Courts Step Up Enforcement of Landlord-Tenant Stipulations

Many, if not most, landlord-tenant cases in New York City are settled by stipulation. These stipulations often condition the tenant's right to continued possession upon the tenant affirmatively taking certain actions (such as paying rent), or refraining from taking certain actions (such as committing a nuisance), in the future.

Because a tenant's breach of a stipulation may lead to eviction, courts are sometimes reluctant to enforce them. That trend may now be reversing. In three recent cases, involving non-payment, illegal alterations, and nuisance, three different New York appellate courts have enforced two-attorney, so-ordered stipulations even though such enforcement would force the tenant to vacate.

Chelsea 19 Associates

In Chelsea 19 Associates v. James, 67 A.D.3d 601, the owner commenced a non-payment proceeding against Warren James, a long-time rent-stabilized tenant. The parties, both represented by counsel, entered into a so-ordered stipulation, whereby the tenant agreed to pay $4,000 in arrears by Dec. 31, 2006, and to otherwise remain current in his rent. The stipulation called for the entry of judgment and the issuance of a warrant if the tenant breached, but gave the tenant an eight-day cure period.

The owner moved for judgment when the tenant failed to make the $4,000 payment and also failed to pay rent on an ongoing basis. After the tenant brought numerous orders to show cause, Civil Court granted the owner's motion on default and directed that the tenant be evicted. Several orders to show cause later, the tenant appeared with the delinquent funds, albeit almost seven months after the stipulation required those funds to be paid. Civil Court, finding that the tenant's inability to pay was not willful, vacated both the default and the warrant. The Appellate Term, First Department, reversed, finding that the tenant had failed to explain his calendar default, and that in any event, a further stay of eviction was not appropriate “in view of the tenant's extensive and unexplained rent defaults.”

The Appellate Division, First Department affirmed, holding that in a non-payment proceeding, the mere inability to pay is not a basis for declining to enforce a stipulation:

Enforcement of stipulations of settlement, including those in housing court cases, is highly favored by the courts. While the court has discretion not to enforce a stipulation of settlement 'where there is evidence of fraud, overreaching, unconscionability, or illegality,' tenant's claimed difficulty in obtaining funds does not fall under that rubric. Accordingly, tenant does not show a meritorious defense to the stipulation, his loss of possession is not a forfeiture but 'merely the contracted-for consequence' of his non-compliance with the stipulation, and Civil Court lacked the discretion not to enforce the stipulation (internal citations omitted).

Recent Rulings

In recent months, the Appellate Term, First Department has favorably cited Chelsea 19 when enforcing stipulations in non-payment proceedings. See Beaux Arts II, LLC v. Oyoue, 26 Misc.3d 139(A),; Harlem 522-147 Assocs., LLC v. Jeantilus, 26 Misc.3d 140(A); Stevenson Commons Assocs., L.P. v. Bishop, 26 Misc.3d 140(A).

Chelsea 19 holds that a tenant's mere inability to secure funds under a stipulation is not a basis for failing to enforce the stipulation. This is not to say that a failure to pay, at least when coupled with other extenuating circumstances, will necessarily result in a tenant's eviction. See, e.g., 443 East 78 Realty LLC v. Tupas, 26 Misc.3d 1240(A) (“Chelsea 19 does not mandate a lease forfeiture for a long term rent stabilized senior citizen tenant who has made substantially all of the payments due pursuant to a stipulation, then suffers a heart attack, is hospitalized for fourteen days and then released to the care of family, and therefore delays in the final payment of the current monthly rent of $615.96 plus arrears of $47.88″).

1035 Washington Realty, LLC

In 1035 Washington Realty, LLC v. Grange, N.Y.L.J., Apr. 16, 2010, at 34, col. 1 (App. T. 2d Dep't), the owner commenced a holdover proceeding against a rent-stabilized tenant who, without consent, had removed the bathtub in her apartment and replaced it with a Jacuzzi. The matter was initially settled pursuant to a two-party, so-ordered stipulation whereby the tenant agreed to, inter alia: 1) undo her illegal alterations; 2) restore the bathroom to its prior condition; 3) obtain necessary governmental approvals for the work; and 4) obtain adequate insurance to protect the landlord. The stipulation further provided that if the court found that the tenant was in breach, the owner would be entitled to a final judgment of possession and a warrant of eviction.

