Landlord & Tenant Law

In affirming, the Appellate Division invoked the statute of frauds, which requires leases for periods of more than one year to be in writing. The court rejected the church's invocation of the part performance exception to the statute, finding no performance "unequivocally referable" to the alleged oral agreement.

Comment

Possession alone, without payment of rent or similar manifestations of a lease agreement, is not conduct that is unequivocally referable to an alleged lease. For example, in Geraci v. Jenrette, 41 N.Y.2d 660, the court granted summary judgment to tenant in an action brought by the landlord for specific performance of an alleged three year unsigned lease agreement where the tenant went into possession of the leased premises by directing his mail to that address and having various people on the premises, ostensibly to begin planning for renovations. The court found that the part performance by the tenant was not unequivocally referable to the alleged unsigned three year lease and therefore the part performance exception could not be applied to avoid the statute of frauds.

When there is no writing at all, courts have been reluctant to apply the part performance exception to an alleged oral lease even if the tenant has paid rent and made improvements. For example in Aeromar C. Por A. v. Port Authority of New York & New Jersey, 145 A.D.2d 584, the court awarded summary judgment to the landlord and found an alleged two year oral lease unenforceable even though tenant had occupied the premises, paid rent, and made improvements. The court held that these acts were not clearly referable to the alleged oral lease agreement, but could instead be explained as acts necessary to allow tenant to conduct business during a month-to-month tenancy, or as repairs to improve the surroundings in which they worked.

In contrast, where there is some form of writing that would otherwise be insufficient under the statute of frauds, but the tenant pays the rent stipulated in the lease, makes improvements, or takes other actions consistent with the unsigned or incomplete lease agreement, courts generally hold the parties bound to the lease. For example, in Tuttle, Pendelton & Gelston, Inc. v. Dronart Realty Corp., 90 A.D.2d 830, the court denied landlord's summary judgment motion when landlord had prepared, and tenant had signed, a lease agreement, and tenant had delivered checks for rent and security deposit, and had paid $2,000 for alterations to the premises. In holding that questions of fact preluded summary judgment on landlord's statute of frauds defense, the court emphasized the allegation that landlord himself had made alterations to accommodate tenant. In Carlyle Record Warehouses Corp. v. Scherlo, 94 Misc. 2d 226, the court dismissed landlord's holdover proceeding, concluding that tenant's payment of rent pursuant to the terms of an unsigned renewal lease was sufficient to constitute part performance, thereby taking the renewal lease out of the statute of frauds. In addition to tenant's payment of rent pursuant to a complicated escalation clause found in the rider to the renewal lease, the court focused on landlord's acquiescence in tenant's possession for two and a half years of the five year lease term, and landlord's initials on the unsigned lease. The court concluded that, taken together, these actions could only have been referable to the unsigned lease. And, in Strahlmann v. Anderson, 58 Misc. 2d 963, the court held that tenant's payment, and landlord's acceptance, of rent precluded landlord from invoking the statute of frauds after the parties had signed a two year lease that was missing a provision stating the amount of time and payment of rent. The court concluded that the parties' actions were clearly and unequivocally related to the written memorandum, and therefore fell within the part performance acceptance to the statute of frauds.

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Buildings Constitute Horizontal Multiple Dwelling

Mendoza v. NewYork State Division of Housing and Community Renewal (DHCR) 2020 WL 2170921, 5/6 2020, AppDiv, Second Dept. (memorandum opinion)

In tenants' article 78 proceeding, tenants challenged DHCR's determination that their building, together with neighboring buildings, did not constitute a horizontal multiple dwelling subject to rent stabilization. The Appellate Division confirmed DHCR's determination, holding that DHCR's determination was entitled to deference.

Tenants are residents of two buildings in Brooklyn, each of which contains three apartments. The two buildings are separated by a third building on the same block. All three buildings are owned by a common owner. Tenants sought a determination from DHCR that the three buildings constituted a horizontal multiple dwelling subject to rent stabilization. DHCR concluded that the subject buildings were not a horizontal multiple dwelling. Tenants brought an article 78 proceeding in Supreme Court challenging DHCR's determination, but Supreme Court transferred the proceeding to the Appellate Division.

In upholding DHCR's determination, the court first held that Supreme Court should not have transferred the matter. But, in the interest of judicial economy, the court resolved the controversy on the merits. The court indicated that the crucial factor is whether there are sufficient indicia of common facilities, ownership, management, and operation to warrant treating the housing as an integrated unit. But the court noted that when divergent factors lead to different conclusions, DHCR's determination should be upheld unless it is arbitrary or irrational. In this case the court noted that the building had separate water mains and sewer lines, separate electrical panels, separate street entrances, and separate bell-buzzer door systems and mailboxes. In light of those differences, DHCR's determination had a rational basis.

