Landlord & Tenant

Lease Provisions Remain in Effect Despite Stipulation That Parties Had Violated Rent Stabilization Code

Jazilek v. Abart Holdings, LLC

NYLJ 4/22/10, p. 32, col. 5

AppDiv, First Dept.

(memorandum opinion)

In tenant's action for a rent overcharge, landlord appealed from Supreme Court's award of damages, treble damages, and attorneys fees. The Appellate Division affirmed, holding that the Court of Appeals' determination that a stipulation between the parties violated the Rent Stabilization Code did not invalidate any of the lease provisions other than the rent provision.

In 2002, prior rent-stabilized tenant of record agreed to vacate the subject apartment and surrender her rights. The legal registered rent at that time was $812.34. Landlord then brought a holdover proceeding against current tenant, contending that he was an illegal subtenant. the parties settled that proceeding pursuant to a so-ordered stipulation, under the terms of which landlord agreed to lease the premises to tenant for $2,200 per month, with a “preferential rent” of $1,800 for the entire two-year lease period. The parties executed the lease and, two years later, executed a renewal lease at a stated rent of $2,299, with a preferential rent of $1,881. Subsequently, tenant brought this action contending that the stipulation was void against public policy and that he was a lawful rent-stabilized tenant. The Court of Appeals held that the stipulation was void as against public policy. Tenant then sought to recover damages. Supreme Court awarded principal damages of $12,377.85, treble damages of $31,205.31, and legal fees of $30,545.86. Landlord appealed.

In affirming, the Appellate Division first held that invalidation of the stipulation did not restore the parties to the situation they were in before the stipulation was entered. The court held that the parties had entered into a lease, which stood on its own apart from the stipulation, and effectively precluded landlord from pursuing any remedies against tenant as a holdover, even if landlord would have had those remedies before entering into the stipulation and lease. The court then concluded that Supreme Court had properly declined to apply any periodic rent increase other than a 20% vacancy increase, because of landlord's failure to file a proper and timely annual rent registration statement, which resulted in rents being frozen at the level of the legal rent in effect on the date of the last registration statement. The court also held that Supreme Court had properly rejected landlord's contention that the overcharge was not willful because the agreed-upon rent was memorialized in a so-ordered stipulation. The court noted that the stipulation itself did not include a representation that $2,200 constituted the legal regulated rent, and emphasized that in any event, a representation in a stipulation is not to be equated to a judicial finding.

Lease Provisions Remain in Effect Despite Stipulation That Parties Had Violated Rent Stabilization Code

Jazilek v. Abart Holdings, LLC

NYLJ 4/22/10, p. 32, col. 5

AppDiv, First Dept.

(memorandum opinion)

In tenant's action for a rent overcharge, landlord appealed from Supreme Court's award of damages, treble damages, and attorneys fees. The Appellate Division affirmed, holding that the Court of Appeals' determination that a stipulation between the parties violated the Rent Stabilization Code did not invalidate any of the lease provisions other than the rent provision.

In 2002, prior rent-stabilized tenant of record agreed to vacate the subject apartment and surrender her rights. The legal registered rent at that time was $812.34. Landlord then brought a holdover proceeding against current tenant, contending that he was an illegal subtenant. the parties settled that proceeding pursuant to a so-ordered stipulation, under the terms of which landlord agreed to lease the premises to tenant for $2,200 per month, with a “preferential rent” of $1,800 for the entire two-year lease period. The parties executed the lease and, two years later, executed a renewal lease at a stated rent of $2,299, with a preferential rent of $1,881. Subsequently, tenant brought this action contending that the stipulation was void against public policy and that he was a lawful rent-stabilized tenant. The Court of Appeals held that the stipulation was void as against public policy. Tenant then sought to recover damages. Supreme Court awarded principal damages of $12,377.85, treble damages of $31,205.31, and legal fees of $30,545.86. Landlord appealed.

In affirming, the Appellate Division first held that invalidation of the stipulation did not restore the parties to the situation they were in before the stipulation was entered. The court held that the parties had entered into a lease, which stood on its own apart from the stipulation, and effectively precluded landlord from pursuing any remedies against tenant as a holdover, even if landlord would have had those remedies before entering into the stipulation and lease. The court then concluded that Supreme Court had properly declined to apply any periodic rent increase other than a 20% vacancy increase, because of landlord's failure to file a proper and timely annual rent registration statement, which resulted in rents being frozen at the level of the legal rent in effect on the date of the last registration statement. The court also held that Supreme Court had properly rejected landlord's contention that the overcharge was not willful because the agreed-upon rent was memorialized in a so-ordered stipulation. The court noted that the stipulation itself did not include a representation that $2,200 constituted the legal regulated rent, and emphasized that in any event, a representation in a stipulation is not to be equated to a judicial finding.