Scott E. Mollen

Landlord-Tenant—Landlord Has "Carryover Liability" For Overcharge Penalties—Landlord Failed To Allege or Show Lack of Collusion or Relationship With Prior Owner or that Rent Records Were Unavailable

A landlord appealed from part of a Civil Court order which granted the tenant's motion for summary judgment dismissing a petition in a non-payment proceeding. The Appellate Term (court) affirmed.

In June 2012, "DHCR issued an order granting a tenant an overcharge award against the then-owner in the amount of $38,639.75." The tenant began "crediting this award against the rent due to the present owner, who had acquired title to the building in September 2012." In November 2016, "a second DHCR order was issued, finding that the tenant was still being incorrectly charged and granting the tenant a second overcharge award in the amount of $12,210.42."

In the subject non-payment proceeding which ensued, the landlord sought monthly rent from the tenant "far in excess of the legal regulated rent as determined by DHCR, as well as the lease amount." The tenant had moved for summary judgment. The trial court dismissed the petition on the ground that no rent was owed, since the tenant was "still deducting the overcharge award from the rent as it accrues." The trial court rejected the landlord's argument that it is "shielded from carryover liability for the overcharge award pursuant to Rent Stabilization Code (RSC) [9 NYCRR] §2526.1(f)(2)(i)." The landlord appealed.

The RSC permits a tenant to recover an overcharge penalty that had been "established by DHCR by deducting it from the rent due to the present owner at a rate not in excess of 20 percent of the amount of the penalty for any month's rent…." Since the overcharge awards had not been fully credited, the court found that the trial court had properly held that no rent is currently due to the landlord.

The court also affirmed the trial court's finding that RSC §2526.1(f)(2)(i) did not "shield" the landlord from "any attempt by tenant to deduct the DHCR award for rent presently due, as landlord has failed to raise any triable issue of fact that the limited exemption provided in RSC §2526.1(f)(2)(i) is properly invoked in this particular case…."

The court explained that RSC §2526.1(f)(2)(i) provides that "a current owner shall be responsible for all overcharge penalties, including penalties based upon overcharges collected by any prior owner." RSC §2526.1(f)(2)(i) may, however, "shield a current owner from overcharges collected by a predecessor owner where the current owner is a purchaser or successor to a purchaser at a judicial sale, 'in the absence of collusion or any relationship between such owner and any prior owner' and 'where no records sufficient to establish the legal regulated rent were provided at the judicial sale…."

Here, the landlord is a "successor to a purchaser at a judicial sale…." However, the landlord failed "to show or even allege the absence of collusion or any relationship between the prior purchaser and prior owner, or that adequate rental records were unavailable at the judicial sale…." The landlord failed to provide "proof on this critical issue and, in particular, did not even allege that no records sufficient to establish the legal regulated rent were provided at the prior judicial sale; thus the landlord failed to establish the condition precedent for the application of the exemption or raise a factual issue…."

The court emphasized that "[m]erely being a successor to a purchaser at a mortgage foreclosure action is not enough to shield the current landlord from liability for the overcharge award." Thus, the landlord was not "shielded from carryover liability for the overcharge award."

Fordham Fulton Realty Corp. v. De Leon, Appellate Term 1st Dept., Case No. 570203/19, decided Oct. 24, 2019, Ling-Cohan, J.P., Gonzalez, J. All concur.

Landlord-Tenant—Chronic Rent Delinquency—11 Non-Payment Proceedings Commenced in 13 years—"Leading Appellate Cases Do Not Discuss Predicate Notices"—Statute of Limitations—Lack of Bona Fide Defenses and Counterclaims

 A landlord commenced a holdover based on alleged "chronic rent delinquency." A notice of default (notice) set forth "details of eleven separate non-payment proceedings commenced against respondent over the past thirteen (13) years." The tenant moved to dismiss the proceeding "pursuant to CPLR §3211(a)(1) and §3211(a)(7) for failure to state a cause of action." A notice of termination incorporated the notice by reference. Both predicate notices cited Rent Stabilization Code (RSC) §2524.3(a) and §2524.3(b). However, the notices did not mention the word "nuisance," "nor any facts, other than details from the prior non-payment proceedings, offered."

The tenant argued that the landlord failed to properly plead a cause of action for nuisance. She claimed that the notices "fail to provide any facts whatsoever that allege respondent willfully, unjustifiably, or intentionally harassed the landlord."

The court explained that a "nuisance has been found to have been committed if it can be determined that the tenant chronically, and unjustifiably, refused to pay the rent when due and that as a result, the landlord was compelled to bring numerous non-payment proceedings within a relatively short period of time." Prior precedent held that the landlord must show that the tenant's conduct was "willful, unjustified…or accompanied by an intent to harass the landlord." The court stated that "leading appellate cases do not discuss predicate notices."

The tenant challenged the RSC §2524.3(a) claim on the grounds that "many of the predicate non-payment proceedings are barred from consideration pursuant to a statue of limitations, and that the remaining proceedings cannot be considered due to respondent's bona fide defenses and counterclaims."

