Landlord & Tenant

Private Parties May Not Agree to Change Rent Control Status

Extell Belnord v. Uppman

NYLJ 11/29/13, p. 21, col. 1

AppDiv, First Dept.

(Opinion by Mazzarelli, J.)

In landlord's action for a judgment declaring that named tenant has ceased using the apartment as her primary residence and is therefore no longer entitled to possession under the terms of the lease, and for an order of ejectment of all persons occupying the apartment, occupant appealed from Supreme Court's grant of summary judgment to landlord declaring that occupant could not challenge the apartment's rent regulated status. The Appellate Division modified to deny landlord's motion, holding that the landlord and tenant could not contract to alter the apartment's rent-regulated status.

In 1994, the previous owner of the subject building and the building's tenants association entered into an agreement acknowledging that certain apartments were rent-controlled. In 2006, the current owner and the association entered into a revised agreement providing that tenants who signed the agreement would not be subject to rent regulation, but would be entitled to new 49-year leases, together with succession rights and limits on annual increases. The agreements also provided that succession rights would extend only to children, not to grandchildren. The agreements required landlord and tenant signatories to submit a copy of the agreement to DHCR and to request that the agency issue an order declaring the apartments exempt from the city's rent regulation laws. DHCR subsequently issued an order of deregulation for each of the subject apartments.

Tenant Uppman was one of the signatories to the agreement. At the time she signed the agreement, her grandson lived in the apartment and signed the agreement, expressly waiving any succession rights to the apartment. Three years later, in 2009, Uppman moved into a nursing home. In 2011, landlord brought this action for a declaration that the apartment was no longer Uppman's apartment, and that landlord was entitled to possession. The grandson answered, asserting that the apartment was rent-controlled, and that he was entitled to succession rights because he resided with Uppman for more than two years before she moved into a nursing home. Supreme Court awarded partial summary judgment to landlord, holding that the grandson could not challenge the apartment's rent regulated status since he had failed to pursue administrative remedies after the DHCR issued its deregulation order and provided him notice of the deregulation. The grandson appealed.

In modifying, the Appellate Division held that the agreement on which the deregulation order was based was void as against public policy because an agreement to modify the rent laws is of no effect even if the modification is favorable to the tenant. The court indicated that the agreement and the DHCR deregulation order were so intertwined that the order was not entitled to collateral estoppels effect. The court then held that questions of fact remained about whether the grandson had in fact occupied the apartment as his primary residence for the two years before the tenant's departure, and about whether the landlord had created a month-to-month tenancy by accepting the grandson's rent.

'

Garage in Mitchell-Lama Building Subject to Rent Regulation Even if Not Operated By Building Owner

In re Richman Plaza Garage Corp. v. DHCR

NYLJ 12/16/13, p. 18, col. 4

AppDiv, First Dept.

(memorandum opinion)

In an article 78 proceeding by a garage operator challenging DHCR's rejection of its petition for higher rates, operator appealed from Supreme Court's denial of the petition and dismissal of the proceeding. The Appellate Division affirmed, holding that a garage in a Mitchell-Lama building is subject to rent regulation even if the garage is not operated by the private housing finance company that owns the building.

The private housing finance company that owns a Mitchell-Lama building leased garage space to a commercial tenant. The garage tenant applied to DHCR for an increase in the parking rate it charges tenants in the building. DHCR granted an increase of nearly 80%, but denied the larger increase the garage tenant had sought. The garage tenant then brought this article 78 proceeding, but Supreme Court denied the petition.

In affirming, the Appellate Division rejected garage tenant's argument that DHCR is only authorized to regulate parking rates for residential tenants when the private housing finance company itself operates the garage. The court noted that accepting the garage tenant's premise would allow private housing finance companies to avoid DHCR oversight simply by leasing out garage space to independent operators. That, in the court's view, would contravene the purpose of the statute and the regulations, which were designed to preserve affordable housing and ancillary expenses for low income tenants.

'

Prospective Landlord Not Entitled to Recover Lost Rent

Bedford Associates LLC v. Ricky's Williamsburg, Inc.

NYLJ 12/30/13, p. 18, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action by prospective landlord against prospective tenant for repudiation of a lease agreement, both parties appealed from Supreme Court's judgment awarding $1,048,708.97 to prospective landlord. The Appellate Division affirmed, holding that landlord was not entitled to recover rent due because it was not foreseeable that tenant would be held liable for lost rent.

Prospective landlord had entered into a contract to purchase the subject building. Prospective landlord then entered into a lease with prospective tenant, and a side letter agreement between the two made it clear that landlord could not purchase the building if prospective tenant did not proceed with the lease. Tenant subsequently repudiated, prospective landlord did not close, and brought this action for damages.

In holding that landlord was not entitled to rent due under the lease, the court noted that it would be unfair to hold tenant liable for rent without deducting the operating costs attributable to the leased space. Because the operating costs are unknowable, the court held that tenant's liability for rent was not foreseeable at the time the parties entered into the lease agreement. The court also held that landlord could not hold tenant liable for loss of a potential opportunity to sell the building in the future, which also was too speculative to permit a damage award. The court did hold, however, that tenant was liable for renovations completed to construct a store for tenant because the parties' agreement expressly made tenant responsible for those costs. The court also held that prospective landlord was entitled only to partial recovery of attorneys fees pursuant to the lease agreement because landlord prevailed on only some of its claims.

