvement Increase

Jemrock Realty Co, LLC v. Krugman

NYLJ 5/20/09, p. 30, col. 1

AppDiv, First Dept.

(3-2 decision; majority opinion by McGuire, J; dissenting opinion by Renwick, J.)

In landlord's action for possession and back rent, tenant appealed from the Appellate Term's modification of a Civil Court order that had directed judgment for tenant on the ground that landlord had not established a right to an increase for major capital improvements. The Appellate Term awarded landlord a judgment of possession, and a divided Appellate Division affirmed, holding that undisputed invoices from a contractor documenting $50,000 in construction work provided a sufficient predicate for the major capital improvement increase.

A rent-regulated tenant vacated the subject apartment in January, 2004. The apartment was then in poor condition, and landlord's managing agent prepared a “punch list” for the apartment that included, among other items, installing new ceramic flooring, kitchen cabinets, sink, appliances, and counter tops in the kitchen; new sinks, toilets and fixtures in both bathrooms; rewiring and replumbing the entire apartment; replacing moldings and lighting fixtures; refinishing hardwood floors; and plastering and painting of the apartment. Landlord and a contractor agreed on a price of $50,000 for the work, and landlord paid for the work. The contractor's invoices matched the items on the punch list. When landlord later entered into a lease with tenant for a period beginning on April 1, landlord attached to the lease a certification calculating the rent based on increases permitted under the Rent Stabilization Law. On top of a vacancy increase and an increase for each year of the prior tenant's occupancy, landlord included an increase for the renovations the contractor had performed. (9 NYCRR 2522.4[s]). With these increases, the monthly rent was listed as $3,600, which took the apartment outside the scope of the rent stabilization law.

In October 2005, landlord brought this action seeking rent arrears and possession based on tenant's failure to pay, and tenant contended that the rent was illegal because the renovations did not qualify as “improvements” that would support a rent increase. Tenant also contended that landlord had breached the warranty of habitability. After a non-jury trial, Civil Court concluded that landlord's evidence of improvements ' the punch list and the invoices ' did not adequately distinguish between ordinary repairs and capital improvements. As a result, the court concluded that landlord had not established an entitlement to an increase for improvements, and the court concluded that tenant was entitled to a judgment for a rent overcharge. Tenant appealed to the Appellate Term from Civil Court's determination that the overcharge was not willful, and landlord cross-appealed. The Appellate Term modified, holding that landlord had adequately documented the improvements. Tenant appealed.

In affirming, the Appellate Division majority held that when landlord provides adequate evidence of expenditure of money on both repairs and improvements to an apartment, landlord is not required to itemize the costs in order to establish an entitlement to an increase for capital improvements. The majority emphasized that DHCR has taken the view that when extensive renovation work is performed, landlord need not submit evidence differentiating the cost of repairs from the cost of improvements. The majority concluded that DHCR's position was entitled to deference, and also noted that in this case, the apartment would remain subject to rent stabilization only if more than $20,000 of the expenditures were for repairs rather than improvements.

Justice Renwick, dissenting, emphasized that testimony at trial had established that the apartment was in very poor condition at the time the prior tenant left, requiring replacement of walls due to prior neglect. In light of these facts, which established the need for extensive repairs for which no increase was available, Justice Renwick contended that the landlord was obligated to itemize expenditures to establish an entitlement to an increase for improvements.

Guarantor Not Liable Once Original Lease Expired

Lo-Ho LLC v. Batista

NYLJ 5/26/09, p. 25, col. 5

AppDiv, First Dept.

(memorandum opinion)

In landlord's action to recover on a guaranty of a commercial lease, landlord appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that the guaranty did not extend to a purported “extension” of the original lease.

Landlord and tenant entered into a five-year lease in April 2000. Guarantor signed a personal guarantee. The guaranty provided that it would remain “in full force and effect as to any renewal, change or extension of the lease.” The original lease expired at the end of March, 2005. On April 25, 2005, landlord and tenant entered into a new agreement, designated an “Extension of Lease,” for an additional five-year term. The new agreement included a number of provisions different from those in the original lease, including a requirement that tenant pay real estate taxes in monthly installments, and a rent concession in return for specified improvements to be made by tenant. Guarantor did not execute a new guaranty. When tenant defaulted on the 2005 lease, landlord sought to recover on the guarantee. Supreme Court dismissed the complaint, and landlord appealed.

In affirming, the Appellate Division rejected landlord's argument that the 2005 lease was an extension of the 2000 lease. The court noted that the 2000 lease had expired in March 2005, and the guarantee expired with it. In the court's words, “[a]n expired lease cannot be extended.” Subsequent execution of the April 2005 agreement did not resuscitate the guaranty. The court also emphasized that the new terms in the 2005 agreement, which included higher rent, would have significantly expanded guarantor's liability without the guarantor's consent.

