Landlord-Tenant Stabilization Luxury Decontrol Altman Issue Seemingly Resolved in 'Matter of 18 St. Marks Palace Trident LLC v. State of New York Div. of Hous. & Community Renewal' Civil Court Opine That Altman Did Not Effect a "Sea Change in Nearly Two Decades of Settled Statutory and Decisional Law"

A landlord commenced a nonpayment proceeding. The landlord previously sent a rent demand, seeking $1,181.67 for May and $1,825 for June. The tenant answered and counterclaimed for a rent overcharge. The tenant thereafter moved to dismiss the case on the grounds that the petition failed to state a cause of action because the predicate notice sought rent in excess of that allowed under the Rent Stabilization Law (RSL) and for damages based on the alleged overcharge.

The apartment was "last registered as rent stabilized in 2002. At that time tenant's legal regulated rent was $1,594.83." Since 2003, the apartment was registered as "exempt due to high rent vacancy." The tenant had moved into the apartment in 2011 and had initially been charged $1,700 per month. "The rent was raised to $1,775 in June 2015 and to $1,825 in June 2016."

The petition alleged that the apartment was "luxury decontrolled under the 1993 Rent Regulation Reform Act as further amended in 1997 and 2011." The tenant challenged such assertion, citing the Appellate Division decision in Altman v. 285 W. Fourth, 38 NYS3d 173 (1st Dept. 2016). Altman held:

The tenant argued that before her apartment was registered as exempt, the prior tenant's legal regulated rent was $1,594.83. Since that was below "the $2,000 threshold for deregulation," the apartment was "still subject to stabilization and [landlord's] failure to register it as such prohibits it from collecting rent in excess of the $1,594.83."

The landlord argued that the apartment had been lawfully deregulated "based on more recent appellate case law." The landlord explained that Altman "is in inherent conflict with the Appellate Term's holdings in 233 E. 5th St. v. Smith, 2016 Slip Op 26404 [2016] and Aimco 322 E. 61st St. v. Brosius, 50 Misc3d 10 [2015]." The Appellate Term, in 233 E. 5th St., stated that "'we do not interpret the contents of a single sentence in Altman so broadly as to effectuate a sea change in nearly two decades of settled statutory and decisional law that allow an owner to deregulate an apartment after a vacancy if the legal rent plus any lawful increases and adjustments to the rent, such as the vacancy allowance, exceeded $2,000."

Altman was "the controlling authority at the time the motion was submitted. However, the subject court opined that on April 20, 2017, the Appellate Division seemingly resolved the split of authority in Matter of 18 St. Marks Palace Trident v. State of New York Div. of Hous. & Community Renewal, 2017 NY Slip Op 03042." In St. Marks Palace, the court reversed the trial court's denial of petitioner's Art. 78 petition, "which sought to vacate respondent's determination that an apartment owned by petitioner was not eligible for deregulation." The St. Marks Palace court "reasoned that based on the formula used by respondent, which included vacancy and improvement increases, the legal regulated rent was above the $2,000 threshold for deregulation." Based upon St. Marks Palace, the subject court stated that "the mere fact that respondent's predecessor's last registered rent was less than $2,000 does not prove that her apartment is subject to rent stabilization."

The court also rejected the tenant's overcharge claim. "[A] rent overcharge claim is generally subject to a four-year statute of limitations," except where the tenant can establish "a colorable claim of fraud." Here, the apartment had been "registered as exempt well before the four year look back" and the tenant did "not provide any evidence that [landlord] engaged in a fraudulent scheme to remove it from rent stabilization." Rather, the tenant merely asserted that "the rent increases were improper based on the contention that the apartment is stabilized."

Accordingly, the court denied the motion to dismiss the case.

Comment: The Altman case is being appealed to the New York Court of Appeals.

Oren Apartments v. Torres, L & T 67038/16, NYLJ 1202785511994, at *1 (Civ., QU, Decided April 24, 2017), Nembhard, J.

Landlord-Tenant Succession Surrender by Operation of Law Landlord Acquiesced to Arrangement Whereby Subsequent Leases Were Signed by Tenant Who Had Left the Premises

A landlord commenced a holdover proceeding against "A" (the tenant of record), "B" ("A's" wife) and three "John/Jane Does," seeking possession of the subject apartment based on a claim that the tenant, "A," failed to occupy the apartment as his primary residence. The only people presently residing in the apartment are "B's" and "A" and "B's" two daughters.

At trial, the managing agent (manager) of the building testified that five lease renewals had been signed by "A" and by "C." "C" is the father of the current manager and he was the prior manager. The manager last recalled seeing "A" at the building about five years ago. The manager believed that "A" had continued to reside in the apartment up until the time of a surrender letter dated April 8, 2015. The surrender letter had been executed after the subject proceeding had been commenced. The manager's belief was based on the fact that "A" had continued to sign lease renewals and because the rent had been paid in the name of "A." The manager recalled seeing "B" approximately four to five years ago in the lobby of the building and had asked the superintendent about her. The manager testified that the superintendent advised him that "A and "B" lived in the apartment. Although the manager did not know "B" by name, he testified that "over the span of about five years," he had recognized "B" in the building and knew that "she was associated with" the apartment.

