Landlord & Tenant

Supreme Ct., Kings Cty.

(Schmidt, J.)

In an action by subtenant against main tenant for fraud and breach of contract, defendant tenant moved to dismiss the complaint. The court granted the motion, holding that subtenant's various claims were barred by the statute of frauds and various express provisions in the sublease agreement.

Tenant had occupied restaurant premises subject to a lease agreement dated in 1995. In 2005, tenant sold the restaurant to subtenant's predecessor, and sublet the restaurant premises to subtenant's predecessor. In 2009, the predecessor sought relief against the landlord, but the claims were dismissed. Although subtenant now brought the same claims against landlord, the court dismissed those claims on res judicata grounds. Subtenant also sought relief against tenant, contending that tenant had represented that subtenant would have a right of first refusal and a 15-year option to renew, that subtenant would own the yard adjacent to the bar, and that there was insufficient soundproofing in the building.

In dismissing subtenant's claim with respect to the right of first refusal and option to renew, the court relied on the statute of frauds, and noted that there was no part performance here that would take the claim outside the statute of frauds. In dismissing the claim with respect to the yard area, the court relied on a clause in the sublease, which provided that owner “makes no representation as to the location of the property line of the building,” together with another clause providing that the owner had not “made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises '” With respect to the soundproofing, the court relied on sublease provisions in which subtenant acknowledged that it was relying only on express representations in the contract and its own independent investigation and examination. The court noted that in the absence of any active concealment by tenant, tenant could not bear liability for inadequate soundproofing. As a result, the court dismissed all three claims of fraud and fraudulent inducement.

Landlord Protected by Reliance on DHCR Interpretation of J-51 Law

Cohen v. 820 West End Avenue, LLC

NYLJ 7/25/12

Supreme Ct., N.Y. Cty.

(Wooten, J.)

In tenants' action for a judgment declaring that their apartment is rent-stabilized, and for relief for rent overcharges and treble damages, landlord sought summary judgment dismissing the complaint. The court declared that the apartment was stabilized, but otherwise dismissed the complaint, concluding that landlord had reasonably relied on DHCR interpretations of the rent stabilization law.

Until 2001, the subject apartment was rent-controlled. In that year, the rent-controlled tenant vacated, and landlord made a number of improvements before renting the apartment to new tenants at a monthly rent of $2,700. Because the new rent exceeded $2,000, landlord treated the apartment as subject to luxury deregulation, and registered the apartment as “permanently exempt” with DHCR. Plaintiff tenants entered into a one-year residential lease for the apartment in May 2009 at a rent of $3975, and renewed the lease a year later at a rent of $4,000. After tenants took occupancy, the Court of Appeals decided Roberts v. Tishman Speyer Props., L.P., 13 NY3d 270, which held that luxury deregulation was not available in a building that was receiving J-51 tax benefits. Landlord had been receiving those benefits, which did not expire until June 2010. As a result, tenant brought this action seeking declaratory relief and money damages.

Landlord essentially conceded that the apartment was subject to rent stabilization, and, in fact, registered the apartment with DHCR in March 2011. The court, therefore, had no difficulty in awarding tenant declaratory relief. The court then turned to fixing the stabilized rent, and concluded that it should look to the rent agreed upon between landlord and the tenant then in occupancy four years before the date of the complaint. Here, that date was 2007, and the rent in the lease in effect from July 2006-July 2007 was $3425. The court concluded that landlord was entitled to collect that amount plus the periodic guideline increases in consecutive years. Based on that amount, plus permitted increases in subsequent years, the court concluded that landlord had charged tenant less than the permitted rent for the apartment, and that tenant had therefore suffered no damages.

The court rejected tenant's argument that landlord had engaged in fraudulent conduct that justified: 1) looking back more than four years to set the permitted rent; and 2) treble damages. The court noted that landlord's actions had been consistent with DHCR's interpretations of the rent stabilization law, and held that because there had been no purposeful evasion of the rent control laws, tenant's overcharge complaint was subject to the ordinary four-year look back period for establishing the base rent.

