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Under the Terms of the Lease and the Related Guaranty of Payment, the Guarantor Was Required to Pay Liquidated Damages in an Amount Equal to the Rent for the Unfinished Term of the Lease Even After the Tenant Was Evicted and the Landlord Had Regained Possession of the Property

The Second Department, over a dissent, determined that the terms of appellant’s guaranty of payment of amounts owed under a lease obligated the appellant even after the tenant had left the premises and the landlord took possession. Although the tenant’s obligation to pay rent had ended when the plaintiff-landlord took possession, the terms of the lease allowed the plaintiff to seek the amount of the rent for the remaining term of the lease as liquidated damages and did not require the plaintiff to mitigate those damages by renting to another:

“Although an eviction terminates the landlord-tenant relationship, the parties to a lease are not foreclosed from contracting as they please” … . Where a lease provides that a landlord is under no duty to mitigate damages after its reentry by virtue of its successful prosecution of a summary proceeding, and that the tenant remains liable for damages, “[the tenant] remain[s] liable for all monetary obligations arising under the lease” … .

Here, the lease did not obligate the plaintiff to mitigate damages after reentry by virtue of its successful prosecution of a summary proceeding, and specifically provided that in the event of such reentry, “tenant shall also pay owner as liquidated damages . . . 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 of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease.” Thus, although the tenant no longer remained liable for rent after it vacated the premises, it was liable for liquidated damages, which could be as much as the balance of rent due under the original term of the lease, since the plaintiff was under no obligation to rent to a new tenant for the balance of the term. Moreover, the guaranty specifically stated that the appellant guaranteed “the full and prompt payment by Tenant of all amounts due under [the] lease.” Accordingly, the plaintiff was entitled to seek from the appellant the liquidated damages for which the tenant was liable under the lease even after the termination of the landlord-tenant relationship… . H.L. Realty, LLC v Edwards, 2015 NY Slip Op 06572, 2nd Dept 8-19-15

 

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Agency’s Failure to Follow Its Own Regulations Renders Determination Arbitrary and Capricious

The Second Department, over a partial dissent, in a rent-overcharge proceeding, affirmed Supreme Court’s review of the propriety of rent regulated by the NYC Rent Stabilization Code. The court explained the extent of the courts’ review powers of the administrative rulings, noting that the Deputy Commissioner’s failure to calculate the appropriate rent in the manner dictated by the controlling regulations rendered that particular aspect of the Commissioner’s ruling arbitrary and capricious:

“[I]n a CPLR article 78 proceeding to review a determination of the DHCR [NYC Department of Housing and Community Renewal], the court is limited to . . . the question of whether its determination was arbitrary and capricious and without a rational basis” … . In reviewing a determination of the DHCR, “[t]he court may not substitute its judgment for that of the DHCR” … . “The DHCR’s interpretation of the statutes and regulations it administers, if reasonable, must be upheld” … . * * *

In determining that the [landlord was] entitled to a rental increase of $204.01 per month pursuant to Rent Stabilization Code (9 NYCRR) § 2522.4(a)(1), the Deputy Commissioner deviated from the statutory calculations set forth in Rent Stabilization Code (9 NYCRR) § 2522.4(a)(4). Accordingly, the determination to recalculate the legal regulated rent to be $1,200 per month, by including a rental increase of $204.01 per month, was arbitrary and capricious and did not have a rational basis in the record … . Matter of Velasquez v New York State Div. of Hous. & Community Renewal, 2015 NY Slip Op 06353, 2nd Dept 7-29-15

 

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Landlord With Notice of a Tenant’s Dog’s Vicious Propensities May Be Liable to the Injured Plaintiff

In finding that there were questions of fact precluding summary judgment in a dog-bite case, the Third Department noted that a landlord with notice of a dog’s vicious propensities can be liable to the injured plaintiff:

