You are here: / Landlord-Tenant
, , ,

Mandamus to Compel Proceedings Properly Sought to Compel the NYC Housing Authority to Consider Requests for Increases in “Section 8” Rent Subsidies (A Ministerial Act), But a Particular Result Could Not Be Compelled (Because Exercise of Discretion Involved)

The First Department, in a full-fledged opinion by Justice Richter, determined that Article78/mandamus-to-compel proceedings were properly brought by owners of rental-properties against the NYC Housing Authority seeking rulings re: increased and suspended “Section 8” rent subsidies. The court held that the property-owners could compel the NYCHA to consider its requests (a ministerial act), but could not compel any specific result (an exercise of discretion).  The action was deemed timely because the NYCHA had never denied the requests, therefore the four-month statute never started running.  With respect increased subsidies, the court wrote:

An article 78 mandamus proceeding may be brought to compel an agency “to perform a duty enjoined upon it by law” (CPLR 7803[1]). It is well-settled that a mandamus to compel “applies only to acts that are ministerial in nature and not those that involve the exercise of discretion” … . Thus, “the petitioner must have a clear legal right to the relief demanded and there must exist a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief” … .

Supreme Court properly found that the determination of the amount of any increase in the Section 8 subsidy is not purely ministerial but a matter entrusted to NYCHA’s discretion. An owner cannot receive a rent increase unless NYCHA first determines the reasonable rent (24 CFR 982.507[a][2][i]). In doing so, NYCHA is required to compare the unit’s rent to comparable unassisted units and must consider a myriad of discretionary factors, including location, quality, size, type and age of the unit, and any services, utilities and amenities provided (24 CFR 982.507[b]). Because the determination of the amount of any rental increase involves the exercise of discretion, it is not subject to mandamus. * * *

Although the eventual determination of reasonable rent will be the product of NYCHA’s judgment, the agency does not enjoy similar discretion to not make a decision at all on the rent increase requests. The applicable regulation, relied upon by NYCHA, provides that before any rent increase is allowed, NYCHA “must redetermine the reasonable rent” (24 CFR 982.507[a][2][i] [emphasis added]; see also 24 CFR 982.519[a] [under regulation relied upon by petitioners, NYCHA must annually adjust rent at owner’s request]). Upon the proper submission of a request for rent increase, NYCHA must process the request and come to a determination, whether adverse to petitioners’ position or not. NYCHA cannot leave petitioners in limbo, neither granting nor denying their requests, many of which have been pending for a significant amount of time. Thus, the petition states a claim for mandamus relief to the extent it seeks an order directing NYCHA to make a determination with respect to the rent increase requests … . Matter of Flosar Realty LLC v New York City Hous. Auth., 2015 NY Slip Op 01906, 1st Dept 3-10-15

 

, , ,

Because the Landlord Engaged in Fraud, the Four-Year Rent-Overcharge Statute of Limitations Runs Back Four Years from When the Rent Overcharge Action Was Brought/Criteria for Collateral Estoppel Explained (Not Met Here)/Question of Fact Re: Piercing Corporate Veil

The Court of Appeals, in a full-fledged opinion by Judge Read, over a dissent, determined that the four-year statute of limitations in rent-overcharge actions, where the landlord engaged in fraud, does not begin to run when the first overcharge payment is made, but rather extends back four years from when the overcharge action is brought.  Here there was evidence the landlord used a fictitious tenant and rent to justify the rent charged the tenants.  The landlord argued the tenants’ action was time-barred because it was brought more than four years after the first overcharge payment was made. In addition to the statute-of-limitations ruling, the Court of Appeals held the collateral estoppel doctrine was not correctly applied by the courts below and there was a question of fact whether the corporate veil should be pierced due to the principal’s control over the corporate-landlord and the principal’s fraudulent acts:

Julie Conason (Conason) and Geoffrey Bryant (Bryant) (collectively, tenants) are the rent-stabilized tenants of an apartment in a residential building in Manhattan. Megan Holding LLC (Megan) is the building’s owner and tenants’ landlord. … Conason asserted an overcharge claim against Megan in April 2009, almost five and one-half years after she occupied the apartment under a vacancy lease. The principal issue on this appeal is whether CPLR 213-a’s four-year statute of limitations completely bars this claim. Because of the unrefuted proof of fraud in the record, we conclude that section 213-a merely limits tenants’ recovery to those overcharges occurring during the four-year period immediately preceding Conason’s rent challenge, and that the lawful rent on the base date must be determined by using the default formula devised by the New York State Division of Housing and Community Renewal (DHCR or the agency) … . * * *

