Landlord & Tenant

In affirming, the Appellate Division upheld Supreme Court's determination that, as a matter of law, the lease's accelerated rent clause constituted an unenforceable penalty and that landlord was limited to actual damages proven. The court also upheld the determination that landlord was obligated to provide proof of actual damages, and that landlord's failure to provide such proof justified a denial of any recovery of damages.

COMMENT

New York courts do not enforce lease provisions calling for rent acceleration if tenant breaches even an immaterial covenant, but they do enforce rent acceleration clauses triggered only by tenant's failure to pay rent. In 884 West End Ave. Corp. v Pearlman, 201 AppDiv. 12, affd 234 N.Y. 589, the court invalidated a rent-acceleration clause that provided that all rent under the lease would become due if tenant failed to comply with any of the lease's covenants, which included covenants as trivial as prohibiting tenant from driving picture nails into the wall. In concluding that the lease provision was unenforceable as a penalty, the court emphasized that some of the conditions that would trigger rent acceleration would involve no damage at all or nominal damage. Although tenant's alleged breach in 884 was a failure to pay rent, the court invalidated the entire clause as a penalty. In Fifty States Management Corp. v. Pioneer Auto Parks, Inc., 46 N.Y.2d 573, on the other hand, the court enforced a rent-acceleration clause requiring payment of future rent due under the lease upon the tenant's failure to pay rent. There, the court reasoned that the damages reserved in the clause bore a distinct relationship to the damages sustained by the landlord as a result of the tenant's breach. Id. When the tenant failed to pay rent, the landlord was merely afforded the option to receive the rental payments reserved for the remainder of the lease as a condition of the tenant's continued occupancy. Id.

Although landlord may enforce a clause accelerating all rent as a consequence of tenant's failure to pay, landlord may require accelerated payment of all rent only if landlord elects to allow the tenant to remain in possession of the premises. In Fifty States, for instance, the landlord allowed the tenant to remain in possession of the premises. Enforcing a rent-acceleration clause where the landlord allows the breaching tenant to remain in possession of the premises does not create the potential for a windfall. The damages reserved are proportionate to the landlord's actual loss — the risk that tenant will default on rent payments for the remainder of the lease term.

By contrast, if a lease authorizes rent acceleration for breach of a covenant to pay rent, and the landlord retakes possession of the premises, the landlord will be entitled to collect only the present value of the leasehold at the time of tenant's default. Courts do not permit a landlord to collect future rent from the former tenant while simultaneously collecting rent from a new tenant. In 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Assn., Inc., 24 N.Y.3d 528, the Court of Appeals granted the tenants a hearing on their allegation that the acceleration of future rent in a commercial lease was disproportionate to the landlord's actual losses and was therefore an unenforceable penalty. The rent acceleration clause at issue gave the landlord both the right to possession of the premises as well as the right to recover all future rent due under the lease. Id. The court reasoned that awarding the landlord both possession as well as the right to immediately recover all future rent due from the prior tenant would allow the landlord to “double-dip.” Id. 172. Van Duzer herefore establishes that a landlord's damages must be discounted to present day value when he or she retakes possession of the premises.

Clearview establishes that a landlord that seeks to enforce a rent acceleration clause has the burden of proving that it has not collected rent from a new tenant that would be offset against any obligation of the original defaulting tenant.

Landlord Liable for Breach
Dunbar Owners LLC v. Jones
NYLJ 1/30/17, p. 24, col. 4
AppTerm, First Dept.
(memorandum opinion)

In landlord's action for unpaid rent, landlord appealed from Civil Court's abatement awarded to tenant for breach of the warranty of habitability. The Appellate Term affirmed, holding that the amount of the award should not be limited to the period after landlord purchased the building, and should not be limited to the amount of unpaid rent sought by landlord.

When landlord brought this action for unpaid rent, tenant asserted a claim for breach of the warranty of habitability, submitting evidence, including photographs and inspection reports by the Department of Housing Preservation and development, documenting the fact that tenant had an unusable bathroom, a broken kitchen sink and living room window, and vermin infestation. The evidence also established that landlord and its predecessor had notice of these conditions. Based on the evidence, Civil Court awarded tenant a substantial rent abatement, and an increase in the abatement for the period after November 2012, when evidence established additional violations. Landlord appealed, contending that the abatement award was excessive.

