Landlord & Tenant

In affirming, the Appellate Division concluded that the lease, the guaranty, and landlord's consent to tenant's sublease to a third party all belied guarantor's contention that its liability was limited to the base rent. The court also held that when a guarantor waives defenses available to the tenant, the guarantor's liability can be greater than that of the tenant, because the guaranty becomes enforceable without qualification or reservation. As a result, even if tenant was wrongfully evicted, guarantor remains liable on the guaranty.

Comment

When a guaranty by its terms covers only the period until tenant relinquishes possession, the guarantor is not liable for rent after the tenant surrenders possession. In I BLDG Co., Inc. v Hong Mei Cheung, 2014 N.Y. Misc. LEXIS 3791, aff'd, 137 A.D.3d 478, the guarantor fully guaranteed performance and observance of all obligations “that accrue while Tenant is in possession of the premises.” The court held that guarantor was not liable for obligations that accrued after landlord evicted tenant from the premises, rejecting landlord's argument that guarantor would be excused from further liability only if tenant voluntarily surrendered the premises.

When the guaranty by its terms absolutely guarantees all rent due under the lease, courts have indicated that the guarantor remains liable even if tenant might have defenses to an action for rent. In Royal Equities Operating, LLC v Rubin, 154 A.D.3d 516, the court held a guarantor liable for accelerated rent, rejecting guarantor's claim that liability for accelerated rent was extinguished when landlord relet the premises to a substitute tenant. Guarantor had “absolutely, irrevocably and unconditionally” guaranteed payment of “all rent and additional rent,” and the court indicated that by this language, guarantor had waived the right to interpose defenses, emphasizing that a guarantor's liability can be “greater than that of the obligor tenant.” In Royal Equities itself, however, the substitute tenant had allowed the original tenant to remain in the premises, and there was no allegation that landlord had collected rent from the substitute tenant.

When the guaranty is absolute, and landlord seeks recovery for a period after which landlord has retaken possession, courts allow landlord to recover liquidated damages when those damages preclude the possibility of double recovery. In H.L. Realty, LLC v. Edwards, 131 A.D.3d 573, the court held guarantor liable for liquidated damages after landlord had regained possession from a tenant in default. In the H.L. Realty case, however, the liquidated damages provision entitles landlord to “any deficiency between the rent hereby received and or covenanted to be paid and the net amount, if any, of the rent collected on account of the subsequent lease or leases.” In effect, this provision precluded double recovery by the landlord. By contrast, if a liquidated damages provision entitled landlord to recover from the guarantor even if landlord also recovered from a subsequent tenant, the guarantor might attack the liquidated damages provision as an unenforceable penalty.

Landlord Bound by Renewal Lease Signed After Judgment of Possession

Related Broadway Dev. LLC v. Malo
NYLJ 2/28/17, p. 21., col. 1.
AppTerm, First Dept.
(per curiam opinion)

In landlord's holdover proceeding, rent-stabilized tenant appealed from Civil Court's order reinstating a judgment and warrant of eviction. The Appellate Term reversed and vacated the judgment, holding that landlord was bound by a renewal lease landlord signed after the final judgment of possession.

Landlord brought the holdover proceeding on the ground that tenant had advertised the apartment on AirBnB and had entered into at least 15 short-term rentals at a rate of $350 per night. The stabilized rent for the apartment was $546 per month. The proceeding was settled by tenant's consent to a judgment of possession, with warrant of eviction stayed through Dec. 31, 2016. On Nov. 21, 2016, landlord tendered a renewal lease to tenant with a start date of April 1, 2017. Tenant executed the lease on Dec. 12, 2016, opting for a two-year renewal, and sent a check to landlord for an additional security deposit. Landlord countersigned the lease on Dec. 15, 2016, and returned it to tenant. Civil Court initially vacated the final judgment and warrant of eviction, concluding that landlord's acceptance of the lease renewal vitiated the final judgment of possession. Civil Court later reinstated the judgment, concluding that landlord's tender and execution of the warrant was inadvertent. Tenant appealed.

In reversing, the Appellate Term concluded that tenant's current right to possession flows from the binding renewal lease, so that tenant cannot now be dispossessed pursuant to the prior final judgment. With respect to the renewal lease, the court concluded that landlord's unilateral mistake in executing the renewal lease was insufficient to invalidate the lease. The court emphasized that the mistake arose from landlord's own negligence in failing to note the prior stipulation and final judgment in its records.