Subtenant's Claim Barred by Statute of Frauds

P.J. Hanley's Corp. v. Esposito

NYLJ 7/30/12

Supreme Ct., Kings Cty.

(Schmidt, J.)

In an action by subtenant against main tenant for fraud and breach of contract, defendant tenant moved to dismiss the complaint. The court granted the motion, holding that subtenant's various claims were barred by the statute of frauds and various express provisions in the sublease agreement.

Tenant had occupied restaurant premises subject to a lease agreement dated in 1995. In 2005, tenant sold the restaurant to subtenant's predecessor, and sublet the restaurant premises to subtenant's predecessor. In 2009, the predecessor sought relief against the landlord, but the claims were dismissed. Although subtenant now brought the same claims against landlord, the court dismissed those claims on res judicata grounds. Subtenant also sought relief against tenant, contending that tenant had represented that subtenant would have a right of first refusal and a 15-year option to renew, that subtenant would own the yard adjacent to the bar, and that there was insufficient soundproofing in the building.

In dismissing subtenant's claim with respect to the right of first refusal and option to renew, the court relied on the statute of frauds, and noted that there was no part performance here that would take the claim outside the statute of frauds. In dismissing the claim with respect to the yard area, the court relied on a clause in the sublease, which provided that owner “makes no representation as to the location of the property line of the building,” together with another clause providing that the owner had not “made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises '” With respect to the soundproofing, the court relied on sublease provisions in which subtenant acknowledged that it was relying only on express representations in the contract and its own independent investigation and examination. The court noted that in the absence of any active concealment by tenant, tenant could not bear liability for inadequate soundproofing. As a result, the court dismissed all three claims of fraud and fraudulent inducement.

Landlord Protected by Reliance on DHCR Interpretation of J-51 Law

Cohen v. 820 West End Avenue, LLC

NYLJ 7/25/12

Supreme Ct., N.Y. Cty.

(Wooten, J.)

In tenants' action for a judgment declaring that their apartment is rent-stabilized, and for relief for rent overcharges and treble damages, landlord sought summary judgment dismissing the complaint. The court declared that the apartment was stabilized, but otherwise dismissed the complaint, concluding that landlord had reasonably relied on DHCR interpretations of the rent stabilization law.

Until 2001, the subject apartment was rent-controlled. In that year, the rent-controlled tenant vacated, and landlord made a number of improvements before renting the apartment to new tenants at a monthly rent of $2,700. Because the new rent exceeded $2,000, landlord treated the apartment as subject to luxury deregulation, and registered the apartment as “permanently exempt” with DHCR. Plaintiff tenants entered into a one-year residential lease for the apartment in May 2009 at a rent of $3975, and renewed the lease a year later at a rent of $4,000. After tenants took occupancy, the Court of Appeals decided Roberts v. Tishman Speyer Props., L.P. , 13 NY3d 270, which held that luxury deregulation was not available in a building that was receiving J-51 tax benefits. Landlord had been receiving those benefits, which did not expire until June 2010. As a result, tenant brought this action seeking declaratory relief and money damages.

Landlord essentially conceded that the apartment was subject to rent stabilization, and, in fact, registered the apartment with DHCR in March 2011. The court, therefore, had no difficulty in awarding tenant declaratory relief. The court then turned to fixing the stabilized rent, and concluded that it should look to the rent agreed upon between landlord and the tenant then in occupancy four years before the date of the complaint. Here, that date was 2007, and the rent in the lease in effect from July 2006-July 2007 was $3425. The court concluded that landlord was entitled to collect that amount plus the periodic guideline increases in consecutive years. Based on that amount, plus permitted increases in subsequent years, the court concluded that landlord had charged tenant less than the permitted rent for the apartment, and that tenant had therefore suffered no damages.

The court rejected tenant's argument that landlord had engaged in fraudulent conduct that justified: 1) looking back more than four years to set the permitted rent; and 2) treble damages. The court noted that landlord's actions had been consistent with DHCR's interpretations of the rent stabilization law, and held that because there had been no purposeful evasion of the rent control laws, tenant's overcharge complaint was subject to the ordinary four-year look back period for establishing the base rent.