CPLR 213-a fixes a four-year statute of limitations for claims of residential rent overcharge; specifically, this provision states that

“[a]n action on a residential rent overcharge shall be commenced within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced. This section shall preclude examination of the rental history of the housing accommodation prior to the four-year period immediately preceding the commencement of the action” (emphasis added) (CPLR 213-a; see also Rent Stabilization Law [Administrative Code of City of NY] § 26-516 [a] [2]; Rent Stabilization Code [9 NYCRR 2520.6 [f]; 2526.1 [a] [2]). * * *

Collateral estoppel comes into play when four conditions are fulfilled:

“(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits” … . … . …

Civil Court’s findings of fraud are not entitled to preclusive effect because two of the four prerequisites for collateral estoppel are unmet: the issues in Civil Court (breach of the warranty of habitability) and Supreme Court (evidence of fraud sufficient to render the rent on the base date unreliable) are not identical (the first condition), and findings of fraud were not necessary to support the judgment entered on the April 8th order, which awarded tenants rent abatement on account of Megan’s breach of the warranty of habitability and directed Megan to remedy code violations (the fourth condition). Conason v Megan Holding LLC, 2015 NY Slip Op 01553, CtApp 2-24-15

 

, , ,

Lease Provision Allowing the Landlord to Recover Attorney’s Fees in an Action Against the Tenant Triggered the Tenant’s Reciprocal Right to Recover Attorney’s Fees Against the Landlord Pursuant to Real Property Law 234 Should Tenant Prevail in the Action

The Court of Appeals, in a full-fledged opinion by Judge Rivera,  determined that a provision in a lease which allowed the landlord to recover attorney’s fees in a successful action against the tenant for failure to cure a default triggered the tenant’s right to attorney’s fees under Real Property Law 234 should the tenant prevail in the action:

Under Real Property Law § 234,

“Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys’ fees and/or expenses incurred by the tenant as a result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease.”

In order for the tenant to be eligible for attorneys’ fees under this section, the parties’ lease must permit the landlord, in any action or summary proceeding, to recover attorneys’ fees as a result of the tenant’s breach. Where a lease so provides, the court must interpret the lease to similarly permit the tenant to seek fees incurred as a result of the landlord’s breach or the tenant’s successful defense of a proceeding by the landlord. Here, we hold that paragraph 15 provides the basis for the tenant’s claim for reciprocal rights to attorneys’ fees within the meaning of Real Property Law § 234.

Paragraph 15 of the lease, titled “Tenant’s default”, sets forth the landlord’s remedies and the tenant’s liabilities upon the tenant’s failure to comply with a term or rule in the lease. According to this paragraph, where a properly notified tenant fails to cure a default the landlord may cancel the lease and retake possession of the premises, if necessary, by way of an eviction proceeding or other lawsuit. Upon cancellation of the lease and the landlord’s repossession of the premises the tenant is liable for rent for the unexpired term. The landlord’s rights to attorneys’ fees are set forth in clause D. (3) of this paragraph, which states, in part,

“D. If this Lease is cancelled, or Landlord takes back the Apartment, the following takes place:. . . .

“(3) Any rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses and second to pay any amounts Tenant owes under this Lease. Landlord’s expenses include the costs of getting possession and re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.”

