Landlord & Tenant

Landlord Entitled to Collect Rent on Illegal Apartment In Single-Family Home

Pickering v. Chappe
NYLJ 8/23/10, p. 25., col. 5 AppTerm, 2nd, 11th, and 13th Districts (memorandum opinion)

In an action by former tenant for return of a security deposit, landlords appealed from Supreme Court's judgment, after nonjury trial, for tenant. The Appellate Term reversed and dismissed the complaint, holding that landlords were entitled to set off the security deposit against rent owed.

Landlords rented to tenant an illegal apartment in their single-family home. The parties entered into an agreement under the terms of which landlords would forego unpaid rent for January, February, and March 2007, and would return tenant's security deposit, if tenant moved out no later than March 1, 2007. Tenant did not move out, and landlord did not return the deposit. When tenant brought this action, Civil Court found that tenant had not moved out by March 1, but nevertheless held that tenant was entitled to return of the security deposit because landlords were not entitled to collect rent for an illegal apartment. For the same reason, the court dismissed landlord's counterclaims for rent due. Landlords appealed.

In reversing, the Appellate Term held that there is no bar to recovery of rent for an illegal apartment in a dwelling that has a certificate of occupancy as a one-family dwelling. The court conceded that the Multiple Dwelling Law precludes collection of rent for an illegal apartment in a dwelling covered by that statute, but noted that the Multiple Dwelling Law does not apply to single-family homes. As a result, landlord was entitled to retain the security deposit against rent owed by tenant.

COMMENT

Although Section 302(1) of the Multiple Dwelling Law bars landlord from recovering rent for an apartment leased in violation of the certificate of occupancy, the statute applies only to a dwelling which is rented “to be occupied, or is occupied by three or more families living independently of each other.” Multiple Dwelling Law section 4(7). When landlord leases two or fewer apartments in violation of the certificate of occupancy, the rent forfeiture provision is inapplicable. Thus, in Herzog v. Thompson, 50 Misc.2d 488, the court held landlord was entitled to recover rent for an apartment leased without a certificate of occupancy because landlord was leasing only two apartments in the building.

When a landlord rents premises not covered by the Multiple Dwelling Law, the primary risk the landlord takes involves public enforcement, largely through local building code and zoning laws. Because violations of these laws are not always apparent to the local government, it is ultimately up to a private individual to bring the city's attention to their violation. In People v. Garcia, 851 N.Y.S.2d 60 (Table), 2007 WL 2871008 , a neighbor was able to secure enforcement of a single-family home restriction by reporting a building owner for renting multiple apartments in a private residence in violation of the Village of Westbury's building code. Although not covered by New York's Multiple Dwelling Law, the landlord violated numerous sections of the building code and was prosecuted by the State. The landlord was ordered to cease her illegal practice immediately and operate her building within the single-family restrictions of the village's laws.

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Balance of Equities Entitled Tenant to
Post-Eviction Vacatur of Warrant of  Eviction

BFT Realty v. Medina
NYLJ 8/18/10, Civil Ct., Bronx Cty. (Madhaven, J.)

In a summary nonpayment proceeding, tenant sought to be restored to her apartment after execution of a warrant of eviction. The court awarded post-eviction relief to tenant, holding that a balance of the equities weighed in her favor.

Landlord brought a summary nonpayment proceeding on July 30, 2009. Tenant defaulted. Judgment was entered against tenant, and tenant's arrears ranged from $3,733.31 in December 2009 to $708.50 in June 2010. During that period, tenant entered into four stipulations of settlement, all of which required her to pay arrears, and required landlord to make repairs. On June 10, 2010, landlord stipulated to correct any violations in the apartment, and tenant stipulated to pay $708.50 in rent arrears by June 30. When tenant failed to pay by the deadline, a marshal executed the warrant of eviction on July 15. Landlord relet the premises, and tenant sought post-eviction relief.

In vacating the warrant of eviction, the court noted that both landlord and tenant agreed that about half of the rent arrears identified in the stipulation were not rent, but were other sums for which eviction would not have been an available remedy. The court also noted that tenant was now prepared to pay all arrears. Finally, the court concluded that the new tenant, who entered shortly after the warrant of eviction was executed, had been in the premises for only two weeks. As a result, the new tenant had not built up any equities in the premises. Therefore, the court held that it had authority to vacate the warrant of eviction, even after execution, and that the balance of the equities dictated restoration of the original tenant to the premises.