The tenant breached the stipulation in several respects, and the owner moved to restore the matter to the trial calendar. On the return date, the tenant entered into a second stipulation, which reinforced the provisions of the earlier stipulation and directed the tenant to remove the Jacuzzi on or before Aug. 31, 2008. The probationary stipulation provided for “the entry of a judgment of possession, in favor of Petitioner and against Respondent, issuance forthwith, execution stayed through Aug. 31, 2008.”

The tenant breached the second stipulation and the landlord requested service of the Marshal's notice and the scheduling of the tenant's eviction. One week later, the tenant moved Civil Court by order to show cause to vacate the Marshal's notice. Civil Court did so, writing:

“Respondent has admittedly removed the Jacuzzi tub, which is the gravamen of the proceeding. Albeit late this was apparently accomplished on or about September 2, 2008.”

The landlord appealed, arguing that notwithstanding Civil Court's view of the “gravamen” of the stipulation, the tenant's obligations under the stipulation to obtain governmental approvals and insurance for the work were critical elements of the agreement and had been breached. The Appellate Term, Second Department agreed, holding:

Settlement stipulations are favored and will not be undone absent proof that the settlement was obtained by fraud, collusion, mistake, accident or other grounds sufficient to invalidate a contract. The stipulations in this proceeding were highly detailed and executed by the attorneys for the respective parties ' . In light of tenant's multiple breaches of the stipulation, her motion should have been denied (internal citations omitted).

Borovicka

In 521 East 77nd Street Realty Co., LLC v. Borovicka, N.Y.L.J., Feb. 25, 2010, at 36, col. 6 (App. T. 1st Dep't), the landlord commenced a nuisance proceeding against an elderly rent-controlled tenant based on noxious odors emanating from her apartment. The parties entered into a two-attorney, so-ordered probationary stipulation that directed the tenant to refrain from her noxious conduct through and including June 30, 2009. The stipulation further provided that should the conduct continue, the landlord could restore the proceeding to the court calendar “for an immediate hearing for the sole purpose of [the] Court determining whether respondent breached this Stipulation.” If the court so found, a judgment and warrant would issue in favor of the landlord.

The tenant breached on March 4, 2008. The odors emanating from her apartment were so bad that a next-door hospital had to shut down an examination room that shared a wall with the tenant's unit.

Following a hearing, Civil Court found that the tenant had breached the stipulation in a “serious and substantial” manner. Notwithstanding, Civil Court sua sponte extended the compliance date to Dec. 31, 2009, and ruled that the tenant would not be evicted as long as there were no further incidents through that date.

The landlord appealed, and the Appellate Term, First Department reversed. The court wrote:

We agree with Civil Court's factual finding that the witnesses' testimony at the hearing 'established overwhelmingly' that 'severe' odors emanating from the apartment premises into a medical office adjacent to the apartment (which required the staff at the office to close an examination room) constituted a 'serious and substantial' violation of the stipulation. Given this determination, and affording proper effect to the plain terms of the two attorney, so-ordered stipulation, no basis existed for the court's staying of the execution of the warrant of eviction ' (internal citations omitted).

Conclusion

In all three cases discussed herein, it was undisputed that the tenant had breached a two-attorney, so-ordered stipulation settlement. The breaches were material and substantial, and deprived the landlord of the benefit of its bargain. In each instance, an Appellate Court, reversing Civil Court, enforced the stipulation, even though it meant that the tenant would be evicted.

Attorneys counseling tenants to enter into a probationary stipulation should make clear that they must satisfy the deadlines and conditions therein, or face possible eviction.

Jeffrey Turkel, a member of this newsletter's Board of Editors, is a partner in the Manhattan real estate law firm of Rosenberg & Estis, P.C. He represented the prevailing owners in Chelsea 19, 1035 Washington Realty, and 521 East 72nd Street Realty.