In affirming, the Appellate Term rejected landlord's argument that landlord's liability should be limited to the period after it purchased the building. The court emphasized that the closing documents indicated that landlord acquired the property in June 2013 subject to existing tenancies. The court also held that tenant's award should not be limited to the amount of unpaid rent sought by landlord.

COMMENT

In holding the landlord liable for breaches committee while a predecessor owned the building, the court departs from the rule New York courts have applied with respect to commercial tenants: A successor landlord is not liable for breaches committed by a predecessor even if the assignment to the successor landlord, or the terms of the original lease, provide that the successor landlord assumes all obligations of its predecessor. Thus, in Won's Cards, Inc. v. Samsondale/Haverstraw Equities, Ltd., 165 A.D.2d 157, where a commercial tenant brought suit against its successor-landlord seeking to recover for damages it allegedly suffered as a result of the predecessor-landlord's breach of an exclusive use provision in the tenant's lease, the court held that the successor-landlord was not liable to the tenant even though the successor-landlord had, in the lease assignment agreement, assumed the predecessor-landlord's obligations under the lease. The court emphasized that an assumption of lease obligations did not include an assumption of predecessor-landlord's liabilities if those liabilities arose prior to the assignment. See also Bank of New York v. Hirschfeld, 63 A.D.2d 794 (holding that, despite assumption of obligations provision in assignment agreement, successor landlord was not liable for liabilities incurred before the date of the assignment).

Won's Cards involved an assumption of obligations in the assignment agreement, but in Kramer Levin Naftalis & Frankel, LLP v. Metropolitan 919 3rd Ave., LLC, 6 Misc.3d 796, the court reached the same result where the assumption appeared in the original lease. In Kramer, where a commercial tenant brought suit against its successor-landlord seeking rent credits owed to the tenant by the predecessor-landlord under its lease, the court held that the successor-landlord was not liable for the credits even though the lease itself provided for an express assumption of “all covenants and obligations … by any successor-in-interest.” The court concluded that the clause did not comprise credits, because credits were liabilities, not covenants or obligations.

Both Won's Cards and Kramer suggested that the result would be different if the successor landlord had agreed to assume the liabilities, as well as the obligations, of the predecessor. For that proposition, Won's Cards cited an earlier case, Cirfico Holdings Corporation v. GTE Products Corporation, 99 A.D.2d 939, which dealt with an assignment outside the context of landlord-tenant relationships.

Tenant's Right to Surrender Bonus
Great Location New York, Inc. v. 719 Seventh TIC 1 Owner, LLC
NYLJ 1/30/17, p. 20, col. 1
AppDiv, First Dept.
(memorandum opinion)

In commercial tenant's action to recover a surrender bonus, tenant appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division affirmed, holding that landlord had raised questions of fact about whether tenant's delay in vacating the premises constituted a material default negating tenant's right to the bonus.

The commercial lease included a provision permitting landlord to terminate the lease if it decided to demolish the building. The demolition provision required landlord to give tenant six months' notice, and also required landlord to pay tenant a surrender bonus after tenant vacated, provided that tenant “was not in default beyond any applicable grace period with respect to a provision of the lease which Landlord reasonably believes to be material.” Tenant's subtenant remained in possession for 26 days after landlord terminated the lease pursuant to the demolition provision. Landlord made $55,000 in incentive payments to the holdover subtenant and to a sub-subtenant, but did not pay the full surrender bonus to tenant in question. The latter then brought this action to recover the bonus, and Supreme Court denied tenant's summary judgment motion.

In affirming, the Appellate Division noted that landlord's representative had submitted an affidavit indicating that landlord was ready to start demolition immediately after termination of the lease, and incurred carrying costs while waiting for delivery of vacant premises. As a result, landlord raised questions of fact about whether tenant was in default of a material provision of the lease. The court also rejected tenant's argument that landlord was required to serve tenant with a notice to cure, focusing on the absence of language in the demolition provision requiring any notice to cure. Finally, the court concluded that loss of payment for early termination did not constitute a “forfeiture” disfavored by the law.