"B" testified that she had moved into the apartment with "A" and had resided in the apartment when "A" signed the lease in 2001. "B" further testified that her young daughter had also lived with her and "A" in the apartment. "B" explained that "A" had left the apartment in 2006 and had never thereafter resided in the apartment. "B" produced a marriage certificate, verifying her marriage to "A." She further testified that in 2010, she had asked "C," the prior manager who managed the building until 2011, for a lease in her name because "A" no longer lived in the apartment. "B" testified that "C" advised "B" to continue to have "A" "sign the lease renewals and then there would be no increase." "B" claimed that she followed "C's" instructions. She further testified that in 2009 she was injured when there was a fire in the building and her personal injury lawyer had notified the landlord that "B" lived in the apartment.

The court noted that Rent Stabilization Code 2523.5(b), "is a remedial measure to safeguard the eviction of family members from their homes." The court opined that such statute was intended to protect "A" and "B's" daughters, who "would be disenfranchised from any right that they may possess to the premises without this remedial statute." The court further explained that "B," in order to succeed to the apartment, "must establish by a preponderance of the evidence that she resided in the premises two years prior to the vacate date of ['A']." Although there had been no showing that "A" had surrendered the apartment "until after the proceeding commenced," the court had to consider "whether there was a surrender by operation of law." The court explained that "[a] surrender by operation of law is inferred from the conduct of the parties, namely, the tenant's abandonment of the premises and the landlord's acceptance of the abandonment."

The court observed that "[w]hat transpired here is indication of what may happen when management changes." The court found that the arrangement between "C" and "B" had "remained in place for years as evidenced by the fact that ['A'] continued to sign five subsequent leases." The court believed that this proceeding would likely not have been commenced if "C" had remained the manager.

The subject proceeding had been commenced shortly after "C" stopped managing the building and "C's" son took over management. The evidence established that "C" knew that "A" had permanently left the apartment in 2006, because "B" "credibly testified that she told him about ['A''s] departure." The court further found that "B" had "credibly testified that she followed the instructions of ['C'] and had ['A'] continue to sign lease renewals." The court stated that "[t]he fact that ['C'] accepted ['A''s] signature on subsequent leases for many years despite knowing that ['A'] no longer resided in the premises demonstrates that the landlord acquiesced to this arrangement."

The court found that "C" had assured "B" that having "A" sign the leases "would not create a problem." The court emphasized that neither "A" nor "B" had engaged "in any sort of subterfuge to hide the fact that ['A'] left the premises." In distinguishing this case from other succession cases, the court stated that "[t]his was not a situation where the tenant's 'course of deception was studied and purposeful.'" Here, the existing arrangement had been changed by the landlord when "C" stopped managing the building. Moreover, "C" continued to remain as "a member of the LLC [landlord]." The court concluded that "B" had "continually resided in the premises since ['A'] left the premises in 2006 ."

The court further explained that "[c]ourts make a distinction between a physical vacate date from the premises and a permanent vacate date out of a concern for prejudice to petitioner when the tenant or the remaining family member conceal the fact that the tenant moved from the apartment." Based on the testimony of the current manager and "B," the landlord had not been prejudiced since "B" had advised the landlord of her presence and of "A's" departure. The court noted that "[u]nder prevailing caselaw, the permanent vacate date is the expiration date of the last lease renewal in effect." Here, the last lease renewal signed by "A" had expired on Jan. 31, 2012 and that is "the legal permanent vacate date of the last tenant of record ['A']." Thus, "B" had to show that she had lived in the apartment for at least two years prior to the permanent vacate date of Jan. 31, 2012, "which translates to a period commencing on February 1, 2010."

The evidence established that "B" had lived in the apartment for at least two years prior to "A's" departure from the premises on Jan. 31, 2012. New York City Human Resource Administration (HRA) records showed that "B" had received HRA services throughout the years when she initially moved into the apartment in 2001. Con Edison records indicated that "B's" name had been placed on a bill in July 2009 and her name continued on the bill through August of 2015. "B" had testified that "she began filing income taxes in 2012 when she first learned that tax filing was required." A 2012 IRS form listed her residence at the apartment, as did subsequent tax filings for the years 2013 and 2014. The only evidence to the contrary was "a National Grid bill for the apartment that was in the name of ['A'] from Feb. 1, 2001 through June 8, 2013, when it was changed to ['B']."

The court also found that there was "convincing evidence establishing that the landlord knew or should have known ['B'] resided in the apartment because of the circumstances surrounding a fire in the building in 2009." "B" and the landlord had been involved in "B's" accident claim. Thus, the court concluded that "B" had lived in the apartment "open and notoriously." The court also explained that an Appellate Division, First Department decision, held that "a potential successor has no duty to notify a landlord regarding his or her presence in an apartment." Accordingly, the court held that "B" had "continuously resided in the premises for at least two years prior to the legal permanent vacated date of ['A'] on Jan. 31, 2012" and therefore, "B" was entitled to succeed to "A's" rent stabilized apartment.

415 Realty v. Abel Campos, L&T 60858/15, NYLJ 1202786328518, at *1 (Civ., KI, Decided April 26, 2017), Stanley, J.