Many, if not most, landlord-tenant cases in New York City are settled by stipulation. These stipulations often condition the tenant's right to continued possession upon the tenant affirmatively taking certain actions (such as paying rent), or refraining from taking certain actions (such as committing a nuisance), in the future.

Because a tenant's breach of a stipulation may lead to eviction, courts are sometimes reluctant to enforce them. That trend may now be reversing. In three recent cases, involving non-payment, illegal alterations, and nuisance, three different New York appellate courts have enforced two-attorney, so-ordered stipulations even though such enforcement would force the tenant to vacate.

Chelsea 19 Associates

In Chelsea 19 Associates v. James , 67 A.D.3d 601, the owner commenced a non-payment proceeding against Warren James, a long-time rent-stabilized tenant. The parties, both represented by counsel, entered into a so-ordered stipulation, whereby the tenant agreed to pay $4,000 in arrears by Dec. 31, 2006, and to otherwise remain current in his rent. The stipulation called for the entry of judgment and the issuance of a warrant if the tenant breached, but gave the tenant an eight-day cure period.

The owner moved for judgment when the tenant failed to make the $4,000 payment and also failed to pay rent on an ongoing basis. After the tenant brought numerous orders to show cause, Civil Court granted the owner's motion on default and directed that the tenant be evicted. Several orders to show cause later, the tenant appeared with the delinquent funds, albeit almost seven months after the stipulation required those funds to be paid. Civil Court, finding that the tenant's inability to pay was not willful, vacated both the default and the warrant. The Appellate Term, First Department, reversed, finding that the tenant had failed to explain his calendar default, and that in any event, a further stay of eviction was not appropriate “in view of the tenant's extensive and unexplained rent defaults.”

The Appellate Division, First Department affirmed, holding that in a non-payment proceeding, the mere inability to pay is not a basis for declining to enforce a stipulation:

Enforcement of stipulations of settlement, including those in housing court cases, is highly favored by the courts. While the court has discretion not to enforce a stipulation of settlement 'where there is evidence of fraud, overreaching, unconscionability, or illegality,' tenant's claimed difficulty in obtaining funds does not fall under that rubric. Accordingly, tenant does not show a meritorious defense to the stipulation, his loss of possession is not a forfeiture but 'merely the contracted-for consequence' of his non-compliance with the stipulation, and Civil Court lacked the discretion not to enforce the stipulation (internal citations omitted).

Recent Rulings

In recent months, the Appellate Term, First Department has favorably cited Chelsea 19 when enforcing stipulations in non-payment proceedings. See Beaux Arts II, LLC v. Oyoue , 26 Misc.3d 139(A),; Harlem 522-147 Assocs., LLC v. Jeantilus , 26 Misc.3d 140(A); Stevenson Commons Assocs., L.P. v. Bishop , 26 Misc.3d 140(A).

Chelsea 19 holds that a tenant's mere inability to secure funds under a stipulation is not a basis for failing to enforce the stipulation. This is not to say that a failure to pay, at least when coupled with other extenuating circumstances, will necessarily result in a tenant's eviction. See, e.g., 443 East 78 Realty LLC v. Tupas , 26 Misc.3d 1240(A) (“ Chelsea 19 does not mandate a lease forfeiture for a long term rent stabilized senior citizen tenant who has made substantially all of the payments due pursuant to a stipulation, then suffers a heart attack, is hospitalized for fourteen days and then released to the care of family, and therefore delays in the final payment of the current monthly rent of $615.96 plus arrears of $47.88″).

1035 Washington Realty, LLC

In 1035 Washington Realty, LLC v. Grange, N.Y.L.J., Apr. 16, 2010, at 34, col. 1 (App. T. 2d Dep't), the owner commenced a holdover proceeding against a rent-stabilized tenant who, without consent, had removed the bathtub in her apartment and replaced it with a Jacuzzi. The matter was initially settled pursuant to a two-party, so-ordered stipulation whereby the tenant agreed to, inter alia: 1) undo her illegal alterations; 2) restore the bathroom to its prior condition; 3) obtain necessary governmental approvals for the work; and 4) obtain adequate insurance to protect the landlord. The stipulation further provided that if the court found that the tenant was in breach, the owner would be entitled to a final judgment of possession and a warrant of eviction.

