Landlord & Tenant

Loft Units May Be Covered By ETPA

Acevedo v. The Piano Building

NYLJ 12/15/09, p. 37, col. 3

AppDiv, First Dept.

(Opinion by Renwick, J.)

In an action by tenants to declare former loft units subject to rent stabilization, and to recover rent overcharges, landlord appealed from a Supreme Court order declaring the units subject to rent stabilization. The First Department affirmed, holding that there is no blanket prohibition barring ETPA coverage of loft units not subject to the Loft Law.

When the former owner purchased the commercial building in 1977, former tenant held a residential lease for one of the units. In 1985, the Loft Board ruled that seven units in the building, including tenant's unit, constituted an Interim Multiple Dwelling. At that point, the unit became subject to rent regulation. In 1995, former owner purchased the former tenant's rights under the Loft Law, pursuant to section 286(12) of the Multiple Dwelling Law. The buyout agreement recited that the prior tenants “were and are covered under article 7C or the Rent Stabilization Laws.” Former owner then began to rent out the units for residential purposes, and treated the new tenants as unregulated market rate tenants. In 2005, current tenant and others brought this action to declare the units subject to rent regulation, and to recover overcharges. Current landlord contended that once the prior owner purchased Loft Law rights from tenant's predecessor, the unit was no longer subject to the ETPA. Supreme Court disagreed, and declared tenant's unit subject to rent stabilization pursuant to the ETPA. Landlord appealed.

In affirming, the First Department adhered to its 2002 decision in 182 Fifth Avenue. v. Design Dev. Concepts, 300 AD2d 198. The court concluded that the 2004 Court of Appeals decision in Wolinsky v. Kee Yip Realty Corp., 2 NY3d 487 did not overrule 182 Fifth. In Wolinsky, tenants had never obtained Loft Law protection because they had illegally converted their units, at their own expense, more than a decade after the Loft Law's eligibility period expired. The Court of Appeals held that tenant were not protected by the ETPA because if the previously enacted ETPA already protected illegal residential conversions, then significant portions of the Loft Law would have been superfluous. In this case, by contrast, zoning allowed residential use as of right, and the owner could legalize residential use by filing a certificate of occupancy. In such cases, the court held that the units were subject to rent stabilization by virtue of the EPTA. In stating its holding, the court acknowledged that the Second Department had reached a contrary conclusion.

Landlord Had No Obligation To Mitigate Damages

Rep A8LLC v. Aventura Technologies, Inc.

NYLJ 1/4/10, p. 29, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In landlord's action for damages for breach of two commercial leases, landlord appealed from Supreme Court's order denying its summary judgment motion on the issue of liability. The Appellate Division reversed and granted the summary judgment motion, holding that landlord's failure to mitigate damages could not constitute a breach of the implied covenant of good faith.

When tenant failed to pay rent on two separate commercial leases, landlord brought summary dispossess proceedings in Suffolk County District Court, seeking possession for nonpayment of rent. Tenant did not appear, and the court entered judgment in landlord's favor. Landlord then brought this action in Supreme Court seeking damages. Landlord sought summary judgment on the issue of liability, relying on the District Court judgments. Tenant, however, contended that it had furnished landlord with names of prospective tenants for one of the two spaces, and landlord had unreasonably withheld consent to an assignment. Supreme Court denied landlord's summary judgment motion.

In reversing, the Appellate Division held that because the lease included a clause restricting assignment without landlord's written consent, and the lease did not prohibit landlord from arbitrarily withholding consent, landlord was within its rights in not permitting assignment of the lease. Moreover, the court noted that landlord had no obligation to mitigate damages, and that failure to mitigate could not constitute a breach of an implied covenant of good faith. The court also concluded that, by the terms of the lease, landlord was entitled to attorneys' fees.

Loft Units May Be Covered By ETPA

Acevedo v. The Piano Building

NYLJ 12/15/09, p. 37, col. 3

AppDiv, First Dept.

(Opinion by Renwick, J.)

In an action by tenants to declare former loft units subject to rent stabilization, and to recover rent overcharges, landlord appealed from a Supreme Court order declaring the units subject to rent stabilization. The First Department affirmed, holding that there is no blanket prohibition barring ETPA coverage of loft units not subject to the Loft Law.

When the former owner purchased the commercial building in 1977, former tenant held a residential lease for one of the units. In 1985, the Loft Board ruled that seven units in the building, including tenant's unit, constituted an Interim Multiple Dwelling. At that point, the unit became subject to rent regulation. In 1995, former owner purchased the former tenant's rights under the Loft Law, pursuant to section 286(12) of the Multiple Dwelling Law. The buyout agreement recited that the prior tenants “were and are covered under article 7C or the Rent Stabilization Laws.” Former owner then began to rent out the units for residential purposes, and treated the new tenants as unregulated market rate tenants. In 2005, current tenant and others brought this action to declare the units subject to rent regulation, and to recover overcharges. Current landlord contended that once the prior owner purchased Loft Law rights from tenant's predecessor, the unit was no longer subject to the ETPA. Supreme Court disagreed, and declared tenant's unit subject to rent stabilization pursuant to the ETPA. Landlord appealed.

In affirming, the First Department adhered to its 2002 decision in 182 Fifth Avenue. v. Design Dev. Concepts , 300 AD2d 198. The court concluded that the 2004 Court of Appeals decision in Wolinsky v. Kee Yip Realty Corp. , 2 NY3d 487 did not overrule 182 Fifth . In Wolinsky, tenants had never obtained Loft Law protection because they had illegally converted their units, at their own expense, more than a decade after the Loft Law's eligibility period expired. The Court of Appeals held that tenant were not protected by the ETPA because if the previously enacted ETPA already protected illegal residential conversions, then significant portions of the Loft Law would have been superfluous. In this case, by contrast, zoning allowed residential use as of right, and the owner could legalize residential use by filing a certificate of occupancy. In such cases, the court held that the units were subject to rent stabilization by virtue of the EPTA. In stating its holding, the court acknowledged that the Second Department had reached a contrary conclusion.

Landlord Had No Obligation To Mitigate Damages

Rep A8LLC v. Aventura Technologies, Inc.

NYLJ 1/4/10, p. 29, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In landlord's action for damages for breach of two commercial leases, landlord appealed from Supreme Court's order denying its summary judgment motion on the issue of liability. The Appellate Division reversed and granted the summary judgment motion, holding that landlord's failure to mitigate damages could not constitute a breach of the implied covenant of good faith.

When tenant failed to pay rent on two separate commercial leases, landlord brought summary dispossess proceedings in Suffolk County District Court, seeking possession for nonpayment of rent. Tenant did not appear, and the court entered judgment in landlord's favor. Landlord then brought this action in Supreme Court seeking damages. Landlord sought summary judgment on the issue of liability, relying on the District Court judgments. Tenant, however, contended that it had furnished landlord with names of prospective tenants for one of the two spaces, and landlord had unreasonably withheld consent to an assignment. Supreme Court denied landlord's summary judgment motion.

In reversing, the Appellate Division held that because the lease included a clause restricting assignment without landlord's written consent, and the lease did not prohibit landlord from arbitrarily withholding consent, landlord was within its rights in not permitting assignment of the lease. Moreover, the court noted that landlord had no obligation to mitigate damages, and that failure to mitigate could not constitute a breach of an implied covenant of good faith. The court also concluded that, by the terms of the lease, landlord was entitled to attorneys' fees.