Tenant Not Entitled to Stay of Execution
222 East 12 Realty v. So
NYLJ 1/17/17, p. 22, col. 4
AppTerm, First Dept.
(2-1 decision; memorandum opinion; dissenting memorandum by Ling-Cohan, J.)

In landlord's nuisance holdover proceeding, tenant appealed from Civil Court's award of possession to landlord upon a finding that tenant had breached a stipulation of settlement. A divided Appellate Term affirmed, holding that in light of the stipulation's provision that there would be no further stays upon breach, Civil Court properly awarded landlord a possessory judgment.

Landlord initially brought this proceeding upon allegations that tenant had crammed garbage and debris into his SRO apartment from floor to ceiling, causing a health, fire, and safety hazard. The parties entered into a two-attorney stipulation of settlement providing for a ten-month period during which tenant would refrain from maintaining the premises in an unsafe condition by cramming garbage, trash, boxes and bags as listed in the termination notice. The stipulation provided that upon alleged breach, the proceeding would be restored to the calendar and if the court found that a nuisance were present, landlord would be entitled to a possessory judgment with no further stays. After an inspection, landlord moved to restore the proceeding to the calendar, claiming breach by tenant. Civil Court concluded that the evidence showed a nuisance condition depicting an undue accumulation of garbage, and found a breach of the stipulation. That court then awarded landlord a judgment of possession, with no stay of the issuance of a warrant, citing the stipulation provision precluding stays. Tenant appealed.

In affirming, the Appellate Term majority concluded that Civil Court's findings were supported by a fair interpretation of the evidence, including photographs. The court held that the stipulation precluded further stays, and noted that, in light of previous efforts by Adult Protective Services to assist tenant in curing the condition, it appeared as if the condition could not be cured.

Justice Ling-Cohan, dissenting, first contended that the evidence did not support the finding that tenant had breached the stipulation, noting that it was not clear that tenant had crammed garbage from floor to ceiling, or that the conditions had created a fire or safety hazard. She then contended that the stipulation did not preclude cure after landlord's inspection but before the court's hearing. Finally, she contended that even if tenant had breached the stipulation, the court was obligated to afford tenant a post-judgment opportunity to cure. She relied on RPAPL 753(4), and noted that the post-judgment opportunity to cure was particularly appropriate in light of the tenant's 38-year rent-stabilized tenancy.

COMMENT

RPAPL 753(4) provides that where a landlord prevails in a holdover proceeding for breach of a lease agreement, the court must grant the tenant a post-judgment 10-day stay of a warrant of ejectment, during which time the tenant will have an opportunity to cure the breach. In Nestor v. McDowell, 81 N.Y.2d 410, the Court of Appeals, in holding that RPAPL 753(4) applies to ejectment actions as well as summary holdover proceedings, affirmed the lower court's decision which granted the tenants an opportunity to cure their breach of installing and maintaining a washing machine without the landlord's consent. Id. at 414-15. In Nestor, landlord had sent at least three notices to tenant to cure the violation prior to the commencing the action. Id. at 413.

However, in a nuisance holdover proceeding, courts draw a distinction between a nuisance that constitutes a mere breach of a lease, warranting an RPAPL 753(4) post-judgment stay and opportunity to cure, and a nuisance that is so chronic that it is incapable of cure. For example, in Unicorn 151 Corp. v. Small, 181 Misc.2d 304, the court held that the tenant was entitled to an opportunity to cure in a nuisance holdover proceeding for failing to maintain the rent-stabilized apartment in suitable condition. Id. The court reasoned, among other things, that a post-judgment opportunity to cure pursuant to RPAPL 753(4) was warranted because the clutter in the apartment had improved over time, the nuisance was not chronic in nature and incapable of cure, and it was merely a breach of the lease agreement. Id. at 313. By contrast, in Rockaway One Co., LLC v Califf, 194 Misc.2d 191, the Appellate Term affirmed the lower court's decision to deny the tenant of a rent stabilized apartment a post-judgment opportunity to cure because the nuisance was outside of the purview of RPAPL 753(4). The Appellate Term reasoned that because the tenant had been given ample opportunities to cure and there was a “pattern of continuity or recurrence of objectionable conduct,” further opportunities to cure were not warranted because the nuisance was so chronic that it was no longer merely a breach of the lease agreement. Id. at 194.