The tenant breached the stipulation in several respects, and the owner moved to restore the matter to the trial calendar. On the return date, the tenant entered into a second stipulation, which reinforced the provisions of the earlier stipulation and directed the tenant to remove the Jacuzzi on or before Aug. 31, 2008. The probationary stipulation provided for “the entry of a judgment of possession, in favor of Petitioner and against Respondent, issuance forthwith, execution stayed through Aug. 31, 2008.”

The tenant breached the second stipulation and the landlord requested service of the Marshal's notice and the scheduling of the tenant's eviction. One week later, the tenant moved Civil Court by order to show cause to vacate the Marshal's notice. Civil Court did so, writing:

“Respondent has admittedly removed the Jacuzzi tub, which is the gravamen of the proceeding. Albeit late this was apparently accomplished on or about September 2, 2008.”

The landlord appealed, arguing that notwithstanding Civil Court's view of the “gravamen” of the stipulation, the tenant's obligations under the stipulation to obtain governmental approvals and insurance for the work were critical elements of the agreement and had been breached. The Appellate Term, Second Department agreed, holding:

Settlement stipulations are favored and will not be undone absent proof that the settlement was obtained by fraud, collusion, mistake, accident or other grounds sufficient to invalidate a contract. The stipulations in this proceeding were highly detailed and executed by the attorneys for the respective parties ' . In light of tenant's multiple breaches of the stipulation, her motion should have been denied (internal citations omitted).

Borovicka

In 521 East 77nd Street Realty Co., LLC v. Borovicka, N.Y.L.J., Feb. 25, 2010, at 36, col. 6 (App. T. 1st Dep't), the landlord commenced a nuisance proceeding against an elderly rent-controlled tenant based on noxious odors emanating from her apartment. The parties entered into a two-attorney, so-ordered probationary stipulation that directed the tenant to refrain from her noxious conduct through and including June 30, 2009. The stipulation further provided that should the conduct continue, the landlord could restore the proceeding to the court calendar “for an immediate hearing for the sole purpose of [the] Court determining whether respondent breached this Stipulation.” If the court so found, a judgment and warrant would issue in favor of the landlord.

The tenant breached on March 4, 2008. The odors emanating from her apartment were so bad that a next-door hospital had to shut down an examination room that shared a wall with the tenant's unit.

Following a hearing, Civil Court found that the tenant had breached the stipulation in a “serious and substantial” manner. Notwithstanding, Civil Court sua sponte extended the compliance date to Dec. 31, 2009, and ruled that the tenant would not be evicted as long as there were no further incidents through that date.

The landlord appealed, and the Appellate Term, First Department reversed. The court wrote:

We agree with Civil Court's factual finding that the witnesses' testimony at the hearing 'established overwhelmingly' that 'severe' odors emanating from the apartment premises into a medical office adjacent to the apartment (which required the staff at the office to close an examination room) constituted a 'serious and substantial' violation of the stipulation. Given this determination, and affording proper effect to the plain terms of the two attorney, so-ordered stipulation, no basis existed for the court's staying of the execution of the warrant of eviction ' (internal citations omitted).

Conclusion

In all three cases discussed herein, it was undisputed that the tenant had breached a two-attorney, so-ordered stipulation settlement. The breaches were material and substantial, and deprived the landlord of the benefit of its bargain. In each instance, an Appellate Court, reversing Civil Court, enforced the stipulation, even though it meant that the tenant would be evicted.

Attorneys counseling tenants to enter into a probationary stipulation should make clear that they must satisfy the deadlines and conditions therein, or face possible eviction.

Jeffrey Turkel, a member of this newsletter's Board of Editors, is a partner in the Manhattan real estate law firm of Rosenberg & Estis, P.C. He represented the prevailing owners in Chelsea 19, 1035 Washington Realty, and 521 East 72nd Street Realty.