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Uncovered Baseboard Radiator May Constitute an Unsafe Condition Created by Landlord

The First Department determined there were questions of fact about whether the landlord assumed a duty to cover a baseboard heating unit, whether the landlord created an unsafe condition by removing the baseboard heating unit’s cover, and whether the uncovered unit needed repairs or was defective.  The infant plaintiff, who suffers from mental retardation and cerebral palsy, was burned when her face and hand was in contact with an uncovered baseboard radiator for an unknown period of time.  Nina W v NDI King Ltd Partnership, 2013 NY Slip Op 08202, 1st Dept 12-10-13

 

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“Rent Paid In Advance” Lease Enforced/Insufficient Proof of Oral Modification

In a full-fledged opinion by Judge Read, the Court of Appeals determined the Appellate Division correctly held the tenant was obligated to pay an annual rent in advance and the proof was insufficient to demonstrate any contrary oral modification of the lease.  The Court explained the “rent paid in advance” concept and the criteria for oral modification in the face of a clause prohibiting it:

Under the common law, rent is consideration for the right of use and possession of the leased property that a landlord does not earn until the end of the rental period (…1 Friedman & Randolph, Friedman on Leases § 5:1.1 [5th ed 2013]).  This presumption may be altered, however, by the express terms of the parties’ lease such that rent is to be paid at the beginning of the rental period rather than the end (…1 Robert Dolan, Rasch’s Landlord and Tenant § 12:23 [4th ed 1998]; 1 Friedman & Randolph § 5:1.1). When a lease sets a due date for rent, that date is the date on which the tenant’s debt accrues (see 1 Friedman & Randolph § 5:1.1… ).  Rent paid “in advance” (i.e. at the beginning of the term) is unrecoverable if the lease is terminated before the completion of the term, unless the language of the lease directs otherwise … * * *

When the parties dispute whether an oral agreement has been formed, it is the conduct of the party advocating for the oral agreement that is “determinative,” although the conduct of both parties may be relevant … .  This is because the equity doctrine is designed to prevent a party from inducing full or partial performance from another and then claiming the sanctuary of the Statute of Frauds or section 15-301 when suit is brought … .  Eujoy Realty Corp v Van Wagner Communications LLC, 179, CtApp 11-26-13

 

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Lease Which Purported to Deregulate Rent-Controlled Apartment Is Void As Against Public Policy

In a full-fledged opinion by Judge Mazzarelli, the First Department determined that a lease (called the “New Agreement”) which purported to deregulate a rent-controlled apartment was void as against public policy:

In Drucker v Mauro (30 AD3d 37, 39 [1st Dept 2006], appeal dismissed 7 NY3d 844 [2006]) this Court stated:

“It is well settled that the parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void (Rent Stabilization Code [9 NYCRR] § 2520.13), and this Court has uniformly thwarted attempts, whether by mutual consent or by contract of adhesion, to circumvent regulated rent maximums.”

Even an agreement that modifies the rent laws in a manner favorable to the tenant is of no effect (id. at 41). The New Agreement does not merely modify the rent regulations; it declares them inapplicable to the apartment. Without question, then, the New Agreement is void. We note that, although Drucker addressed only agreements to deregulate rent-stabilized apartments, there is no logical reason why the same principle should not apply to the rent-controlled apartment at issue here.  Extell Belnord LLC v Uppman, 2013 NY Slip Op 07697, 1st Dept 11-19-13

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Lease; Services Agreement Did Not Allow Building Owner to Recover for Condition of Property

In a full-fledged opinion by Judge Smith, the Court of Appeals determined that plaintiffs, the building owners, could not recover damages related to the condition of the property upon the termination of the lease.  The property was used as a homeless shelter.  The City of New York entered into a Services Agreement with The Salvation Army to run the shelter.  The Salvation Army leased the property from the property owners. The City, in the Services Agreement, was required to pay The Salvation Army’s obligations to the property owners under the lease. The Court wrote:

The Lease is clear that, as a general proposition, The Salvation Army is not obliged to pay more to plaintiffs than it can recover from the City, and it is equally clear that The Salvation Army must do what it reasonably can to recover what the City owes it.  If The Salvation Army breached its duty to use commercially reasonable efforts to enforce a City obligation, it could not rely on the City’s non-payment of that obligation to defeat plaintiffs’ claim.  …[H]owever, … the complaint fails to allege any commercially reasonable step that The Salvation Army should have taken to recover money from the City. Plaintiffs do not identify any provision of the Services Agreement under which the City owes money to The Salvation Army that The Salvation Army failed to collect.  JFK Holding Company LLC v City of New York…, 196, CtApp 11-14-13

 

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Improper Notice of Benefit Termination; Four-Month S/L Never Triggered; Termination Annulled