Moreover, although RPAPL § 753(5) prohibits waivers of the 10-day stay and opportunity to cure, courts have not construed stipulations of settlement as waivers and have routinely enforced them. Even where the nuisance does not rise to the a chronic level, where the tenant breaches a stipulation of settlement staying the tenant's eviction conditioned upon the tenant's cure, the tenant will generally not be given an opportunity to cure either pre- or post-judgment. For instance, in Hotel Cameron, Inc. v. Purcell, 35 A.D.3d 153, the Appellate Division reversed a stay of eviction where the tenant had stipulated to refrain from certain behavior for a period of two years and subsequently breached the stipulation of settlement with his continued nuisance, such as threatening the doorman that he would kill him. Id. at 154.Although the court noted that courts have some discretion not to enforce a stipulation of settlement, the court emphasized that in general strict enforcement of stipulations of settlement serves the interest of efficient dispute resolution. The court also observed that the stipulation had benefited tenant by allowing him to avoid adjudication of landowner's nuisance holdover proceeding, and to remain the apartment so long as he complied with the stipulation's conditions. Id.

Tenant Bound By Repair Covenant
Columbia Heights, LLC v. Manheim
NYLJ 1/23/17, p. 18, col. 1
AppDiv, First Dept.
(Opinion by Tom, J.)

In an action by landlord for a declaration that tenant had an obligation to repair improvements tenant had made to his apartment, both parties appealed from Supreme Court's denial of their respective summary judgment motions. The Appellate Division modified to grant landlord's motion, rejecting tenant's argument that tenant's leases have been invalid because they improperly sought to remove the apartment from rent control.

Tenant occupies an apartment that was once three separate adjoining apartments. Tenant rented the first of these in 1963 and the second in 1966. Both were rent-controlled. When the third apartment became available, tenant initially leased it from landlord and subleased it to a subtenant. Then, in 1977, the parties executed a lease to the combined three apartments. That lease included a rider purporting to treat the combined apartment as rent-stabilized rather than rent-controlled. The lease recognized the possibility that the apartment might not be decontrolled, and provided that in that instance, the rent would be the maximum permitted controlled rent. The lease also authorized tenant to make alterations to the combined apartment at his own expense, and obligated tenant to make repairs to those installations, explicitly relieving landlord of any obligations to repair those installations.

Although city agencies initially declared the combined apartment decontrolled, DHCR subsequently determined that the apartment remained subject to rent control. Disputes subsequently arose about tenant's failure to make repairs to his installations. When a section of the ceiling of the apartment below tenant's apartment collapsed, allegedly due to tenant's failure to repair a shower he had installed, landlord brought this action for a judgment declaring that tenant had an obligation to repair. Supreme Court denied summary judgment motions, and both parties appealed.

In modifying to grant landlord's motion, the Appellate Division , in an opinion by Justice Tom, first concluded that the lease in this case was not invalid as an attempt to deregulate a controlled apartment because the lease explicitly anticipated the possibility that the apartment might remain controlled, and provided for a legal rent if the apartment were still controlled. The court then held that even if the portions of the lease calling for a move to rent stabilization were void, the remainder of the lease, including the repair obligation imposed on tenant, would remain valid. The court also held that the lease provision entitling landlord to attorneys' fees was valid and enforceable.

Rent Acceleration Clause Clearview Farms, LLC v. Fannon
145 A.D.3d 1556, 12/23/16
AppDiv, Fourth Dept.
(memorandum opinion)

In landlord's action against residential tenant for breach of a residential lease, landlord appealed from Supreme Court's denial of its motion to set aside part of the court's verdict after a bench trial. The Appellate Division affirmed, holding that the lease's rent-acceleration clause constituted an unenforceable penalty.