Comment

Courts defer to DHCR's horizontal multiple dwelling determinations when divergent factors lead to different reasonable conclusions. For example, in Matter of Julia 455, LLC v. State of N.Y., Div. of Hous. & Community Renewal, 104 A.D.3d 686, the court deferred to DHCR's determination that the landlord's premises were a HMD, finding that the presence of common ownership, management, and physical features of the property sufficient to form a rational basis. In Matter of Kobrick v. New York State Div. of Hous. & Community Renewal, 126 A.D.3d 538 (2015), the court deferred to DHCR's determination that two adjacent buildings did not form an HMD, finding the indicia of separateness were sufficient to form a rational basis. The expansive record contained both indicia of commonality and separateness. Indicia of commonality included common ownership and management, shared commercial tenant, shared heat and hot water, and mutual access to the roof. Indicia of separateness included the buildings were erected separately, assessed separately for real estate taxes, and separately billed for water and sewer, electricity, and natural gas.

The Court of Appeals has overturned a DHCR determination that premises constituted an HMD when the evidence of a HMD was limited to one common element. In Salvati v. Eimicke, 72 N.Y.2d 784 (1988), three sisters owned two adjoining buildings that used a common boiler. The DHCR determined that the buildings were a HMD. The Court of Appeals overturned DHCR's decision, reasoning that the single indicator of commonality — a common boiler was not substantial evidence to support an HMD determination. Although the DHCR had argued that the buildings also had a common backyard, roof, hot water system, fuel tank, the court dismissed these arguments because DHCR hadn't included them in the record.

Courts do not defer to the DHCR and make determinations de novo when the DHCR determination is in direct conflict with a prior DHCR precedent. In 721 Ninth Ave., LLC v. N.Y. State Div. of Hous. & Cmty. Renewal, 8 A.D.3d 41 (2004), the court overturned DHCR's determination that the buildings constituted a HMD, concluding that the determination was inconsistent with prior DHCR precedent. The buildings had In an earlier case the DHCR had concluded that attached buildings did not constitute an HMD when they had separate entrances, hallways, mailboxes, roofs, basements, utility, water, and sewer lines. The First Department concluded that the distinction between these two determinations was irrational and that it was therefore not bound by the DHCR determination. The court relied on prior case law to hold that the buildings did not constitute a HMD.

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No Agreement to Renew

Barton v. Truesdell 2020 WL 2200967, AppDiv, Third Dept. 5/7/20 (Opinion by Garry, P.J.)

In landlord's summary holdover proceeding, tenant appealed from County Court's affirmance of Justice Court's award of possession to landlord. The Appellate Division affirmed, rejecting tenant's argument that the parties had entered into an agreement to renew the lease.

In July 2017, the parties entered into a one-year lease agreement. In May 2018 the parties entered into discussions about a lease renewal, and about the possibility that tenant would make improvements and repairs in lieu of rent. Landlord then served a notice of termination on tenant and informed her that she had one month to vacate. When tenant failed to vacate, landlord brought this summary proceeding. Justice Court issued a warrant of eviction and County Court affirmed.

In affirming, the Appellate division rejected tenant's argument that a series of back-and-forth emails established an agreement to renew the lease. The court noted that tenant's last reply to landlord was that the agreement "looks good", but the reply offered further changes to two terms. The court held that this counteroffer constituted a rejection of the proposed agreement, and established that there was no meeting of the minds between the parties.

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No Wrongful Eviction When Subtenant Remains On Premises

Quality King Distrib. Inc. v. Chip Fifth Ave, LLC NYLJ 5/12/20, 0. 17, col. 3, Supreme Ct., N.Y. Cty (Goetz, J.)

In an action by commercial tenant's assignee seeking damages for wrongful eviction and breach of the lease, both parties sought summary judgment. The court granted landlord's motion, holding that tenant could not establish a wrongful eviction when subtenants remained in possession of the premises.

Landlord leased an entire floor of a commercial building to S3 and Cloudbreak. Cloudbreak subsequently assigned its interest to S3 pursuant to agreements by the terms of which Quality King guaranteed the tenant's obligations. S# sublet portions of the premises to various subtenants, and subsequently stopped paying full rent and electric charges. Landlord wrote to S3's principal asking for the status of those payments. S3's principal replied by an email indicating that S3 and a subtenant would be exiting the premises on or before September 30, 2015. On October 5, 2015, landlord changed the electronic security access codes, blocking access to S3's employees. After negotiations with S3 failed, landlord brought an action against Quality King on its guaranty of the lease, and S3 brought an action against landlord for breach of contract and wrongful eviction. The actions were joined for discovery and trial, but before trial, the court awarded summary judgment to landlord on its guaranty claim. The Appellate Division affirmed that judgment, leaving only S3's claims against landlord. S3 subsequently declared bankruptcy and, as an incident to those proceedings, assigned its claims to Quality King.

Quality King's breach of contract claim centered on landlord's failure to make a rent demand, but the court held that S3's earlier failure to pay rent was a prior failure to perform that precluded the breach of contract claim. The court then turned to the wrongful eviction claim, and concluded that although changing the card access code "is akin to changing the lock on the door, and thus an actional eviction," landlord did not, in this case, deprive tenant's subtenants of access to the premises. Because the subtenant's retained access, there was no actual eviction. The court then held that Quality King could not establish a constructive eviction because S3 had not completely abandoned the premises. The court then noted that S3's email indicating that it would vacate the premises on September 30, 2015 undercut the argument that changing the access codes constituted an eviction. The court treated changing the codes as an action intended to secure the premises after S3 was no longer a tenant. As a result, landlord was entitled to summary judgment on both the breach of contract and the wrongful eviction claims.