“A landlord may be liable for the attack by a dog kept by a tenant if the landlord has actual or constructive knowledge of the animal’s vicious propensities and maintains sufficient control over the premises to require the animal to be removed or confined” … . Defendant was empowered to require the [tenants] to remove the animal and, indeed, its site manager testified that he took steps to do so once he learned of the dog’s existence in September 2012. Rodgers v Horizons At Monticello, LLP, 2015 NY Slip Op 06189, 3rd Dept 7-16-15

 

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Question of Fact Whether Out-of-Possession Landlord Relinquished Control of the Premises to the Extent that Its Duty to Maintain the Premises in a Reasonably Safe Condition Was Extinguished—Lease Allowed Landlord to Reenter to Inspect and Make Repairs and Improvements

The Second Department determined there were questions of fact whether an out-of-possession landlord (Marphil Realty) was liable for a dangerous condition (resulting in a fire). The lease gave the landlord the right to reenter during usual business hours in order to inspect the premises and to make repairs and improvements. Therefore there was a question of fact whether the landlord had relinquished complete control over the property such that its duty to maintain the property in a reasonably safe condition was extinguished:

“Generally, a landowner owes a duty of care to maintain his or her property in a reasonably safe condition” … . “That duty is premised on the landowner’s exercise of control over the property, as the person in possession and control of property is best able to identify and prevent any harm to others'” … . Accordingly, “a landowner who has transferred possession and control is generally not liable for injuries caused by dangerous conditions on the property” … . However, an out-of-possession landlord may be liable for injuries occurring on the premises if “it has retained control of the premises, is contractually obligated to perform maintenance and repairs, or is obligated by statute to perform such maintenance and repairs” … . Yehia v Marphil Realty Corp., 2015 NY Slip Op 05670, 2nd Dept 7-1-15

 

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“Extreme and Outrageous Conduct” Is Not an Element of “Negligent Infliction of Emotional Distress”—Elements of Private Nuisance, Intentional Infliction of Emotional Distress, and Negligent Infliction of Emotional Distress Explained in Some Depth—Complaint Should Have Been Dismissed for Failure to State a Cause of Action

The Second Department, in a full-fledged opinion by Justice Miller, reversed Supreme Court and dismissed the complaint for failure to state a cause of action.  The opinion is important because it clarified “negligent infliction of emotional distress,” explaining that “extreme and outrageous conduct” is not one of the elements. Although the court held that the complaint did not state causes of action for intentional infliction of emotional distress, negligent infliction of emotional distress, or private nuisance, the nature of those causes of action was explained in some depth. The defendants owned property next door to the plaintiffs’ home.  The defendants rented to tenants, who were not parties to the lawsuit.  The tenants apparently held loud parties at which drugs were used and sold. The plaintiffs at one point called the police to complain about the tenants’ behavior. Subsequently two masked men entered plaintiffs’ home to intimidate them. Plaintiff-husband ultimately shot the two intruders and in the process accidently shot his dog. The men were arrested by the police. The opinion is too detailed to properly summarize here, but the essence of the court’s ruling is that the tenants’ behavior was not sufficiently linked to any acts or omissions by the defendants. The court wrote:

The elements of a private nuisance cause of action are: “(1) an interference substantial in nature, (2) intentional in origin, (3) unreasonable in character, (4) with a person’s property right to use and enjoy land, (5) caused by another’s conduct in acting or failure to act” … . * * *  … [T]he duty to abate a private nuisance existing on real property arises from the power to possess the property and control the activities that occur on it. Accordingly, a landowner who has relinquished possession of his or her property will not be liable for a private nuisance that arises on the property if the landowner neither created the nuisance nor had notice of it at the time that possession of the property was transferred … . In the absence of any such knowledge or consent to the objectionable activity which may be attributable to the landowner at the time the lease is executed, the common-law duty to abate a nuisance that exists during the course of a tenancy lies with the tenant, in his or her capacity as the one in possession of the property … .