The residential apartment lease between landlord and tenant included a clause that accelerated tenant's rent obligation in case of breach by the tenant. When tenant breached, landlord relet the premises and brought this action against tenant for breach. Supreme Court awarded landlord $9,224.41 in rent, plus attorneys' fees, litigation cost and prejudgment interest, but directed subtraction of amounts landlord collects from the new tenant during the period of the original lease term. Landlord then moved to set aside the portion of the verdict calling for an offset of rent collected from the new tenant. Supreme Court denied the motion and, when landlord failed to submit a post-trial affidavit detailing income it had collected from the new tenant, determined that landlord had failed to prove damages and was therefore not entitled to a money judgment against tenant. Landlord appealed.

In affirming, the Appellate Division upheld Supreme Court's determination that, as a matter of law, the lease's accelerated rent clause constituted an unenforceable penalty and that landlord was limited to actual damages proven. The court also upheld the determination that landlord was obligated to provide proof of actual damages, and that landlord's failure to provide such proof justified a denial of any recovery of damages.

COMMENT

New York courts do not enforce lease provisions calling for rent acceleration if tenant breaches even an immaterial covenant, but they do enforce rent acceleration clauses triggered only by tenant's failure to pay rent. In 884 West End Ave. Corp. v Pearlman, 201 AppDiv. 12, affd 234 N.Y. 589, the court invalidated a rent-acceleration clause that provided that all rent under the lease would become due if tenant failed to comply with any of the lease's covenants, which included covenants as trivial as prohibiting tenant from driving picture nails into the wall. In concluding that the lease provision was unenforceable as a penalty, the court emphasized that some of the conditions that would trigger rent acceleration would involve no damage at all or nominal damage. Although tenant's alleged breach in 884 was a failure to pay rent, the court invalidated the entire clause as a penalty. In Fifty States Management Corp. v. Pioneer Auto Parks, Inc., 46 N.Y.2d 573, on the other hand, the court enforced a rent-acceleration clause requiring payment of future rent due under the lease upon the tenant's failure to pay rent. There, the court reasoned that the damages reserved in the clause bore a distinct relationship to the damages sustained by the landlord as a result of the tenant's breach. Id. When the tenant failed to pay rent, the landlord was merely afforded the option to receive the rental payments reserved for the remainder of the lease as a condition of the tenant's continued occupancy. Id.

Although landlord may enforce a clause accelerating all rent as a consequence of tenant's failure to pay, landlord may require accelerated payment of all rent only if landlord elects to allow the tenant to remain in possession of the premises. In Fifty States, for instance, the landlord allowed the tenant to remain in possession of the premises. Enforcing a rent-acceleration clause where the landlord allows the breaching tenant to remain in possession of the premises does not create the potential for a windfall. The damages reserved are proportionate to the landlord's actual loss — the risk that tenant will default on rent payments for the remainder of the lease term.

By contrast, if a lease authorizes rent acceleration for breach of a covenant to pay rent, and the landlord retakes possession of the premises, the landlord will be entitled to collect only the present value of the leasehold at the time of tenant's default. Courts do not permit a landlord to collect future rent from the former tenant while simultaneously collecting rent from a new tenant. In 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Assn., Inc., 24 N.Y.3d 528, the Court of Appeals granted the tenants a hearing on their allegation that the acceleration of future rent in a commercial lease was disproportionate to the landlord's actual losses and was therefore an unenforceable penalty. The rent acceleration clause at issue gave the landlord both the right to possession of the premises as well as the right to recover all future rent due under the lease. Id. The court reasoned that awarding the landlord both possession as well as the right to immediately recover all future rent due from the prior tenant would allow the landlord to “double-dip.” Id. 172. Van Duzer herefore establishes that a landlord's damages must be discounted to present day value when he or she retakes possession of the premises.

Clearview establishes that a landlord that seeks to enforce a rent acceleration clause has the burden of proving that it has not collected rent from a new tenant that would be offset against any obligation of the original defaulting tenant.

Landlord Liable for Breach
Dunbar Owners LLC v. Jones
NYLJ 1/30/17, p. 24, col. 4
AppTerm, First Dept.
(memorandum opinion)

In landlord's action for unpaid rent, landlord appealed from Civil Court's abatement awarded to tenant for breach of the warranty of habitability. The Appellate Term affirmed, holding that the amount of the award should not be limited to the period after landlord purchased the building, and should not be limited to the amount of unpaid rent sought by landlord.