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Questions of Fact Preclude Summary Judgment

3 MB Recording Studios, LLC v. 737 Smithtown Bypass Corp.
NYLJ 8/11/10 Supreme Ct., Suffolk Cty. (Pines, J.)

In tenant's action setting forth claims for constructive eviction, breach of the covenant of quiet enjoyment, and wrongful eviction, landlord moved for summary judgment dismissing the complaint and also sought summary judgment on its counterclaim for rent due. The court granted summary judgment on the wrongful eviction claim, but held that questions of fact precluded summary judgment on the other claims.

Landlord and tenant entered into a commercial lease. By the terms of the lease, tenant agreed to accept the premises subject to any code violations, and was “solely responsible for obtaining plans and permits.” However, in a rider to the lease, tenant covenanted “to use and occupy the demised premises solely as a recording studio/warehouse and for no other purpose unless approved in writing by Landlord ' ” The rider also imposed on tenant the obligation to “ comply at its sole cost and expense with all applicable codes, orders ' of any governmental authority having jurisdiction over the use of the premises.” When tenant began using the space for a recording studio, the Town of Smithtown served tenant with a series of violations. Apparently, use of the premises as a recording studio violated the local zoning ordinance. Although tenant learned of this difficulty in February 2007, tenant did not leave until August. Subsequently, tenant brought this action.

In denying landlord's summary judgment motion on the constructive eviction claim, the court concluded that the language of the lease was ambiguous, noting tenant's assertions that landlord had assured tenant that use as a recording studio was legal, and tenant's assertion that there was no way in which that use could ever be legalized. But the court dismissed tenant's wrongful eviction claim, noting that documentary evidence established that tenant had voluntarily abandoned the premises

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Landlord's Acceptance of J-51 Benefits Entitled
Tenants to Rent Stabilization Protection

Independence Plaza North Tenants' Assn v. Independence Plaza Associates L.P.
NYLJ 9/13/10, Supreme Ct., N.Y. Cty. (Friedman, J.)

In declaratory judgment actions, tenants in a former Mitchell-Lama apartment complex sought a determination that they had become rent-stabilized tenants at the expiration of landlord's exit from the Mitchell-Lama program. The court granted tenants the requested declaration, holding that landlord's acceptance of J-51 tax benefits after exit from the program entitled tenants to rent stabilization protection.

The subject buildings were built after 1974 pursuant to the Mitchell-Lama program. In 1998, the complex began to receive J-51 tax abatements based on a major capital improvement. In 2004, landlord exercised its statutory option to dissolve and exit from the Mitchell-Lama program. In 2006, the Department of Housing Preservation and Development (HPD) terminated the J-51 benefits effective as of th exit date, and landlord repaid all tax benefits received between exit from the program and the date of retroactive termination. Tenants brought this action contending that landlord's receive of the J-51 benefits subjected the apartments to rent stabilization protection from the date of exit from the Mitchell-Lama program. Although landlords had initially moved for summary judgment in 2007, Supreme Court, on motion by tenants, remanded to the Department of Housing and Community Renewal (DHCR), for a determination of the rent stabilized status of the apartments. DHCR determined that the apartments were not rent stabilized, and landlords then moved for summary judgment dismissing the complaint.

In awarding summary judgment to tenants and declaring the apartments rent-stabilized, the court held that it was not bound to defer to DHCR's determination because DHCR had not drawn upon its expertise in addressing the merits of tenants' claim, but instead had relied on HPD's determination that J-51 benefits had terminated as of the date landlord exited from the Mitchell-Lama program. The court concluded that DHCR had misapprehended the relevant legal issue, which the court characterized as whether the mere receipt of J-51 benefits subjected the units to rent stabilization protection. The court held that nothing in the applicable statute required termination of J-51 benefits upon exit from the Mitchell-Lama program. Instead, the court concluded that HPD had discretion whether to terminate those benefits. Because the benefits had not yet been terminated upon exit, landlord remained entitled to those benefits, but landlord's continued receipt of the benefits subjected the units to rent stabilization protection. Each apartment would remain subject to rent stabilization coverage until vacancy of that apartment by tenant, even though the tax benefit period has already expired, because the leases tenants executed did not contain notice that the unit would become subject to deregulation upon expiration of the tax benefit period.

Landlord Entitled to Collect Rent on Illegal Apartment In Single-Family Home

Pickering v. Chappe
NYLJ 8/23/10, p. 25., col. 5 AppTerm, 2nd, 11th, and 13th Districts (memorandum opinion)

In an action by former tenant for return of a security deposit, landlords appealed from Supreme Court's judgment, after nonjury trial, for tenant. The Appellate Term reversed and dismissed the complaint, holding that landlords were entitled to set off the security deposit against rent owed.

Landlords rented to tenant an illegal apartment in their single-family home. The parties entered into an agreement under the terms of which landlords would forego unpaid rent for January, February, and March 2007, and would return tenant's security deposit, if tenant moved out no later than March 1, 2007. Tenant did not move out, and landlord did not return the deposit. When tenant brought this action, Civil Court found that tenant had not moved out by March 1, but nevertheless held that tenant was entitled to return of the security deposit because landlords were not entitled to collect rent for an illegal apartment. For the same reason, the court dismissed landlord's counterclaims for rent due. Landlords appealed.

In reversing, the Appellate Term held that there is no bar to recovery of rent for an illegal apartment in a dwelling that has a certificate of occupancy as a one-family dwelling. The court conceded that the Multiple Dwelling Law precludes collection of rent for an illegal apartment in a dwelling covered by that statute, but noted that the Multiple Dwelling Law does not apply to single-family homes. As a result, landlord was entitled to retain the security deposit against rent owed by tenant.

COMMENT

Although Section 302(1) of the Multiple Dwelling Law bars landlord from recovering rent for an apartment leased in violation of the certificate of occupancy, the statute applies only to a dwelling which is rented “to be occupied, or is occupied by three or more families living independently of each other.” Multiple Dwelling Law section 4(7). When landlord leases two or fewer apartments in violation of the certificate of occupancy, the rent forfeiture provision is inapplicable. Thus, in Herzog v. Thompson, 50 Misc.2d 488, the court held landlord was entitled to recover rent for an apartment leased without a certificate of occupancy because landlord was leasing only two apartments in the building.

When a landlord rents premises not covered by the Multiple Dwelling Law, the primary risk the landlord takes involves public enforcement, largely through local building code and zoning laws. Because violations of these laws are not always apparent to the local government, it is ultimately up to a private individual to bring the city's attention to their violation. In People v. Garcia, 851 N.Y.S.2d 60 (Table), 2007 WL 2871008 , a neighbor was able to secure enforcement of a single-family home restriction by reporting a building owner for renting multiple apartments in a private residence in violation of the Village of Westbury's building code. Although not covered by New York's Multiple Dwelling Law, the landlord violated numerous sections of the building code and was prosecuted by the State. The landlord was ordered to cease her illegal practice immediately and operate her building within the single-family restrictions of the village's laws.

---

Balance of Equities Entitled Tenant to
Post-Eviction Vacatur of Warrant of  Eviction

BFT Realty v. Medina
NYLJ 8/18/10, Civil Ct., Bronx Cty. (Madhaven, J.)

In a summary nonpayment proceeding, tenant sought to be restored to her apartment after execution of a warrant of eviction. The court awarded post-eviction relief to tenant, holding that a balance of the equities weighed in her favor.

Landlord brought a summary nonpayment proceeding on July 30, 2009. Tenant defaulted. Judgment was entered against tenant, and tenant's arrears ranged from $3,733.31 in December 2009 to $708.50 in June 2010. During that period, tenant entered into four stipulations of settlement, all of which required her to pay arrears, and required landlord to make repairs. On June 10, 2010, landlord stipulated to correct any violations in the apartment, and tenant stipulated to pay $708.50 in rent arrears by June 30. When tenant failed to pay by the deadline, a marshal executed the warrant of eviction on July 15. Landlord relet the premises, and tenant sought post-eviction relief.

In vacating the warrant of eviction, the court noted that both landlord and tenant agreed that about half of the rent arrears identified in the stipulation were not rent, but were other sums for which eviction would not have been an available remedy. The court also noted that tenant was now prepared to pay all arrears. Finally, the court concluded that the new tenant, who entered shortly after the warrant of eviction was executed, had been in the premises for only two weeks. As a result, the new tenant had not built up any equities in the premises. Therefore, the court held that it had authority to vacate the warrant of eviction, even after execution, and that the balance of the equities dictated restoration of the original tenant to the premises.