… [U]nder New York law, a cause of action alleging intentional infliction of emotion distress “has four elements: (i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress” … . * * * ” Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community'” … . * * * Although the individuals who broke into the plaintiffs’ home may have engaged in extreme and outrageous conduct, the complaint alleges no basis upon which the intruders’ conduct may be imputed to the defendants. The defendants’ intentional conduct, as alleged in the complaint, amounts to nothing more than a failure to ensure that their tenants and their friends refrained from committing the acts described in the complaint. * * *

[Re: negligent infliction of emotional distress] …. [T]o the extent that certain of this Court’s past decisions have indicated that extreme and outrageous conduct is an element of negligent infliction of emotional distress … , those cases should no longer be followed. … [A] breach of a duty of care “resulting directly in emotional harm is compensable even though no physical injury occurred” … . However, the mental injury must be “a direct, rather than a consequential, result of the breach” … , and the claim must possess “some guarantee of genuineness” … . … Applying the correct standard to the complaint in this case, we conclude that the plaintiffs’ failure to adequately allege extreme and outrageous conduct is not fatal to their cause of action alleging negligent infliction of emotional distress … . Nevertheless, we conclude that the complaint is deficient in another respect, as it failed to adequately allege facts that would establish that the mental injury was “a direct, rather than a consequential, result of the breach” … . Taggart v Costabile, 2015 NY Slip Op 05464, 2nd Dept 6-24-15

 

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Question of Fact Whether Landlord Entitled to Pass On Increased Real Estate Taxes (Pursuant to a Tax Escalation Clause)—Increase Cannot Be Tied to Improvements Which Solely Benefit the Landlord

The First Department determined the landlord should not have been granted summary judgment.  Plaintiff-tenant sought a declaration that it was not responsible for increased real estate taxes related to improvements to the building which benefitted only the landlord and not the tenant. The matter was sent back for a determination whether and to what extent the improvements benefitted only the landlord:

The Court of Appeals has made clear that “[i]t is not the aim of . . . a [tax escalation] clause . . . to impose upon the tenant responsibility for increases in real estate taxes resulting from improvements on the property redounding solely to the benefit of the landlord” … .

The motion court incorrectly found that this principle was limited to circumstances where the improvement involved a vertical or horizontal enlargement of the building. … The improvement at issue is a renovation solely of the residential aspects of the building. Plaintiff is a commercial tenant. Our declaration here simply states the well settled principle regarding tax escalation clauses.  Enchantments Inc. v 424 E. 9th LLC2015 NY Slip Op 05409, 1st Dept 6-23-15

 

Acceptance of Unsolicited Rent After Expiration of a Lease and After the Requisite Nonrenewal Notice Does not Waive the Intention Not to Renew or Vitiate the Notice

The Second Department, in a full-fledged opinion by Justice Cohen, determined the acceptance of unsolicited rent payments after the lease for a rent-stabilized apartment had expired, and after the tenant had received the requisite nonrenewal notice, did not constitute a waiver of the intention not to renew:

… [W]e are asked to determine whether a landlord’s acceptance of unsolicited rent in the “window period” between the expiration date of a lease and the commencement of a holdover proceeding nullifies a landlord’s previous service of a notice of intention not to renew the lease. We conclude that the acceptance of unsolicited rent in these circumstances does not, by itself, demonstrate an intentional waiver of a previously served notice of intention not to renew the lease and, thus, does not vitiate that notice. Matter of Georgetown Unsold Shares, LLC v Ledet, 2015 NY Slip Op 05185, 2nd Dept 6-17-15

 

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Indemnification Clause in Lease/Alteration Agreements Unenforceable—No Exception for Lessor’s Negligence

The Second Department determined an indemnification clause in lease/alteration agreements was unenforceable because it was not limited to the lessee’s acts or omissions and because it did not make exceptions for the lessor’s negligence (General Obligations Law 5-321):

