Landlord & Tenant Law

In affirming, the court's 5-2 majority started by reciting the common law rule that a third party has no cause of action for personal injuries against an out-of-possession landlord, and was instead entitled only to recover from the tenant in possession. The court then noted that Putnam v. Stout, 38 N.Y.2d 607, had modified the common law rule to permit recovery against the landlord for injuries due to dangerous conditions when the landlord had contractually assumed the obligation to make repairs. The court held, however, that the Putnam exception to the common law rule was applicable only when the agreement to maintain and repair the premises is an agreement between landlord and tenant, not when the agreement is between landlord and a third party. As a result, the agreement between landlord and HUD did not subject landlord to liability for personal injuries. Judge Rivera, dissenting for herself and Judge Wilson, argued that the Putnam rule should apply even when the landlord's agreement to repair is an agreement with a third party.

Comment

In Putnam v Stout, 38 NY2d 607 [1976], the Court of Appeals carved out an exception to the common law rule that an out-of-possession landlord is not liable for injuries resulting from the condition of the demised premises. In Putnam, the court, relying on Restatement (Second) of Torts, §357, held that where a lease covenant imposes on landlord the responsibility to maintain and repair the property, breach of the covenant subjects landlord to liability for injuries to third parties. In light of Putnam, two polar rules are clear: when an out-of-possession landlord undertakes no obligation to maintain the premises, the landlord has no liability to injured third parties, and when a lease covenant obligates landlord to maintain the premises, the landlord does have liability to such third parties. For example, in Stickles v Fuller, 2 Misc 3d 954 [Sup Ct 2004], affd, 9 AD3d 599 [3d Dept 2004], the court found the out-of-possession landlord liable for damages to a third-party farm hand because the landlord had covenanted with the tenant to assume responsibilities for all repairs not caused by the negligence of the tenant. In contrast, the court in Brilliant v DCVM Realty, 284 AD2d 289[2d Dept 2001] found the out-of-possession not liable to an injured third party since the lease between landlord and tenant placed the duty to repair and maintain the premises solely on the tenant.

Even if a lease covenant does not expressly impose an obligation to repair on landlord, the landlord is liable for third party injuries due to building defects caused by statutory violations if landlord has retained a right to enter the premises for inspection and repair. The court in Guzman v Haven Plaza Hous. Dev. Fund Co., Inc., 69 NY2d 559 [1987] relied on landlord's right to enter in holding landlord liable for breach of New York City Administration Code regulations regarding general responsibilities, maintenance, handrail clearance, and lighting requirements. In contrast, a mere reservation of right by a landlord to reinter the premises for inspection and repair is not sufficient to impose liability for third party injuries on the landlord absent any statutory obligation. In Manning v New York Tel. Co., 157 AD2d 264 [1st Dept 1990], the court held that landlord's right of entry and repair did not make landlord liable for injuries to third parties when the lease imposed general maintenance obligations on the tenant. The court in Manning distinguished Guzman by emphasizing that the issue in Manning dealt with general maintenance and repair, not any specific breaches of the Administration code.

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Out of Possession Landlord Liability for Injuries on Abutting Sidewalk He v. Troon Management, Inc. NYLJ 10/25/19, p. 24, col. 1 Court of Appeals (Opinion by Rivera, J.)

In an action for personal injuries suffered in a fall on a sidewalk abutting landowner's leased property, injured plaintiff appealed from the Appellate Division's grant of summary judgment to landowner. The Court of Appeals reversed and denied summary judgment, holding that an out-of-possession landlord remains liable for injuries suffered on an abutting sidewalk.

Section 7-210 of New York City's Administrative Code imposes liability on abutting landowners for injury claims arising from negligent failure to remove snow and ice from sidewalks. Injured plaintiff slipped on the sidewalk abutting landowner's property, which had been leased to a tenant who had agreed to maintain the sidewalk free of ice and snow. When injured plaintiff brought this action, landlord sought summary judgment, contending that its transfer of possession absolved it from liability. Supreme Court denied the motion, but the Appellate Division reversed, concluding that out-of-possession landowners have no obligation to maintain sidewalks.