The Second Department determined the four-month statute of limitations for Article 78 review was never triggered because the NYC Housing Authority’s (NYCHA’s) failed to provide proper notice of termination of Section 8 housing benefits.  Therefore the termination was properly annulled and the subsidy was properly reinstated:

Pursuant to paragraph 22(f) of the Williams first partial consent judgment, the four-month statute of limitations of CPLR 217 begins to run on the date of receipt of the NYCHA’s notice of default letter … . Paragraph 22(f) cannot be read in a vacuum. Relying on contract principles, as urged by the NYCHA, and reading the Williams first partial consent judgment as a whole, we conclude that the NYCHA has the burden of satisfying the condition precedent of serving all three notices upon the Section 8 participant before its determination to terminate a participant’s subsidy can be considered final and binding upon the participant … . * * *

Here, the NYCHA failed to show that it mailed two of the three required notices. It did not present any proof that it mailed the initial warning letter and it submitted insufficient proof with respect to the mailing of the T-1 letter. As a result of this failure to abide by the notice provisions set forth in the Williams first partial consent judgment, the statute of limitations was not properly triggered and did not begin to run … . Matter of Dial v Rhea, 2013 NY Slip Op 07475, 2nd Dept 11-13-13

 

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Contractor Working for Tenant Could Not Impose Mechanic’s Lien on Property Owner; Owner Acquiesced In, But Did Not Affirmatively Consent to, Work

The Second Department determined that the contractor, Matell, who was hired by the tenant to construct a supermarket, could not impose a mechanic’s lien upon the property owner (Fleetwood Park) based on the tenant’s failure to pay.  In affirming the dismissal of two affirmative defenses, the court explained that the lien was timely filed and privity was not required for a valid mechanic’s lien. On the “affirmative consent of the property owner requirement,” the court wrote:

“A contractor who performs work for, or provides equipment to, a tenant may nonetheless impose a mechanic’s lien against the premises where the owner of the premises affirmatively gave consent for the work or equipment directly to the contractor, but not where the owner has merely approved or acquiesced in the undertaking of such work or the provision of such equipment” … . “To sustain the lien, the owner must either be an affirmative factor in procuring the improvement to be made, or having possession and control of the premises assent to the improvement in the expectation that he [or she] will reap the benefit of it'” … .

Here, while Matell presented evidence showing that Fleetwood Park had knowledge of, and acquiesced in, the work performed to convert the leased property into a supermarket for the tenant’s use, Matell failed to present any evidence showing that Fleetwood Park conveyed any affirmative consent directly to Matell for the work … . Therefore, Matell failed to make a prima facie showing that Fleetwood Park affirmatively consented to the subject work.  Matell Contr Co v Fleetwood Park Dev LLC, 2013 NY Slip Op 07456, 2nd Dept 11-13-13

 

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Administrative Review of a Rent Overcharge Petition Should Have Been Granted; Allegations of Fraud Overcame Four-Year Statute of Limitations

The First Department, over a dissent, reversed Supreme Court’s dismissal of an Article 78 petition for administrative review of the denial of petitioner’s rent overcharge complaint by the NYS Division of Housing and Community Renewal (DHCR).  Petitioner’s rent was increased from $572 to $1750 a month.  To justify that adjustment, the landlord was required to have spent $39,000 improving the apartment.  Petitioner submitted evidence that supported her position the landlord spent very little on the improvements.  The landlord, however, produced no evidence of what was actually spent and, therefore, there was no basis in the record for the DHCR’s determination that the $1750 rental amount was justified.  The First Department noted that the four-year statute of limitations did not apply because there was substantial evidence of fraud:

Under the standard set forth in Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin. (15 NY3d 358 [2010]), petitioner made a sufficient showing of fraud to require DHCR to investigate the legality of the base date rent … . Although the “look-back” for an apartment’s rental history is ordinarily limited to the four-year period preceding the date that the petitioner files the complaint …, where fraud is alleged and there is “substantial indicia of fraud on the record,” DHCR is obliged to investigate whether the base date rate was legal and “act[s] arbitrarily and capriciously in failing to meet that obligation”… .