 

Rent Stabilization Supersedes Conditions in Decontrol Order

Matter of Sandow v. DHCR

NYLJ 6/10/09, p. 27, col. 1

Supreme Ct., N.Y. Cty

(Figueroa, J.)

In an article 78 proceeding, rent-stabilized tenants challenged DHCR's determination that their apartments could not eventually revert to rent-controlled status. Supreme Court denied the petition and dismissed the proceeding, holding that enactment of the rent stabilization scheme superseded any impact of previous decontrol orders that suggested that rent control might be re-imposed if certain conditions were to occur.

The subject apartments were converted from rooming house units to single-family occupancy units in 1957. As a result of that conversion, the apartments were decontrolled. The decontrol orders, however, provided that decontrol was effective only so long as the unit is “rented for single-family occupancy.” Tenants were not in occupancy at that time, but when they took occupancy, the apartments were subject to rent stabilization protections. Prior landlord sought to remove them to use the apartments for his personal residence. Tenants challenged his right, contending that under the 1957 order, if landlord no longer rented the apartments for single-family occupancy, the apartments would become subject to rent control. Prior landlord abandoned his effort, and current landlord offered tenants rent-stabilized leases. Tenants nevertheless sought to clarify their status with DHCR, and DHCR determined that their apartments could never revert to rent control. Tenants then brought this article 78 proceeding.

In dismissing the proceeding, Supreme Court indicated that when, in 1974, the state legislature extended rent stabilization protection to previously decontrolled an exempt units, the statute became fully applicable to those units, and superseded any conditions on a previous decontrol order. Moreover, the court noted that even if the conditions imposed by the decontrol order were still in effect, a landlord's use of the apartment for single-family occupancy would not trigger the condition. As a result, tenants were not entitled to relief.

Rent Obligation Independent of Landlord's Obligation to Maintain

91 East Main Street Realty Corp. v. Angelic Creations by Lucia

NYLJ 4/30/09, p. 42, col. 2

AppTerm, 9th and 10th Districts

(memorandum opinion)

In a commercial summary nonpayment proceeding, tenant appealed from Justice Court's award of possession and back rent. The Appellate Term affirmed, holding that tenant's obligation to pay rent was independent of landlord's obligations to make repairs or provide essential services.

Landlord brought this nonpayment proceeding, which was adjourned twice at tenant's request, and a third time to permit tenant an additional opportunity to obtain counsel. Justice Court denied tenant's request for a fourth adjournment to permit tenant to obtain counsel, but permitted a friend of tenant's to assist in the litigation. Tenant conceded that it had not paid rent, but argued instead that landlord had breached the lease. Justice Court refused to permit tenant to raise claims of breach, informing tenant's principal that she could raise such claims in another forum. The court then awarded landlord possession and back rent, and the tenant appealed.

In affirming, the Appellate Term held that in the absence of a clear intention to the contrary, a commercial tenant's obligation to pay rent is independent of landlord's obligation to make repairs or provide essential services. Tenant never alleged that the parties intended to the contrary, so that landlord's alleged breaches did not excuse tenant's failure to pay rent. Accordingly, landlord was entitled to possession and back rent.

Documentation Sufficient to Sustain Major Capital Improvement Increase

Jemrock Realty Co, LLC v. Krugman

NYLJ 5/20/09, p. 30, col. 1

AppDiv, First Dept.

(3-2 decision; majority opinion by McGuire, J; dissenting opinion by Renwick, J.)

In landlord's action for possession and back rent, tenant appealed from the Appellate Term's modification of a Civil Court order that had directed judgment for tenant on the ground that landlord had not established a right to an increase for major capital improvements. The Appellate Term awarded landlord a judgment of possession, and a divided Appellate Division affirmed, holding that undisputed invoices from a contractor documenting $50,000 in construction work provided a sufficient predicate for the major capital improvement increase.

A rent-regulated tenant vacated the subject apartment in January, 2004. The apartment was then in poor condition, and landlord's managing agent prepared a “punch list” for the apartment that included, among other items, installing new ceramic flooring, kitchen cabinets, sink, appliances, and counter tops in the kitchen; new sinks, toilets and fixtures in both bathrooms; rewiring and replumbing the entire apartment; replacing moldings and lighting fixtures; refinishing hardwood floors; and plastering and painting of the apartment. Landlord and a contractor agreed on a price of $50,000 for the work, and landlord paid for the work. The contractor's invoices matched the items on the punch list. When landlord later entered into a lease with tenant for a period beginning on April 1, landlord attached to the lease a certification calculating the rent based on increases permitted under the Rent Stabilization Law. On top of a vacancy increase and an increase for each year of the prior tenant's occupancy, landlord included an increase for the renovations the contractor had performed. (9 NYCRR 2522.4[s]). With these increases, the monthly rent was listed as $3,600, which took the apartment outside the scope of the rent stabilization law.