In reversing, the Court of Appeals held that a landowner's duty under section 7-210 is not delegable. The court noted that the statute excludes certain owner-occupied premises from its reach, establishing that if the City Council meant to exclude out-of-possession landlords from liability it knew how to do so.

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Breach of Lease By Subsidiary Does Not Justify Piercing Corporate Veil TMCC v. Jennifer Convertibles, Inc. NYLJ 10/25/19, p. 31, col. 5 AppDiv, Second Dept. (memorandum opinion).

In landlord's action for rent against the alleged parent corporation of tenant, landlord appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that landlord was not entitled to pierce tenant's corporate veil.

Landlord leased the subject property to Hartsdale Convertibles. When Hartsdale Convertibles failed to pay rent, landlord brought this action against Jennifer Convertibles, Inc., alleging that Hartsdale was a wholly-owned subsidiary of Jennifer Convertibles. Supreme Court dismissed the complaint, and landlord appealed.

In affirming, the Appellate Division held that even if the parent company wholly dominated the subsidiary, landlord was not entitled to pierce the subsidiary's corporate veil unless landlord could show that the parent's used its domination to commit a wrong against landlord. Mere breach of the lease — the only wrong alleged by landlord — was insufficient to justify piercing the corporate veil.

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Tenant Not Entitled to Preliminary Injunction Requiring Landlord to Co-Operate Shake Shack Fulton Street Brooklyn, LLC v. Allied Property Group, LLC NYLJ 11/22/19, p. 33, col. 3 AppDiv, Second Dept. (memorandum opinion)

In commercial tenant's action for declaratory and injunctive relief, landlord appealed from Supreme Court's grant of a preliminary injunction preventing landlord from withholding or revoking consent to a city permit, and preventing landlord from demolishing sidewalk structures. The Appellate Division modified to delete the injunction against withholding or revoking consent, holding that the preliminary injunction did more than preserve the status quo.

In 2010, tenant leased a portion of the ground floor and basement of landlord's building. The lease had a 20-year term with two five-year renewal options. The following year, as part of tenant's application to the city to operate a sidewalk café on the sidewalk adjoining the premises, landowner executed a form consenting to tenant's application. In 2015, tenant petitioned the city department of consumer affairs for consent to continue the sidewalk café. Owner, however, was unwilling to submit a new consent form, without which the department of consumer affairs would not renew tenant's license. Tenant then brought this action for a judgment declaring that landlord must execute the consent form. Tenant also sought a preliminary injunction to prevent landlord from demolishing the sidewalk café, and to prevent the landlord from withholding or revoking its consent to a permit. Tenant's motion also sought an order requiring landlord to execute a consent. Supreme Court granted tenant's motion.

In modifying, the Appellate Division concluded that a preliminary injunction requiring landlord to execute the consent would grant tenant some of the ultimate relief tenant sought in the action rather than simply maintaining the status quo. The court held that tenant had not demonstrated the need for such extraordinary relief, nor had tenant demonstrated a likelihood of success on the merits in light of unresolved questions about whether the lease contemplated use of the sidewalk space. The court, however, upheld Supreme Court's grant of a preliminary injunction against demolition and removal of the café, holding that with respect to that branch of the injunction, equities favored maintenance of the status quo.

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Landlord Must Maintain Elevator Service for Use By Single Tenant In re Leonard Street Properties Group, Ltd. V. DHCR NYLJ 11/14/19, p. 22, col. 1 AppDiv, First Dept. (Opinion by Tom, J.)

In landlord's article 78 proceeding challenging denial of landlord's request to eliminate elevator service, tenant appealed from Supreme Court's grant of the petition. The Appellate Division reversed, denied the petition, and dismissed the proceeding, holding that DHCR's determination was not irrational.