When landlord brought this action for unpaid rent, tenant asserted a claim for breach of the warranty of habitability, submitting evidence, including photographs and inspection reports by the Department of Housing Preservation and development, documenting the fact that tenant had an unusable bathroom, a broken kitchen sink and living room window, and vermin infestation. The evidence also established that landlord and its predecessor had notice of these conditions. Based on the evidence, Civil Court awarded tenant a substantial rent abatement, and an increase in the abatement for the period after November 2012, when evidence established additional violations. Landlord appealed, contending that the abatement award was excessive.

In affirming, the Appellate Term rejected landlord's argument that landlord's liability should be limited to the period after it purchased the building. The court emphasized that the closing documents indicated that landlord acquired the property in June 2013 subject to existing tenancies. The court also held that tenant's award should not be limited to the amount of unpaid rent sought by landlord.

COMMENT

In holding the landlord liable for breaches committee while a predecessor owned the building, the court departs from the rule New York courts have applied with respect to commercial tenants: A successor landlord is not liable for breaches committed by a predecessor even if the assignment to the successor landlord, or the terms of the original lease, provide that the successor landlord assumes all obligations of its predecessor. Thus, in Won's Cards, Inc. v. Samsondale/Haverstraw Equities, Ltd., 165 A.D.2d 157, where a commercial tenant brought suit against its successor-landlord seeking to recover for damages it allegedly suffered as a result of the predecessor-landlord's breach of an exclusive use provision in the tenant's lease, the court held that the successor-landlord was not liable to the tenant even though the successor-landlord had, in the lease assignment agreement, assumed the predecessor-landlord's obligations under the lease. The court emphasized that an assumption of lease obligations did not include an assumption of predecessor-landlord's liabilities if those liabilities arose prior to the assignment. See also Bank of New York v. Hirschfeld, 63 A.D.2d 794 (holding that, despite assumption of obligations provision in assignment agreement, successor landlord was not liable for liabilities incurred before the date of the assignment).

Won's Cards involved an assumption of obligations in the assignment agreement, but in Kramer Levin Naftalis & Frankel, LLP v. Metropolitan 919 3rd Ave., LLC, 6 Misc.3d 796, the court reached the same result where the assumption appeared in the original lease. In Kramer, where a commercial tenant brought suit against its successor-landlord seeking rent credits owed to the tenant by the predecessor-landlord under its lease, the court held that the successor-landlord was not liable for the credits even though the lease itself provided for an express assumption of “all covenants and obligations … by any successor-in-interest.” The court concluded that the clause did not comprise credits, because credits were liabilities, not covenants or obligations.

Both Won's Cards and Kramer suggested that the result would be different if the successor landlord had agreed to assume the liabilities, as well as the obligations, of the predecessor. For that proposition, Won's Cards cited an earlier case, Cirfico Holdings Corporation v. GTE Products Corporation, 99 A.D.2d 939, which dealt with an assignment outside the context of landlord-tenant relationships.

Tenant's Right to Surrender Bonus
Great Location New York, Inc. v. 719 Seventh TIC 1 Owner, LLC
NYLJ 1/30/17, p. 20, col. 1
AppDiv, First Dept.
(memorandum opinion)

In commercial tenant's action to recover a surrender bonus, tenant appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division affirmed, holding that landlord had raised questions of fact about whether tenant's delay in vacating the premises constituted a material default negating tenant's right to the bonus.

The commercial lease included a provision permitting landlord to terminate the lease if it decided to demolish the building. The demolition provision required landlord to give tenant six months' notice, and also required landlord to pay tenant a surrender bonus after tenant vacated, provided that tenant “was not in default beyond any applicable grace period with respect to a provision of the lease which Landlord reasonably believes to be material.” Tenant's subtenant remained in possession for 26 days after landlord terminated the lease pursuant to the demolition provision. Landlord made $55,000 in incentive payments to the holdover subtenant and to a sub-subtenant, but did not pay the full surrender bonus to tenant in question. The latter then brought this action to recover the bonus, and Supreme Court denied tenant's summary judgment motion.