The tenant argued that any proceedings commenced more than six years ago cannot be considered. The court explained that there was "no appellate authority supporting (tenant's) position. In fact, several appellate decisions implicitly permit the use of predicate proceedings commenced more than six years prior to the chronic rent delinquency holdover." The tenant had not argued that the landlord failed to act on a claim that accrued more than six years ago. Thus, the court found that "non-payment proceedings commenced more than six-years prior to the date this proceeding was commenced are not time barred."

The court further explained that whether the tenant "had bona-fide defenses to the prior proceedings remain questions of fact." Absent "conclusive proof that rent was withheld specifically because the tenant sought the opportunity to interpose a warranty of habitability defense, this pre-trial motion must be denied."

With respect to a 2006 matter, the tenant paid the arrears on the first court appearance and the proceeding was discontinued. A pro-se answer alleged conditions in need of repair. However, a Jan. 17, 2007 stipulation did not mention repairs. There was no indication that the tenant had "withheld rent due to conditions in the apartment."

In 2017, the landlord had obtained a possessory judgment based on the tenant's failure to answer. In March 2018, the tenant executed a stipulation pursuant to which a warrant was stayed for approximately a month to permit the respondent to pay the arrears. That stipulation listed repairs, but there was no indication that the tenant was withholding rent until the repairs were addressed. A May 2018 order provided the tenant with further time to pay the arrears and noted that the tenant was seeking participation in a government program. That language "suggests (tenant) was not withholding rent, but rather that she did not have it." The parties had also stipulated to additional time in July 2019 for the tenant to pay arrears. There was no indication at that time that payments were withheld due to repairs. Similarly, an August 2018 court order gave the tenant additional time to pay rent arrears, without any indication that the tenant was withholding rent due to repairs. That court order indicated that the tenant's problem was lack of funds, rather than that rent was withheld because of needed repairs.

The court noted that the landlord's agreement to make repairs in a prior proceeding was not "dispositive." The "dispositive" issue is "whether bona-fide habitability defenses caused the tenant to withhold rent." Since there were issues of fact which required a trial, the court denied the motion to dismiss the petition on the ground that it failed to state a cause of action.

The court also noted that although the Appellate Division, First Department had implicitly held that "multiple proceedings commenced in a short time lays out a prima facie showing whether or not additional facts are alleged in a predicate notice," an Appellate Division, Second Department case held that dismissal was appropriate where a "notice of termination and holdover petition failed to allege additional aggravating circumstances as would sustain a claim of nuisance."

3510 Realty Corp. v. Matos, Civil Court, Bronx Co., Case No. 8901/19, decided Oct. 30, 2019, Ibrahim, J.

Landlord-Tenant—Termination Notice Served By a Party Renders Service Defective

 A landlord sought to recover possession of an apartment on the grounds that the respondents' "weekly tenancy expired upon the service of the notice of termination." The respondents moved to dismiss on several grounds, including that the notice of termination was not properly served. They claimed that the predicate notice was "served by a party to the proceeding which renders service facially defective." The landlord asserted that a "landlord or its agent may serve a notice terminating the tenancy."

"Real Property Law §232-a requires service of a thirty (30) day notice terminating a month-to-month tenancy in the same manner as a notice of petition and petition in a summary proceeding. CPLR §2103(a) "explicitly states pleadings cannot be served by any person who is a party to the proceeding." The landlord contended that since a predicate notice is not a pleading, CPLR §2103(a) is inapplicable since the "proceeding predicated thereon was not a pending action."

The court cited Zamar v. Fair, 153 Misc. 2d 913 (Civ. Ct., Bx. Co. 1991) (Zamar), where a Housing Court "interpreted the service requirement of CPLR §2103(a), read the statute in para materia with RPL §232-a, and extended the requirement to apply to the service of predicate notices." The subject court agreed with Zamar. The subject court explained that the "public policy behind extending CPLR §2103(a) to service of a notice of termination pursuant to RPL §232-a is that an individual who has an interest in the outcome of a summary proceeding should not be permitted to also effectuate service. If a hearing on the propriety of service is required, there is a risk that testimony on service of a predicate notice by a party who has an interest in the outcome of the controversy may be tainted."

Zamar had noted that "service of a termination notice can be the subject of a traverse hearing. CPLR §2103(a)'s requirement that paper be served by a non-party helps assure that traverse hearings are properly and correctly decided."

The court explained that "prudent practice, particularly in summary proceedings where the landlord has a direct interest in the outcome of the proceeding, is to require an individual, non-party of unassailable character to do the serving and complete the affidavit of service."

Here, the landlord is a limited liability corporation and the owner of the LLC served the notice of termination. The court stated that the landlord may not "seek to hide behind the corporate veil of the LLC as an exception to CPLR §2103(a) and RPL §232-a as (the individual owner of the LLC) has a direct interest in the outcome of this proceeding." Accordingly, the court dismissed the proceeding without prejudice.

JP 603 Linden Blvd. LLC v. Whiteman, Civil Court, Kings Co., Case No. 71716/2019, decided Nov. 1, 2019, Scheckowitz, J.

Scott E. Mollen is a partner at Herrick, Feinstein.