Thus, clause D. (3) anticipates that after a tenant’s default leads to the reletting of the premises, the landlord is entitled to collect attorneys’ fees incurred in gaining possession. Under these circumstances, clause D. (3) complies with the requirements of Real Property Law § 234 that the lease provide “in any action or summary proceeding” for the landlord’s recovery of attorneys’ fees “incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease.” Graham Ct Owner’s Corp v Taylor, 2015 NY Slip Op 01482, CtApp 2-19-15

, ,

Landlord Not Entitled to Reformation of a Lease—Landlord Had Failed to Use Due Diligence Before Signing and Did Not Notice a Deletion Made by Plaintiff—Plaintiff Was Not Obligated to Highlight the Deletion

The First Department determined defendant landlord, sophisticated in business matters, was not entitled to reformation of a lease. The landlord had signed the agreement after the provision capping what the landlord would pay for renovations made by the tenant was deleted.  The renovations ended up costing nearly a year’s rental income. Plaintiff’s failure to “highlight” the deletion did not constitute fraud:

Defendant landlord failed to demonstrate that it was entitled to reformation of the lease amendment providing that it would reimburse plaintiff tenant the total cost of its alterations, rather than a capped amount as had been set forth in drafts circulated during negotiations over the renewal lease. Defendant’s failure to read the final document before signing it precludes its claim of unilateral mistake induced by fraud based on plaintiff’s failure to highlight its deletion of the portion of the provision capping the reimbursement amount, before presenting it to defendant’s in-house counsel for defendant’s signature … . Contrary to this sophisticated defendant’s contention, the justifiability of its reliance does not present an issue of fact barring summary disposition … . Even assuming an obligation to conduct pre-contractual negotiations in good faith in appropriate circumstances, such as would enable a party to rely on the adverse party negotiating in good faith and to assume that there are no new changes to earlier drafts unless the change is highlighted, defendant’s claim for reformation based on the allegation of fraud cannot stand. Defendant simply may not justifiably rely on the absence of such highlighting for its failure to fully review the final version of this four-page document before signing it, especially since the change is on the first page. US Legal Support Inc v Eldad Prime LLC, 2015 NY Slip Op 01386, 1st Dept 2-17-15

 

,

Criteria for Collateral Estoppel Explained (Criteria Not Met Here)

The Second Department reversed Supreme Court finding that plaintiff’s housing discrimination action was not precluded by the landlord’s prior successful eviction action under the doctrine of collateral estoppel.  Although it was determined that there was a nondiscriminatory reason for the eviction, the eviction proceeding did not address issues raised in the discrimination action.  The court explained the criteria for collateral estoppel:

“The doctrine of collateral estoppel . . . precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same” … . “The two elements that must be satisfied to invoke the doctrine of collateral estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue” … . “Preclusive effect, however, will only be given where the particular issue was actually litigated, squarely addressed and specifically decided'” … . “Generally, for a question to have been actually litigated’ so as to satisfy the identity requirement, it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding'” … .

Here, while the Supreme Court and the landlords characterize the instant action as one to recover damages for “wrongful eviction,” that is not the essence of the plaintiff’s claim. Rather, the complaint alleges that, upon learning that the plaintiff suffered from a mental illness, the defendants engaged in a course of “harassment, discrimination and hostile conduct” against him that spanned several years and predated the decision to enforce the rule pertaining to carpeting of the floor against him. The prior summary proceeding did not decide whether the plaintiff was subjected to harassment based on his mental illness, whether such harassment affected a term, condition, or privilege of his housing, or any other elements of his cause of action to recover damages for housing discrimination based on disability in violation of Executive Law § 296(5) … . Curley v Bon Aire Props Inc, 2015 NY Slip Op 00718, 2nd Dept 1-28-15

 

,

Question of Fact Whether Out-of-Possession Landlord Created the Dangerous Condition Which Caused Gas Escaping from a Propane Tank to Ignite/Question of Fact Whether the Injured Employee’s Negligent Act (the Employee, Against the Direction of His Supervisor, Brought a Partially-Filled Propane Tank Inside the Building) Was Foreseeable

The Third Department determined a question of fact had been raised about the out-of-possession landlord’s liability for an accident which ignited gas from a propane tank.  The landlord had converted the building where the accident occurred for the operation of a propane tank refinishing business.  The business was continued by the tenant.  An expert concluded that there were several ignition sources within the building, installed by the landlord, which could have ignited the gas.  Therefore, there was a question of fact whether the out-of-possession landlord had created the dangerous condition.  In response to the argument that the negligence of injured employee (who brought a propane tank which still had gas in it into the building) was the sole proximate cause of the accident, the Third Department determined there was a question of fact about whether bringing such a partially filled tank inside the building (something employees were directed not to do) was foreseeable:

… [I]t is well established that, generally, “once possession has been transferred to a tenant, an out-of-possession landlord will not be held responsible for dangerous conditions existing upon leased premises” … . Exceptions to the general rule do exist, including situations where the landlord retains control over the leased premises, has agreed to repair or maintain the premises or “has affirmatively created the dangerous condition” … .