Tenant has occupied an apartment in landlord's building since 1979. The Department of Buildings identifies the eight-unit building as a walk-up apartment building, but the building had a single elevator used principally, if not exclusively, by a single tenant. A rider to the lease that was assigned to tenant in 1979 stated that landlord would not provide manned elevator service and that landlord retained the right to eliminate elevator service. The rider also absolved landlord of any responsibility for repair or maintenance of the elevator, which was nearly a century old, was designed to be manned by an elevator operator, and whose door was a scissor gate that presented a safety hazard. At some point, the building fell under the auspices of the Loft Board, and, in 2009 the building came under the jurisdiction of DHCR as a rent-stabilized building. At some time around 2009, the elevator stopped operating, either because it broke down or because landlord dismantled it. In 2010, DHCR granted landlord's application to terminate elevator service and ordered a rent reduction of 5% for all of the building's tenants. DHCR credited landlord's evidence that replacing the elevator would cost $150,000. Tenant challenged that determination, and Supreme Court remanded because DHCR had not adequately considered the cost of repair rather than replacement. On remand, the landlord submitted evidence that the existing elevator was not serviceable, and estimating the cost of replacement at more than $260,000. This time, DHCR granted tenant's petition for administrative review and ordered landlord to restore elevator service, concluding that the major capital improvement program was designed to facilitate repairs and upgrading of outdated equipment. Landlord then brought this article 78 proceeding. Supreme Court granted landlord's petition, concluding that DHCR's determination was irrational, and noting that MCI increases were capped at 6% for tenants whose average monthly rent was $976.37. The court emphasized that the elevator would serve a single rent-stabilized tenant in a walk-up building. Tenant appealed.

In reversing, the Appellate Division focused on the deference due DHCR determinations. The court emphasized that DHCR has broad discretion when a landlord applies for a reduction in required services, and concluded that the cost to landlord alone would not support setting aside DHCR's determination.

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Tenant Not Relieved of Obligation to Pay Real Estate Taxes Gristedes Operating Corp. v. Scarsdale Shopping Center Associates, LLC NYLJ 11/1/19, p. 26, col. 6 AppDiv, Second Dept. (memorandum opinion).

In an action by tenant against landlord and prospective lease purchaser for breach of contract, tenant appealed from Supreme Court's grant of summary judgment to prospective lease purchaser on the breach of contract claim, and to landlord on tenant's affirmative defense to landlord's counterclaims. The Appellate Division affirmed, holding that prospective purchaser's contact with landlord did not breach the terms of an agreement with tenant, and that a stipulation did not relieve tenant of its lease obligation to pay real estate taxes.

In 2006, tenant Gristedes began negotiations with Walgreen to explore sale of several of tenant's leases. The parties signed a letter agreement binding Walgreen not to conduct negotiations or discussions with the owners of any of the properties the parties were discussing. In 2007, Walgreen agreed to purchase six Gristedes leases, including the subject lease of a store in a Scarsdale shopping center. In 2009, the parties amended the 2007 agreement to limit the purchaser to a single Manhattan store. The 2009 agreement expressly terminated the 2007 agreement with respect to all other properties, and provided that the parties would have no rights under the 2007 agreement except to the extent that rights expressly survived the 2009 agreement. In 2011, Walgreen allegedly contacted the owner of the Scarsdale shopping center. Then, in 2012, Gristedes and Walgreen entered into a new agreement confirming that the 2006 agreement, as amended by the 2007 sale contract, remained in full force and effect. Later that year, Gristedes brought this action, in part alleging that Walgreen's 2011 contact with the shopping center owner constituted a breach of contract. The shopping center owner, also named as a defendant, counterclaimed for real estate taxes due under the lease. Supreme Court granted summary judgment to Walgreen on the breach of contract claim, and to the owner on the claim for real estate taxes. Gristedes appealed.

In affirming, the Appellate Division emphasized that in 2011, when the alleged contact between Walgreen and the owner took place, no agreement barred that contact. The 2009 agreement had terminated the earlier contracts, and the parties had not yet entered into the 2012 agreement. The court then turned to the owner's counterclaim for real estate taxes and rejected Gristedes' agreement that a stipulation of settlement barred the counterclaim. The court noted that the stipulation, which settled owner's claim for two months unpaid rent, expressly provided that "[t]he parties reserve all other rights as they may have."