'

'

Private Parties May Not Agree to Change Rent Control Status

Extell Belnord v. Uppman

NYLJ 11/29/13, p. 21, col. 1

AppDiv, First Dept.

(Opinion by Mazzarelli, J.)

In landlord's action for a judgment declaring that named tenant has ceased using the apartment as her primary residence and is therefore no longer entitled to possession under the terms of the lease, and for an order of ejectment of all persons occupying the apartment, occupant appealed from Supreme Court's grant of summary judgment to landlord declaring that occupant could not challenge the apartment's rent regulated status. The Appellate Division modified to deny landlord's motion, holding that the landlord and tenant could not contract to alter the apartment's rent-regulated status.

In 1994, the previous owner of the subject building and the building's tenants association entered into an agreement acknowledging that certain apartments were rent-controlled. In 2006, the current owner and the association entered into a revised agreement providing that tenants who signed the agreement would not be subject to rent regulation, but would be entitled to new 49-year leases, together with succession rights and limits on annual increases. The agreements also provided that succession rights would extend only to children, not to grandchildren. The agreements required landlord and tenant signatories to submit a copy of the agreement to DHCR and to request that the agency issue an order declaring the apartments exempt from the city's rent regulation laws. DHCR subsequently issued an order of deregulation for each of the subject apartments.

Tenant Uppman was one of the signatories to the agreement. At the time she signed the agreement, her grandson lived in the apartment and signed the agreement, expressly waiving any succession rights to the apartment. Three years later, in 2009, Uppman moved into a nursing home. In 2011, landlord brought this action for a declaration that the apartment was no longer Uppman's apartment, and that landlord was entitled to possession. The grandson answered, asserting that the apartment was rent-controlled, and that he was entitled to succession rights because he resided with Uppman for more than two years before she moved into a nursing home. Supreme Court awarded partial summary judgment to landlord, holding that the grandson could not challenge the apartment's rent regulated status since he had failed to pursue administrative remedies after the DHCR issued its deregulation order and provided him notice of the deregulation. The grandson appealed.

In modifying, the Appellate Division held that the agreement on which the deregulation order was based was void as against public policy because an agreement to modify the rent laws is of no effect even if the modification is favorable to the tenant. The court indicated that the agreement and the DHCR deregulation order were so intertwined that the order was not entitled to collateral estoppels effect. The court then held that questions of fact remained about whether the grandson had in fact occupied the apartment as his primary residence for the two years before the tenant's departure, and about whether the landlord had created a month-to-month tenancy by accepting the grandson's rent.

'

Garage in Mitchell-Lama Building Subject to Rent Regulation Even if Not Operated By Building Owner

In re Richman Plaza Garage Corp. v. DHCR

NYLJ 12/16/13, p. 18, col. 4

AppDiv, First Dept.

(memorandum opinion)

In an article 78 proceeding by a garage operator challenging DHCR's rejection of its petition for higher rates, operator appealed from Supreme Court's denial of the petition and dismissal of the proceeding. The Appellate Division affirmed, holding that a garage in a Mitchell-Lama building is subject to rent regulation even if the garage is not operated by the private housing finance company that owns the building.

The private housing finance company that owns a Mitchell-Lama building leased garage space to a commercial tenant. The garage tenant applied to DHCR for an increase in the parking rate it charges tenants in the building. DHCR granted an increase of nearly 80%, but denied the larger increase the garage tenant had sought. The garage tenant then brought this article 78 proceeding, but Supreme Court denied the petition.

In affirming, the Appellate Division rejected garage tenant's argument that DHCR is only authorized to regulate parking rates for residential tenants when the private housing finance company itself operates the garage. The court noted that accepting the garage tenant's premise would allow private housing finance companies to avoid DHCR oversight simply by leasing out garage space to independent operators. That, in the court's view, would contravene the purpose of the statute and the regulations, which were designed to preserve affordable housing and ancillary expenses for low income tenants.

'

Prospective Landlord Not Entitled to Recover Lost Rent

Bedford Associates LLC v. Ricky's Williamsburg, Inc.

NYLJ 12/30/13, p. 18, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action by prospective landlord against prospective tenant for repudiation of a lease agreement, both parties appealed from Supreme Court's judgment awarding $1,048,708.97 to prospective landlord. The Appellate Division affirmed, holding that landlord was not entitled to recover rent due because it was not foreseeable that tenant would be held liable for lost rent.

Prospective landlord had entered into a contract to purchase the subject building. Prospective landlord then entered into a lease with prospective tenant, and a side letter agreement between the two made it clear that landlord could not purchase the building if prospective tenant did not proceed with the lease. Tenant subsequently repudiated, prospective landlord did not close, and brought this action for damages.

In holding that landlord was not entitled to rent due under the lease, the court noted that it would be unfair to hold tenant liable for rent without deducting the operating costs attributable to the leased space. Because the operating costs are unknowable, the court held that tenant's liability for rent was not foreseeable at the time the parties entered into the lease agreement. The court also held that landlord could not hold tenant liable for loss of a potential opportunity to sell the building in the future, which also was too speculative to permit a damage award. The court did hold, however, that tenant was liable for renovations completed to construct a store for tenant because the parties' agreement expressly made tenant responsible for those costs. The court also held that prospective landlord was entitled only to partial recovery of attorneys fees pursuant to the lease agreement because landlord prevailed on only some of its claims.

'

'