In affirming, the Appellate Division noted that landlord's representative had submitted an affidavit indicating that landlord was ready to start demolition immediately after termination of the lease, and incurred carrying costs while waiting for delivery of vacant premises. As a result, landlord raised questions of fact about whether tenant was in default of a material provision of the lease. The court also rejected tenant's argument that landlord was required to serve tenant with a notice to cure, focusing on the absence of language in the demolition provision requiring any notice to cure. Finally, the court concluded that loss of payment for early termination did not constitute a “forfeiture” disfavored by the law.

Tenant Not Entitled to Stay of Execution
222 East 12 Realty v. So
NYLJ 1/17/17, p. 22, col. 4
AppTerm, First Dept.
(2-1 decision; memorandum opinion; dissenting memorandum by Ling-Cohan, J.)

In landlord's nuisance holdover proceeding, tenant appealed from Civil Court's award of possession to landlord upon a finding that tenant had breached a stipulation of settlement. A divided Appellate Term affirmed, holding that in light of the stipulation's provision that there would be no further stays upon breach, Civil Court properly awarded landlord a possessory judgment.

Landlord initially brought this proceeding upon allegations that tenant had crammed garbage and debris into his SRO apartment from floor to ceiling, causing a health, fire, and safety hazard. The parties entered into a two-attorney stipulation of settlement providing for a ten-month period during which tenant would refrain from maintaining the premises in an unsafe condition by cramming garbage, trash, boxes and bags as listed in the termination notice. The stipulation provided that upon alleged breach, the proceeding would be restored to the calendar and if the court found that a nuisance were present, landlord would be entitled to a possessory judgment with no further stays. After an inspection, landlord moved to restore the proceeding to the calendar, claiming breach by tenant. Civil Court concluded that the evidence showed a nuisance condition depicting an undue accumulation of garbage, and found a breach of the stipulation. That court then awarded landlord a judgment of possession, with no stay of the issuance of a warrant, citing the stipulation provision precluding stays. Tenant appealed.

In affirming, the Appellate Term majority concluded that Civil Court's findings were supported by a fair interpretation of the evidence, including photographs. The court held that the stipulation precluded further stays, and noted that, in light of previous efforts by Adult Protective Services to assist tenant in curing the condition, it appeared as if the condition could not be cured.

Justice Ling-Cohan, dissenting, first contended that the evidence did not support the finding that tenant had breached the stipulation, noting that it was not clear that tenant had crammed garbage from floor to ceiling, or that the conditions had created a fire or safety hazard. She then contended that the stipulation did not preclude cure after landlord's inspection but before the court's hearing. Finally, she contended that even if tenant had breached the stipulation, the court was obligated to afford tenant a post-judgment opportunity to cure. She relied on RPAPL 753(4), and noted that the post-judgment opportunity to cure was particularly appropriate in light of the tenant's 38-year rent-stabilized tenancy.

COMMENT

RPAPL 753(4) provides that where a landlord prevails in a holdover proceeding for breach of a lease agreement, the court must grant the tenant a post-judgment 10-day stay of a warrant of ejectment, during which time the tenant will have an opportunity to cure the breach. In Nestor v. McDowell, 81 N.Y.2d 410, the Court of Appeals, in holding that RPAPL 753(4) applies to ejectment actions as well as summary holdover proceedings, affirmed the lower court's decision which granted the tenants an opportunity to cure their breach of installing and maintaining a washing machine without the landlord's consent. Id. at 414-15. In Nestor, landlord had sent at least three notices to tenant to cure the violation prior to the commencing the action. Id. at 413.