Thus, we find that DHCR’s disparate treatment of the parties’ claims was arbitrary. While the agency made no attempt to evaluate the legitimacy of petitioner’s claims despite their consistency and degree of detail, DHCR credited the owner’s implicit claim that it spent $39,000 to renovate the apartment simply because “it would not be difficult for anyone with any experience in this industry to believe it could have taken $39,000 … to update the appearance and equipment in an apartment which had not changed hands for thirty-two years.” This justification for the agency’s determination is irrational. Finding that the owner “could have” spent $39,000 …, where the owner never submitted any evidence controverting petitioner’s claims is not equivalent to finding that the owner actually made improvements costing that much. Accordingly, this matter should be remanded to DHCR to give the parties the opportunity to present evidence in connection with the legality of the base rate rent. Matter of Boyd v NYS Division of Housing and Community Renewal…, 2013 NY Slip Op 06966, 1st Dept 10-29-13

 

 

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Son’s Application for Succession to Mitchell-Lama Apartment Should Not Have Been Denied Because of Mother’s Failure to File Income Affidavit

In a full-fledged opinion by Judge Lippman, with three dissenters, the Court of Appeals determined that his mother’s failure to file an income affidavit did not warrant the denial of her son’s [Murphy’s] application for succession to the Mitchell-Lama apartment vacated by his parents:

In this case, DHCR [Division of Housing and Community Renewal] contests neither Murphy’s status as a family member, nor that he lived in the apartment during the relevant two-year period of 1998-1999.  The sole basis for DHCR’s denial of Murphy’s application was that his mother did not file the requisite income affidavit for 1998, the year prior to Murphy’s high school graduation.  Given the overwhelming evidence of primary residence, and the absence of any indication that the failure to file was related to Murphy’s status as a co-occupant or an income-earner,  we hold that it was arbitrary and capricious for DHCR to deny succession on the basis of the failure to file a single income affidavit.

There is no doubt that DHCR has a compelling interest in encouraging the timely filing of income affidavits in order to fairly and efficiently administer the Mitchell-Lama program. Housing companies and supervising agencies like DHCR rely on these affidavits to monitor both the number and aggregate income of occupants, information that is crucial to determining the appropriate amount of rent and to ensuring that tenants remain eligible for the rental subsidy.  Accordingly, failure to file income affidavits can result in harsh penalties: the tenant can be charged a surcharge on rent for the applicable year (as occurred here), or can be evicted (see 9 NYCRR §§ 1727-2.6 [a] and 1727-5.3 [a] [7]).

In the succession context, however, the principal purpose of the income affidavit is to provide proof of the applicant’s primary residence… . As both Supreme Court and the Appellate Division noted, Murphy provided ample evidence in support of his succession application evincing that he resided in the apartment during 1998 and 1999.  Indeed, DHCR does not dispute Murphy’s residency for the past 32 years.  DHCR instead cites only his mother’s technical non-compliance for a single year to justify evicting him from the only home he has ever known.

Notwithstanding the importance of the income affidavit requirement, given the overwhelming evidence of residency provided in this case, and the lack of relationship between the tenant-of-record’s failure to file and Murphy’s income or cooccupancy, DHCR’s decision to deny Murphy succession rights was arbitrary and capricious.  Matter of Murphy v NYS Division of Housing and Community Renewal, 146, CtApp 10-17-13

 

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Appellate Division, Acting as Second Appellate Court, Used Wrong Standard of Review

The Court of Appeals reversed the appellate division in a holdover tenant proceeding because the appellate division, acting as the second appellate court, use the wrong standard of review:

We agree with the dissenting opinion that the Appellate Division applied the incorrect standard of review to the Appellate Term order.  In primary residence cases, where the Appellate Division acts as the second appellate court, “the decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility of witnesses” … .The Appellate Division did not apply this standard of review to this case, instead substituting its own view of the trial evidence.  Accordingly, the case needs to be remitted to that court to apply the appropriate standard of review… . 409-411 Sixth Street, LLC v Mogi, 250, CtApp 10-10-13

 

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Four-Year Rent-Overcharge Statute of Limitations Does Not Apply Where There Is Fraud

The First Department noted that the four-year statute of limitations for rent-overcharge actions does not apply where fraud in involved, because the fraud renders the underlying lease void:

We are not persuaded that plaintiffs’ overcharge claim is barred by the four-year statute of limitations. As we noted in Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin. (68 AD3d 29, 32, affd 15 NY3d 358, 366 [2010] [citations ommitted]), “while the applicable four-year statute of limitations reflects a legislative policy to alleviate the burden on honest landlords to retain rent records indefinitely,’ and thus precludes us from using any rental history prior to the base date, where there is fraud . . . the lease is rendered void[,]” and the legal rent is to be determined by the default formula … . We went on to note that “[s]anctioning the owner’s behavior on a statute of limitations ground can result in a future tenant having to pay more than the legal stabilized rent for a unit, a prospect which militates in favor of voiding agreements such as this in order to prevent abuse and promote enforcement of lawful regulated rents'” … . We thus hold that the four year statute of limitations is not a bar in a rent overcharge claim where there is significant evidence of fraud on the record… . Conason v Megan Holding LLC, 2013 NY Slip Op 05956, 1st Dept 9-24-13

 

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