… [Landlord and tenant-employer] assert that the reckless conduct of [tenant’s] employees was the sole proximate cause of the explosion and that defendant cannot be held liable to plaintiffs merely because it allegedly furnished the condition that allowed for the accident. In order to sever the causal connection in this matter, it must be demonstrated that the employees’ actions were “extraordinary under the circumstances, not foreseeable in the normal course of events, or independent of or far removed from … defendant’s conduct” … . Certainly, the act of the [tenant’s] new employee of bringing a tank that was not marked as empty into the building –against the direct instructions of his supervisor–was negligent. Nonetheless, defendant and third-party defendant have failed to show that such conduct was unforeseeable, thereby “sever[ing] any causal link between [defendant’s] negligence and [decedent’s] injuries” … . Miller v Genoa AG Ctr Inc, 2015 NY Slip Op 00586, 3rd Dept 1-22-15

 

, ,

Tenant Entitled to Attorney’s Fees After Successfully Defending Landlord’s Holdover Action—Discretion to Deny Attorney’s Fees Should Be Used Sparingly Because of the Purpose of the Controlling Statute

The First Department reversed the Appellate Term finding that a tenant who successfully defended a holdover action brought by the landlord was entitled to attorney’s fees. After several lease renewals at a “preferential” rate, the landlord required that a renewal be at the “legal” rate (several thousand dollars higher than the preferential rate) and started a holdover proceeding when the tenant refused to pay the “legal” rate.  Appellate Term decided the tenant was not entitled to attorney’s fees because the landlord had a “colorable claim” that it was entitled to charge the “legal” rate.  The First Department explained that whether the landlord had a “colorable claim” was not the correct standard to apply:

Under Real Property Law § 234, when a residential lease provides for a landlord’s recovery of attorneys’ fees resulting from a tenant’s failure to perform a lease covenant, a reciprocal covenant is implied requiring the landlord to pay the tenant’s attorneys’ fees incurred as a result of, inter alia, the tenant’s successful defense of an action or summary proceeding commenced by the landlord arising out of the lease … . To support an award of attorneys’ fees, the tenant must be the prevailing party, that is, the result must be substantially favorable to the tenant … .

Here, the terms of the parties’ lease plainly triggers the reciprocal covenant mandated by Real Property Law § 234, and the tenant is entitled to recover the attorneys’ fees incurred in his successful defense of the holdover proceeding. Contrary to the landlord’s assertion, the tenant was the prevailing party regardless of whether the holdover proceeding was formally dismissed, since a tenant is entitled to recover fees “when the ultimate outcome is in his favor, whether or not such outcome is on the merits” … .

Despite the tenant’s status as the prevailing party, the Appellate Term nevertheless denied the fee request because, in its view, the landlord’s possessory claim was “of colorable merit” … . This was an improper standard. “The overriding purpose of [Real Property Law § 234] is to provide a level playing field between landlords and tenants, creating a mutual obligation that provides an incentive to resolve disputes quickly and without undue expense” … . Because it is a remedial statute, Real Property Law § 234 “should be accorded its broadest protective meaning consistent with legislative intent” … . The Appellate Term’s conclusion that a tenant’s claim to reciprocal attorneys’ fees can be denied whenever a landlord asserts a colorable claim undermines the salutary purpose of Real Property Law § 234. A “colorable claim” standard would result in the gutting of the protections afforded by the statute because it would allow courts to deny fees whenever the landlord can make a nonfrivolous legal argument in support of its position.

Although courts have some discretion to deny attorneys’ fees sought under Real Property Law § 234, such discretion should be exercised sparingly … . Thus, a request for attorneys’ fees should be denied only where a fee award would be manifestly unfair or where the successful party engaged in bad faith … .