In October 2005, landlord brought this action seeking rent arrears and possession based on tenant's failure to pay, and tenant contended that the rent was illegal because the renovations did not qualify as “improvements” that would support a rent increase. Tenant also contended that landlord had breached the warranty of habitability. After a non-jury trial, Civil Court concluded that landlord's evidence of improvements ' the punch list and the invoices ' did not adequately distinguish between ordinary repairs and capital improvements. As a result, the court concluded that landlord had not established an entitlement to an increase for improvements, and the court concluded that tenant was entitled to a judgment for a rent overcharge. Tenant appealed to the Appellate Term from Civil Court's determination that the overcharge was not willful, and landlord cross-appealed. The Appellate Term modified, holding that landlord had adequately documented the improvements. Tenant appealed.

In affirming, the Appellate Division majority held that when landlord provides adequate evidence of expenditure of money on both repairs and improvements to an apartment, landlord is not required to itemize the costs in order to establish an entitlement to an increase for capital improvements. The majority emphasized that DHCR has taken the view that when extensive renovation work is performed, landlord need not submit evidence differentiating the cost of repairs from the cost of improvements. The majority concluded that DHCR's position was entitled to deference, and also noted that in this case, the apartment would remain subject to rent stabilization only if more than $20,000 of the expenditures were for repairs rather than improvements.

Justice Renwick, dissenting, emphasized that testimony at trial had established that the apartment was in very poor condition at the time the prior tenant left, requiring replacement of walls due to prior neglect. In light of these facts, which established the need for extensive repairs for which no increase was available, Justice Renwick contended that the landlord was obligated to itemize expenditures to establish an entitlement to an increase for improvements.

Guarantor Not Liable Once Original Lease Expired

Lo-Ho LLC v. Batista

NYLJ 5/26/09, p. 25, col. 5

AppDiv, First Dept.

(memorandum opinion)

In landlord's action to recover on a guaranty of a commercial lease, landlord appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that the guaranty did not extend to a purported “extension” of the original lease.

Landlord and tenant entered into a five-year lease in April 2000. Guarantor signed a personal guarantee. The guaranty provided that it would remain “in full force and effect as to any renewal, change or extension of the lease.” The original lease expired at the end of March, 2005. On April 25, 2005, landlord and tenant entered into a new agreement, designated an “Extension of Lease,” for an additional five-year term. The new agreement included a number of provisions different from those in the original lease, including a requirement that tenant pay real estate taxes in monthly installments, and a rent concession in return for specified improvements to be made by tenant. Guarantor did not execute a new guaranty. When tenant defaulted on the 2005 lease, landlord sought to recover on the guarantee. Supreme Court dismissed the complaint, and landlord appealed.

In affirming, the Appellate Division rejected landlord's argument that the 2005 lease was an extension of the 2000 lease. The court noted that the 2000 lease had expired in March 2005, and the guarantee expired with it. In the court's words, “[a]n expired lease cannot be extended.” Subsequent execution of the April 2005 agreement did not resuscitate the guaranty. The court also emphasized that the new terms in the 2005 agreement, which included higher rent, would have significantly expanded guarantor's liability without the guarantor's consent.

 

Rent Stabilization Supersedes Conditions in Decontrol Order

Matter of Sandow v. DHCR

NYLJ 6/10/09, p. 27, col. 1

Supreme Ct., N.Y. Cty

(Figueroa, J.)

In an article 78 proceeding, rent-stabilized tenants challenged DHCR's determination that their apartments could not eventually revert to rent-controlled status. Supreme Court denied the petition and dismissed the proceeding, holding that enactment of the rent stabilization scheme superseded any impact of previous decontrol orders that suggested that rent control might be re-imposed if certain conditions were to occur.

The subject apartments were converted from rooming house units to single-family occupancy units in 1957. As a result of that conversion, the apartments were decontrolled. The decontrol orders, however, provided that decontrol was effective only so long as the unit is “rented for single-family occupancy.” Tenants were not in occupancy at that time, but when they took occupancy, the apartments were subject to rent stabilization protections. Prior landlord sought to remove them to use the apartments for his personal residence. Tenants challenged his right, contending that under the 1957 order, if landlord no longer rented the apartments for single-family occupancy, the apartments would become subject to rent control. Prior landlord abandoned his effort, and current landlord offered tenants rent-stabilized leases. Tenants nevertheless sought to clarify their status with DHCR, and DHCR determined that their apartments could never revert to rent control. Tenants then brought this article 78 proceeding.

In dismissing the proceeding, Supreme Court indicated that when, in 1974, the state legislature extended rent stabilization protection to previously decontrolled an exempt units, the statute became fully applicable to those units, and superseded any conditions on a previous decontrol order. Moreover, the court noted that even if the conditions imposed by the decontrol order were still in effect, a landlord's use of the apartment for single-family occupancy would not trigger the condition. As a result, tenants were not entitled to relief.