Notice of Nonrewnal Sufficient to Withstand Jurisdictional Challenge

Kim v. Hettinger
NYLJ 3/1/18, p. 22., col. 1.
AppTerm, First Dept.
(memorandum opinion)

In landlord's owner occupancy holdover proceeding, landlord appealed from Civil Court's grant of tenant's motion to dismiss. The Appellate Term modified to reinstate the petition, concluding that landlord's notice of nonrenewal was sufficient to withstand jurisdictional challenge.

Landlord sent tenant a notice of nonrenewal stating that landlord intended to recover possession of all nine apartments in the five-story building in order to convert the building into a single-family home for herself, her husband, and her two children. The notice set forth the contemplated use of the building on a floor-by-floor basis, and stated landlord's current address. Civil Court nevertheless dismissed the petition, and landlord appealed.

In modifying to reinstate the petition, the Appellate Term held that the landlord's notice complied with the specificity requirements of the Rent Stabilization Code. The court noted that information such as the size of landlord's current residence could be acquired through a bill or particulars, and other issues could be explored during discovery. The predicate notice itself, was adequate to permit tenant to frame a defense.

Incarcerated Son Not Entitled to Succession Rights

528 West 123^rd St. LLC v. Baptiste
NYLJ 3/2/18, p. 26., col. 1.
AppTerm, First Dept.
(memorandum opinion)

Tenant's son appealed from Civil Court's rejection of his claim for succession rights to tenant's rent-stabilized apartment. The Appellate Term affirmed, holding that tenant's incarceration at the time of his father's death precluded the claim.

Tenant died in 2015. His son began living with him in August 2012, but has been incarcerated since November 2013 and will not be eligible for release until March 2021. As a result, the son did not reside with the tenant for the requisite two-year period before the father's death.

In affirming Civil Court's denial of succession rights, the Appellate Term rejected the son's claim that his incarceration is a protected “temporary absence” within the meaning of section 2523.5(b)(2) of the Rent Stabilization Code. The court noted that the enumerated temporary absences included military service, time as a full-time student, and relocation for employment purposes, but held that allowing a lengthy period of incarceration to qualify as a temporary absence would not further the purposes of the rent stabilization code's primary residence requirement, which is designed to return underutilized apartments to the marketplace.

Occupant Did Not Establish Succession Rights

Well Done Realty LLC v. Epps
NYLJ 3/1/18, p. 22., col. 2.
AppTerm, First Dept.
(memorandum opinion)

In landlord's holdover proceeding, occupant appealed from Civil Court's award of possession to landlord. The Appellate Term affirmed, holding that occupant had not acquired succession rights.

Tenants of record vacated the rent-stabilized apartment in 2003. They continued to execute renewal leases extending through September 2015, and paid rent by checks in their name. During that period, the mother of one of the tenants of record continued to live in the apartment. When landlord sought to recover possession, the mother asserted succession rights, but Civil Court rejected her claim.

In affirming, the Appellate Term relied on the Appellate Division's decision in Third Lennox Terrace Assoc. v. Edwards, 91 AD3d 532, in which the court held that a tenant who continues to sign leases in her own name cannot be found to have permanently vacated the apartment until the expiration of the last lease renewal. Because it is conceded that the tenant of record did not live in the apartment at that time, her mother cannot have “resided with” the tenant of record during the two-year period prior to tenant's permanent vacatur. As a result, the mother could not prevail on her succession rights claim.

Court Dismisses Tortious Interference Claim By Holder of First Refusal Right

White Knight of Flatbush, LLC v. Deacons of the Dutch Congregation of Flatbush
NYLJ 3/23/18, p. 30., col. 2.
AppDiv, Second Dept.
(memorandum opinion)

In a tortious interference action by tenant as holder of a right of first refusal, tenant appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that tenant had failed to establish that the lease creating the first refusal right would not have been breached but for the conduct of the alleged tortfeasor.

On April 4, 2014, the church, as owner of the subject property, leased the property, and gave the tenant a right of first refusal. Four months later, on Aug. 14, 2014, the church entered into a contract to sell the property to Sterling. Tenant brought this action against the church for breach of contract, and against Sterling for tortious interference. Tenant settled the action with the church, leaving only the action against Sterling. Supreme Court dismissed that action for failure to state a claim, and tenant appealed.

In affirming, the Appellate Division emphasized two deficiencies in the complaint. First, the complaint failed to sufficiently allege that the lease would not have been breached but for Sterling's conduct. Second, the complaint failed to allege damages that were causally related to Sterling's conduct.