Here, the landlord has made no showing of any bad faith on the tenant’s part. Matter of 251 CPW Hous LLC v Pastreich, 2015 NY Slip Op 00208, 1st Dept 1-6-15

 

, , ,

Tenant’s Filing for Bankruptcy Precluded County from Proceeding with Efforts to Collect on a Property Tax Lien

The Fourth Department determined the county properly concluded it could not proceed to collect on a tax lien after the tenant in the relevant property filed for bankruptcy:

The Village contends that the County used an improper basis for its determination to withdraw the properties from the in rem foreclosure proceeding and to cancel the tax liens, i.e., the bankruptcy proceeding filed by plaintiff’s tenant. Although the County does not explicitly respond to the Village’s contention that the bankruptcy petition of plaintiff’s tenant did not operate to stay the in rem proceeding because plaintiff is the property owner, we nevertheless reject that contention. “[A] leasehold, like all other interests of the debtor, immediately becomes property of the [debtor’s] estate whenever bankruptcy relief is sought” … . Thus, the tenant’s petition operated as a stay to “enforce any lien against property of the estate” (11 USC § 362 [a] [4]). We therefore conclude that the County properly determined that the in rem foreclosure proceeding with respect to the subject parcels was stayed pursuant to RPTL 1140 (1), and properly withdrew those parcels from the proceeding. Herkimer County Indus Dev Agency v Village of Herkimer, 2015 NY Slip Op 00053, 4th Dept 1-2-15

 

,

Although the Landlord Can Sue Pursuant to the Accelerated Rent Clause and Is Not Under a Duty to Mitigate, the Out-of-Possession Tenant Should Be Afforded a Hearing On Whether the Accelerated Rent/Liquidated Damages Clause, Under the Facts, Constitutes an Unenforceable Penalty Because It Results In Recovery Grossly Disproportionate to the Landlord’s Actual Damages

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined that, where the tenant has breached the lease and left the premises, the landlord can sue to enforce the rent acceleration clause and is under no duty to mitigate.  However, under the facts here, the tenant was entitled to a hearing to address whether the acceleration clause allows liquidated damages which are grossly disproportionate to the actual losses, and therefore constitutes an unenforceable penalty:

As a general matter parties are free to agree to a liquidated damages clause “provided that the clause is neither unconscionable nor contrary to public policy” … . Liquidated damages that constitute a penalty, however, violate public policy, and are unenforceable … . A provision which requires damages “grossly disproportionate to the amount of actual damages provides for a penalty and is unenforceable” … .

Whether a provision in an agreement is “an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances” … . “The burden is on the party seeking to avoid liquidated damages[] to show that the stated liquidated damages are, in fact a penalty” … . Where a party establishes a penalty, the proper recovery is the amount of actual damages established by the party … .

Defendants claim that because the acceleration clause permits [the landlord] to hold possession and immediately collect all rent due, the damages are grossly disproportionate to the landowner's actual damages. They contend this is a windfall that allows [the landlord] to double dip—–get the full rent now and hold the property. On its face this argument is compelling because arguably the ability to obtain all future rent due in one lump sum, undiscounted to present-day value, and also enjoy uninterrupted possession of the property provides the landowner with more than the compensation attendant to the losses flowing from the breach—–even though such compensation is the recognized purpose of a liquidated damages provision … . 172 Van Duzer Realty Corp v Globe Alumni Student Assistance Assn Inc, 2014 NY Slip Op 08872, CtApp 12-18-14

 

, ,

Officer of Corporation Dissolved Pursuant to the Tax Law Is Personally Liable for Corporation’s Lease Obligations

The Second Department determined that defendant, an officer of the defendant dissolved corporation, was personally liable for the dissolved corporation’s lease obligations:

Pursuant to Tax Law § 203-a, the Secretary of State may dissolve a corporation by proclamation for the nonpayment of franchise taxes. Upon dissolution, the corporation’s legal existence terminates and it is prohibited from carrying on new business (see … Business Corporation Law § 1005[a][1]). It retains a limited de jure existence solely for the purpose of winding up its affairs (see … Business Corporation Law §§ 1005[a][1], 1006). A person who purports to act on behalf of a dissolved corporation is personally responsible for the obligations incurred … . Personal liability is not limited to the person who executes a contract on behalf of a dissolved corporation, but extends to the officers of the dissolved corporation … . 80-02 Leasehold LLC v CM Realty Holdings Corp, 2014 NY Slip Op 08805, 2nd Dept 12-17-14

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy