Chelsea 19: A Survey

Strict Compliance

The fundamental holding of Chelsea 19 is that a tenant's mere “difficulty in obtaining funds” does not constitute a valid basis for relieving a tenant from its failure to pay monies under a stipulation of settlement. Thus, tenants who simply do not have the money to pay have not prevailed. See Waterside Plaza, LLC v. Bhawnaney, 34 Misc. 3d 140(A) (App. T. 1st Dep't 2012); 601 West Realty, LLC v. Castro, 32 Misc. 3d 143(A) (App. T. 1st Dep't 2011).

Repeated Failures

Courts have consistently ruled against tenants who have repeatedly, unexplainably, or inexcusably failed to abide by the payment terms of a stipulation of settlement. In such cases, courts have declined to: 1) further stay a warrant of eviction, see BPIV-556 West 188th Street v. Seka, 33 Misc. 3d 131(A) (App. T. 1st Dep't 2011); George Units, LLC v. Galan, 32 Misc. 3d 145(A) (App. T. 1st Dep't 2011); 2) vacate a stipulation or relieve a tenant from the consequences of the stipulation, see 223-225 West 10th Street Equities, Inc. v. Stokes, 31 Misc. 3d 137(A) (App. T. 1st Dep't 2011); RR Reo II, LLC v. Miah, 28 Misc. 3d 131(A) (App. T. 1st Dep't 2010); or 3) restore a tenant to possession, see Stevenson Commons Assoc., LP v. Bishop, 26 Misc. 3d 140(A) (App. T. 1st Dep't 2010). In denying such relief, courts have been particularly unsympathetic where payment deadlines had been extended, see Beaux Arts II, LLC v. Oyoue, 26 Misc. 3d 139(A) (App. T. 1st Dep't 2010), and where the stipulation has been denominated as “final.” See 100 Audubon Holdings, LP v. Hernandez, 31 Misc. 3d 128(A) (App. T. 1st Dep't 2011).

Confusion

Sometimes the terms of a stipulation are unclear as to how and when a tenant is to pay. Thus, in 421 W 22 LLC & 421 W 22B LLC v. Walberg, 30 Misc. 3d 136(A) (App. T. 1st Dep't 2011), Appellate Term found good cause to stay execution of the warrant of eviction where the tenant was confused as to “how he should make a payment under the subject stipulation when a payment deadline falls on a weekend.” In P&T Mgt. Co., LLC v. Galanis, 33 Misc. 3d 21 (App. T. 2d Dep't 2011), Appellate Term excused the tenant's default in paying where “tenant's understanding of the stipulation was incorrect” as to certain grace periods. Justice Weston, dissenting, argued for a strict enforcement of Chelsea 19.

Third-Party Payments

Occasionally a tenant will rely on a third party, such as the New York City Department of Social Services, to pay arrears owed under a stipulation of settlement. Courts have excused defaults where the tenant has diligently applied for funds from a third party, but where the funds were nevertheless late. In Bushwick Properties, LLC v. Wright, 34 Misc. 3d 135(A) (App. T. 2d Dep't), Appellate Term (again, over a dissent by Justice Weston) ruled in favor of a tenant who had “applied to several organizations for the arrears and, albeit belatedly, received a commitment letter for the full amount of the arrears.” See also Einhorn v. McCloud, 30 Misc. 3d 20 (App. T. 1st Dep't 2010) (tenant restored to possession where “he promptly applied for relief from a charitable organization” and “was then successful when he reapplied to HRA for the remainder of the arrears”). In both Bushwick and Einhorn, the courts favorably cited 2246 Holding Corp. v. Nolasco, 52 A.D.3d 377 (1st Dep't 2008), wherein the First Department stayed the execution of a warrant of eviction in favor of
“[a]n indigent tenant who reside[d] in an apartment for many years,” who had “made diligent efforts to comply with the terms of the settlement agreement, only to be stymied by events beyond her control.”

The third-party defense, however, will not work every time. In Harvey 1390 LLC v. Bodenheim, 29 Misc. 3d 77 (App. T. 1st Dep't 2010), Appellate Term declined to relieve the tenants from their default, holding that the record established that “tenants took no steps to obtain the stipulated arrearages through recourse to charitable organizations or otherwise until the payment due date agreed upon in the stipulation.” See also Diagonal Realty LLC v. Gil, 29 Misc. 3d 129(A) (App. T. 1st Dep't 2010) (“tenant took no steps to obtain the stipulated arrearages through recourse to City agencies until February 2009, months after the payment due date agreed upon in the stipulation”).

RPAPL 749(3)

RPAPL 749(3) provides that although the issuance of a warrant of eviction cancels the lease under which the tenant holds the premises, a court shall nevertheless have “the power to vacate such warrant for good cause shown prior to the execution thereof.” In 368 Chauncey Ave. Trust v. Whitaker, 28 Misc. 3d 130(A) (App. T. 2d Dep't 2010), the tenant had failed to substantially comply with a stipulation of settlement. The majority (Justices Golia and Weston) held that although courts may relieve a party from the consequences of strict enforcement of a stipulation where such enforcement would be unjust or inequitable, that power is only appropriate “where a party has substantially complied with the stipulation.” The majority went on to hold that “the authority of the court to vacate a warrant for good cause shown” under RPAPL 749(3) “is not appropriately invoked to override or alter the foregoing standards.” In dissent, Justice Rios held that a court's authority to invoke RPAPL 749(3) allows a court to extend a payment deadline “if there is no prejudice to the landlord.”

In 443 East 78 Realty LLC v. Tupas, 26 Misc. 3d 1240(A) (N.Y.C. Civ. Ct. 2010), Judge Michelle D. Schreiber held that Chelsea 19 did not “bar the granting of relief post-eviction” or divest a court of “the discretion to relieve a tenant of a default under a stipulation under appropriate circumstances.” There, the tenant made substantial payments under a stipulation, suffered a heart attack and was hospitalized for two weeks, and was late in making a final $615.96 payment.

Advice to Practitioners

Attorneys counseling tenants in non-payment proceedings must make certain that the tenant will actually have the necessary funds by each deadline set forth in the stipulation. If a tenant intends to rely on a third party for payment, the tenant's efforts to obtain such funds should be prompt, diligent, and documented.

Chelsea 19 teaches that stipulations are contracts, and that breaching a contract has consequences, including eviction. As the court held in that case, a tenant's loss of possession for breaching a stipulation is not a forfeiture, but is “'merely the contracted-for consequence' of his non-compliance with the stipulation.”

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 owner in Chelsea 19.

Chelsea 19 Associates v. James , 67 A.D.3d 601, was a seemingly unremarkable decision rendered by the Appellate Division, First Department on Nov. 24, 2009. In Chelsea 19, the landlord commenced a non-payment proceeding against a long-term rent-stabilized tenant. The parties settled the proceeding pursuant to a so-ordered stipulation whereby the tenant agreed to pay $4,000 in rent arrears by Dec. 31, 2006, and to otherwise remain current in his rent. The stipulation called for the entry of a judgment and the issuance of a warrant if the tenant breached, but gave the tenant an eight-day cure period.

The tenant defaulted on the stipulation, but Civil Court vacated the warrant of eviction when the tenant tendered the disputed sums many months after the deadline. The Appellate Division, affirming Appellate Term, held that stipulations are to be enforced, and that the tenant's excuse for his default under the stipulation ' that he had difficulty securing the necessary funds ' was no excuse at all. The tenant was thereafter evicted.

In the 30 months following Chelsea 19, the case has been cited in no less than 22 Appellate Term and Civil Court decisions. This article surveys those decisions.

Strict Compliance

The fundamental holding of Chelsea 19 is that a tenant's mere “difficulty in obtaining funds” does not constitute a valid basis for relieving a tenant from its failure to pay monies under a stipulation of settlement. Thus, tenants who simply do not have the money to pay have not prevailed. See Waterside Plaza, LLC v. Bhawnaney , 34 Misc. 3d 140(A) (App. T. 1st Dep't 2012); 601 West Realty, LLC v. Castro , 32 Misc. 3d 143(A) (App. T. 1st Dep't 2011).

Repeated Failures

Courts have consistently ruled against tenants who have repeatedly, unexplainably, or inexcusably failed to abide by the payment terms of a stipulation of settlement. In such cases, courts have declined to: 1) further stay a warrant of eviction, see BPIV-556 West 188th Street v. Seka , 33 Misc. 3d 131(A) (App. T. 1st Dep't 2011); George Units, LLC v. Galan , 32 Misc. 3d 145(A) (App. T. 1st Dep't 2011); 2) vacate a stipulation or relieve a tenant from the consequences of the stipulation, see 223-225 West 10th Street Equities, Inc. v. Stokes , 31 Misc. 3d 137(A) (App. T. 1st Dep't 2011); RR Reo II, LLC v. Miah , 28 Misc. 3d 131(A) (App. T. 1st Dep't 2010); or 3) restore a tenant to possession, see Stevenson Commons Assoc., LP v. Bishop , 26 Misc. 3d 140(A) (App. T. 1st Dep't 2010). In denying such relief, courts have been particularly unsympathetic where payment deadlines had been extended, see Beaux Arts II, LLC v. Oyoue , 26 Misc. 3d 139(A) (App. T. 1st Dep't 2010), and where the stipulation has been denominated as “final.” See 100 Audubon Holdings, LP v. Hernandez , 31 Misc. 3d 128(A) (App. T. 1st Dep't 2011).