---

Questions of Fact Preclude Summary Judgment

3 MB Recording Studios, LLC v. 737 Smithtown Bypass Corp.
NYLJ 8/11/10 Supreme Ct., Suffolk Cty. (Pines, J.)

In tenant's action setting forth claims for constructive eviction, breach of the covenant of quiet enjoyment, and wrongful eviction, landlord moved for summary judgment dismissing the complaint and also sought summary judgment on its counterclaim for rent due. The court granted summary judgment on the wrongful eviction claim, but held that questions of fact precluded summary judgment on the other claims.

Landlord and tenant entered into a commercial lease. By the terms of the lease, tenant agreed to accept the premises subject to any code violations, and was “solely responsible for obtaining plans and permits.” However, in a rider to the lease, tenant covenanted “to use and occupy the demised premises solely as a recording studio/warehouse and for no other purpose unless approved in writing by Landlord ' ” The rider also imposed on tenant the obligation to “ comply at its sole cost and expense with all applicable codes, orders ' of any governmental authority having jurisdiction over the use of the premises.” When tenant began using the space for a recording studio, the Town of Smithtown served tenant with a series of violations. Apparently, use of the premises as a recording studio violated the local zoning ordinance. Although tenant learned of this difficulty in February 2007, tenant did not leave until August. Subsequently, tenant brought this action.

In denying landlord's summary judgment motion on the constructive eviction claim, the court concluded that the language of the lease was ambiguous, noting tenant's assertions that landlord had assured tenant that use as a recording studio was legal, and tenant's assertion that there was no way in which that use could ever be legalized. But the court dismissed tenant's wrongful eviction claim, noting that documentary evidence established that tenant had voluntarily abandoned the premises

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Landlord's Acceptance of J-51 Benefits Entitled
Tenants to Rent Stabilization Protection

Independence Plaza North Tenants' Assn v. Independence Plaza Associates L.P.
NYLJ 9/13/10, Supreme Ct., N.Y. Cty. (Friedman, J.)

In declaratory judgment actions, tenants in a former Mitchell-Lama apartment complex sought a determination that they had become rent-stabilized tenants at the expiration of landlord's exit from the Mitchell-Lama program. The court granted tenants the requested declaration, holding that landlord's acceptance of J-51 tax benefits after exit from the program entitled tenants to rent stabilization protection.

The subject buildings were built after 1974 pursuant to the Mitchell-Lama program. In 1998, the complex began to receive J-51 tax abatements based on a major capital improvement. In 2004, landlord exercised its statutory option to dissolve and exit from the Mitchell-Lama program. In 2006, the Department of Housing Preservation and Development (HPD) terminated the J-51 benefits effective as of th exit date, and landlord repaid all tax benefits received between exit from the program and the date of retroactive termination. Tenants brought this action contending that landlord's receive of the J-51 benefits subjected the apartments to rent stabilization protection from the date of exit from the Mitchell-Lama program. Although landlords had initially moved for summary judgment in 2007, Supreme Court, on motion by tenants, remanded to the Department of Housing and Community Renewal (DHCR), for a determination of the rent stabilized status of the apartments. DHCR determined that the apartments were not rent stabilized, and landlords then moved for summary judgment dismissing the complaint.

In awarding summary judgment to tenants and declaring the apartments rent-stabilized, the court held that it was not bound to defer to DHCR's determination because DHCR had not drawn upon its expertise in addressing the merits of tenants' claim, but instead had relied on HPD's determination that J-51 benefits had terminated as of the date landlord exited from the Mitchell-Lama program. The court concluded that DHCR had misapprehended the relevant legal issue, which the court characterized as whether the mere receipt of J-51 benefits subjected the units to rent stabilization protection. The court held that nothing in the applicable statute required termination of J-51 benefits upon exit from the Mitchell-Lama program. Instead, the court concluded that HPD had discretion whether to terminate those benefits. Because the benefits had not yet been terminated upon exit, landlord remained entitled to those benefits, but landlord's continued receipt of the benefits subjected the units to rent stabilization protection. Each apartment would remain subject to rent stabilization coverage until vacancy of that apartment by tenant, even though the tax benefit period has already expired, because the leases tenants executed did not contain notice that the unit would become subject to deregulation upon expiration of the tax benefit period.