However, in a nuisance holdover proceeding, courts draw a distinction between a nuisance that constitutes a mere breach of a lease, warranting an RPAPL 753(4) post-judgment stay and opportunity to cure, and a nuisance that is so chronic that it is incapable of cure. For example, in Unicorn 151 Corp. v. Small, 181 Misc.2d 304, the court held that the tenant was entitled to an opportunity to cure in a nuisance holdover proceeding for failing to maintain the rent-stabilized apartment in suitable condition. Id. The court reasoned, among other things, that a post-judgment opportunity to cure pursuant to RPAPL 753(4) was warranted because the clutter in the apartment had improved over time, the nuisance was not chronic in nature and incapable of cure, and it was merely a breach of the lease agreement. Id. at 313. By contrast, in Rockaway One Co., LLC v Califf, 194 Misc.2d 191, the Appellate Term affirmed the lower court's decision to deny the tenant of a rent stabilized apartment a post-judgment opportunity to cure because the nuisance was outside of the purview of RPAPL 753(4). The Appellate Term reasoned that because the tenant had been given ample opportunities to cure and there was a “pattern of continuity or recurrence of objectionable conduct,” further opportunities to cure were not warranted because the nuisance was so chronic that it was no longer merely a breach of the lease agreement. Id. at 194.

Moreover, although RPAPL § 753(5) prohibits waivers of the 10-day stay and opportunity to cure, courts have not construed stipulations of settlement as waivers and have routinely enforced them. Even where the nuisance does not rise to the a chronic level, where the tenant breaches a stipulation of settlement staying the tenant's eviction conditioned upon the tenant's cure, the tenant will generally not be given an opportunity to cure either pre- or post-judgment. For instance, in Hotel Cameron, Inc. v. Purcell, 35 A.D.3d 153, the Appellate Division reversed a stay of eviction where the tenant had stipulated to refrain from certain behavior for a period of two years and subsequently breached the stipulation of settlement with his continued nuisance, such as threatening the doorman that he would kill him. Id. at 154.Although the court noted that courts have some discretion not to enforce a stipulation of settlement, the court emphasized that in general strict enforcement of stipulations of settlement serves the interest of efficient dispute resolution. The court also observed that the stipulation had benefited tenant by allowing him to avoid adjudication of landowner's nuisance holdover proceeding, and to remain the apartment so long as he complied with the stipulation's conditions. Id.

Tenant Bound By Repair Covenant
Columbia Heights, LLC v. Manheim
NYLJ 1/23/17, p. 18, col. 1
AppDiv, First Dept.
(Opinion by Tom, J.)

In an action by landlord for a declaration that tenant had an obligation to repair improvements tenant had made to his apartment, both parties appealed from Supreme Court's denial of their respective summary judgment motions. The Appellate Division modified to grant landlord's motion, rejecting tenant's argument that tenant's leases have been invalid because they improperly sought to remove the apartment from rent control.

Tenant occupies an apartment that was once three separate adjoining apartments. Tenant rented the first of these in 1963 and the second in 1966. Both were rent-controlled. When the third apartment became available, tenant initially leased it from landlord and subleased it to a subtenant. Then, in 1977, the parties executed a lease to the combined three apartments. That lease included a rider purporting to treat the combined apartment as rent-stabilized rather than rent-controlled. The lease recognized the possibility that the apartment might not be decontrolled, and provided that in that instance, the rent would be the maximum permitted controlled rent. The lease also authorized tenant to make alterations to the combined apartment at his own expense, and obligated tenant to make repairs to those installations, explicitly relieving landlord of any obligations to repair those installations.

Although city agencies initially declared the combined apartment decontrolled, DHCR subsequently determined that the apartment remained subject to rent control. Disputes subsequently arose about tenant's failure to make repairs to his installations. When a section of the ceiling of the apartment below tenant's apartment collapsed, allegedly due to tenant's failure to repair a shower he had installed, landlord brought this action for a judgment declaring that tenant had an obligation to repair. Supreme Court denied summary judgment motions, and both parties appealed.

In modifying to grant landlord's motion, the Appellate Division , in an opinion by Justice Tom, first concluded that the lease in this case was not invalid as an attempt to deregulate a controlled apartment because the lease explicitly anticipated the possibility that the apartment might remain controlled, and provided for a legal rent if the apartment were still controlled. The court then held that even if the portions of the lease calling for a move to rent stabilization were void, the remainder of the lease, including the repair obligation imposed on tenant, would remain valid. The court also held that the lease provision entitling landlord to attorneys' fees was valid and enforceable.