Confusion

Sometimes the terms of a stipulation are unclear as to how and when a tenant is to pay. Thus, in 421 W 22 LLC & 421 W 22B LLC v. Walberg , 30 Misc. 3d 136(A) (App. T. 1st Dep't 2011), Appellate Term found good cause to stay execution of the warrant of eviction where the tenant was confused as to “how he should make a payment under the subject stipulation when a payment deadline falls on a weekend.” In P&T Mgt. Co., LLC v. Galanis , 33 Misc. 3d 21 (App. T. 2d Dep't 2011), Appellate Term excused the tenant's default in paying where “tenant's understanding of the stipulation was incorrect” as to certain grace periods. Justice Weston, dissenting, argued for a strict enforcement of Chelsea 19.

Third-Party Payments

Occasionally a tenant will rely on a third party, such as the New York City Department of Social Services, to pay arrears owed under a stipulation of settlement. Courts have excused defaults where the tenant has diligently applied for funds from a third party, but where the funds were nevertheless late. In Bushwick Properties, LLC v. Wright , 34 Misc. 3d 135(A) (App. T. 2d Dep't), Appellate Term (again, over a dissent by Justice Weston) ruled in favor of a tenant who had “applied to several organizations for the arrears and, albeit belatedly, received a commitment letter for the full amount of the arrears.” See also Einhorn v. McCloud , 30 Misc. 3d 20 (App. T. 1st Dep't 2010) (tenant restored to possession where “he promptly applied for relief from a charitable organization” and “was then successful when he reapplied to HRA for the remainder of the arrears”). In both Bushwick and Einhorn , the courts favorably cited 2246 Holding Corp. v. Nolasco , 52 A.D.3d 377 (1st Dep't 2008), wherein the First Department stayed the execution of a warrant of eviction in favor of
“[a]n indigent tenant who reside[d] in an apartment for many years,” who had “made diligent efforts to comply with the terms of the settlement agreement, only to be stymied by events beyond her control.”

The third-party defense, however, will not work every time. In Harvey 1390 LLC v. Bodenheim , 29 Misc. 3d 77 (App. T. 1st Dep't 2010), Appellate Term declined to relieve the tenants from their default, holding that the record established that “tenants took no steps to obtain the stipulated arrearages through recourse to charitable organizations or otherwise until the payment due date agreed upon in the stipulation.” See also Diagonal Realty LLC v. Gil , 29 Misc. 3d 129(A) (App. T. 1st Dep't 2010) (“tenant took no steps to obtain the stipulated arrearages through recourse to City agencies until February 2009, months after the payment due date agreed upon in the stipulation”).

RPAPL 749(3)

RPAPL 749(3) provides that although the issuance of a warrant of eviction cancels the lease under which the tenant holds the premises, a court shall nevertheless have “the power to vacate such warrant for good cause shown prior to the execution thereof.” In 3 68 Chauncey Ave. Trust v. Whitaker , 28 Misc. 3d 130(A) (App. T. 2d Dep't 2010), the tenant had failed to substantially comply with a stipulation of settlement. The majority (Justices Golia and Weston) held that although courts may relieve a party from the consequences of strict enforcement of a stipulation where such enforcement would be unjust or inequitable, that power is only appropriate “where a party has substantially complied with the stipulation.” The majority went on to hold that “the authority of the court to vacate a warrant for good cause shown” under RPAPL 749(3) “is not appropriately invoked to override or alter the foregoing standards.” In dissent, Justice Rios held that a court's authority to invoke RPAPL 749(3) allows a court to extend a payment deadline “if there is no prejudice to the landlord.”

In 443 East 78 Realty LLC v. Tupas , 26 Misc. 3d 1240(A) (N.Y.C. Civ. Ct. 2010), Judge Michelle D. Schreiber held that Chelsea 19 did not “bar the granting of relief post-eviction” or divest a court of “the discretion to relieve a tenant of a default under a stipulation under appropriate circumstances.” There, the tenant made substantial payments under a stipulation, suffered a heart attack and was hospitalized for two weeks, and was late in making a final $615.96 payment.

Advice to Practitioners

Attorneys counseling tenants in non-payment proceedings must make certain that the tenant will actually have the necessary funds by each deadline set forth in the stipulation. If a tenant intends to rely on a third party for payment, the tenant's efforts to obtain such funds should be prompt, diligent, and documented.

Chelsea 19 teaches that stipulations are contracts, and that breaching a contract has consequences, including eviction. As the court held in that case, a tenant's loss of possession for breaching a stipulation is not a forfeiture, but is “'merely the contracted-for consequence' of his non-compliance with the stipulation.”

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 owner in Chelsea 19.