Broad indemnification provisions … which are not limited to the lessee’s acts or omissions, and which fail to make exceptions for the lessor’s own negligence, are unenforceable pursuant to General Obligations Law § 5-321 where [the relevant agreements] were not negotiated at arm’s length by two sophisticated business entities… . Nolasco v Soho Plaza Corp., 2015 NY Slip Op 05164, 2nd Dept 6-17-15

 

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Late Notice of Claim Should Not Have Been Deemed Timely (Sua Sponte, Nunc Pro Tunc)—the 90 Days Started Running When Plaintiff’s Asthma Symptoms Worsened, Not When a Doctor Connected the Symptoms to Mold in the Apartment—the Plaintiff Did Not Make a Motion for Permission to File a Late Notice of Claim

The First Department determined Supreme Court should not have, sua sponte (in the absence of a motion by the plaintiff), deemed plaintiff’s late notice of claim timely filed nunc pro tunc. The claim alleged mold resulting from a leak in plaintiff’s New York City Housing Authority (NYCHA) apartment exacerbated plaintiff’s asthma.  The First Department found that the cause of action accrued when plaintiff’s symptoms worsened, no later than February, 2011, not when a connection between the mold and plaintiff’s symptoms was suggested by a doctor in March 2011:

[Plaintiff] was required to file a notice of claim within 90 days after “the date of [her] discovery of the injury” or the date on which “through the exercise of reasonable diligence the injury should have been discovered” (CPLR 214-c[3]; see General Municipal Law § 50-e[1][a]…). NYCHA established that plaintiff’s claim accrued no later than February 2011, by relying on plaintiff’s testimony that her asthma symptoms worsened, resulting in more frequent attacks and hospital visits, starting in September or December of 2010, or January or February of 2011, when she was prescribed additional medications, as reflected in her hospital records. Thus, the notice of claim, filed over 90 days later in June 2011, without leave of court, was late and without effect … .

Plaintiff argues that her claim did not accrue until March 2011, when a doctor noted a connection between her symptoms and the mold in her apartment. However, a “cause of action for damages resulting from exposure to toxic substances accrues when the plaintiff begins to suffer the manifestations and symptoms of his or her physical condition, i.e.[,] when the injury is apparent, not when the specific cause of the injury is identified” … .

The court lacked authority to deem the late notice of claim timely filed nunc pro tunc, since plaintiff never moved for such relief and the statutory time limitation for bringing the claim had already expired when NYCHA moved for summary judgment … . Vincent v New York City Hous. Auth., 2015 NY Slip Op 04767, 1st Dept 6-9-15

 

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Triggering Event for the Statute of Limitations Re: a Challenge of the Termination of Section 8 Rent Subsidies Is the Sending of the So-Called T-3 Letter-Notification, Irrespective of Whether the Two Prior Required Letter-Notifications Were Sent

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a three-judge dissent, determined that the so-called T-3 letter to tenants from the New York City Housing Authority (NYCHA), which notifies tenants of the termination of their Section 8 rent subsidies, is the triggering event for the four-month statute of limitations for challenging the termination. The applicable “Williams consent judgment” mandates a three-step procedure for termination of the rent subsidies, essentially three notifications to tenants, of which the T-3 letter is the last. The issue before the court was whether the NYCHA’s inability to show the first two notifications were properly sent prevented the statute of limitations from running when the T-3 letter was sent.  The Court of Appeals held that, although the failure to follow the three-step procedure is a defense to the termination of the subsidies, the statute of limitations for any challenge properly runs from the sending of the T-3 letter:

The plain language of the Williams consent judgment draws a distinction between what is required to commence the limitations period for a challenge to a termination of Section 8 benefits, on the one hand, and what is required for NYCHA to establish the merit of such a termination — including NYCHA’s full compliance with the notice requirements — on the other hand. Matter of Banos v Rhea, 2015 NY Slip Op 04029, CtApp 5-12-15

 

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