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HERE THE LEASE MADE THE OUT-OF-POSSESSION LANDLORD RESPONSIBLE FOR STRUCTURAL REPAIRS AND MADE THE THE TENANT RESPONSIBLE FOR ALL NON-STRUCTURAL REPAIRS; THE CRACKED STEP WAS NOT A STRUCTURAL DEFECT; THE FACT THAT THE LANDLORD WAS AWARE OF THE DEFECT WAS IRRELEVANT (FIRST DEPT).

The First Department, reversing Supreme Court, determined defendant out-of-possession landlord’s motion for summary judgment in this slip and fall case should have been granted. The court noted that if, due to the provisions of the lease, an out-of-possession landlord is not responsible for the repair of a defect, the fact that the landlord had notice of the defect is irrelevant:

“An out-of-possession landlord is generally not liable for negligence with respect to the condition of the demised premises unless it ‘(1) is contractually obligated to make repairs or maintain the premises or (2) has a contractual right to reenter, inspect and make needed repairs and liability is based on a significant structural or design defect that is contrary to a specific statutory safety provision'” … .Here, defendant established that it was an out of possession landlord with no contractual obligation to make repairs or maintain the restaurant premises. Pursuant to Paragraph 4 of the lease agreement, all non-structural repairs to the premises were to be made by the tenant restaurant at its sole cost and expense. Moreover, the cracked step at issue was not a significant structural or design defect that is contrary to a specific statutory safety provision … .

In response, plaintiff failed to raise a triable issue of fact sufficient to defeat defendant’s motion. Plaintiff’s assertion that there is an issue of fact as to whether defendant had actual notice of the cracked step on which plaintiff fell is without merit. An out of possession landlord may not be held liable even if it had notice of the defective condition prior to the accident … . Padilla v Holrod Assoc. LLC, 2023 NY Slip Op 02082, First Dept 4-25-23

Practice Point: By the terms of the lease, the out-of-possession landlord was only responsible for structural repairs. The cracked step in this slip and fall case was not a structural defect. The fact that the landlord was aware of the defect was irrelevant.

 

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PLAINTIFFS COULD NOT DEMONSTRATE RELIANCE UPON THE INFLATED RENTS DESCRIBED IN THE FILED REGISTRATION STATEMENTS; THEREFORE THE COMPLAINT ALLEGING A FRAUDULENT SCHEME TO DEREGULATE APARTMENTS SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Friedman, determined defendant landlord’s motion to dismiss the complaint alleging a fraudulent scheme to deregulate apartments should have been granted. The court found that the plaintiffs did not demonstrate the “reliance” element of fraud:

The primary question on this appeal is whether plaintiffs, who allege that the predecessor in interest of defendant 75-25 153rd Street, LLC initially registered an unlawfully inflated “legal regulated rent” for each of their apartments in 2007, have sufficiently alleged, in this action commenced in 2020, the perpetration of “a fraudulent scheme to deregulate” so as to avoid the bar of the four-year lookback rule and to allow recalculation of the legal rent on the base date (in 2016), utilizing the default formula referenced in Regina [35 NY3d 332], as a basis for overcharge damages. We hold that plaintiffs have failed to allege such a fraudulent scheme because neither plaintiffs nor their predecessors in interest could have reasonably relied upon the inflated legal regulated rents on the registration statements. As the Court of Appeals recognized in Regina [35 NY3d 332], reasonable reliance is as much an element of fraud in this context as in others (see id. at 356 n 7 [“Fraud consists of evidence of a representation of material fact, falsity, scienter, reliance and injury”] [emphasis added, internal quotation marks and brackets omitted]). As more fully explained below, the inflation of the legal regulated rents set forth on the publicly filed registration statements was evident from the registration statements themselves, negating the element of reliance as a matter of law. Burrows v 75-25 153rd St., LLC, 2023 NY Slip Op 01940, First Dept 4-13-23

Practice Point: In this action alleging the fraudulent deregulation of apartments, plaintiffs were unable to demonstrate reliance upon the inflated rents described in the registration statements. Therefore the complaint alleging a fraudulent scheme to deregulate apartments should have been dismissed.

 

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THE ATTORNEY AFFIDAVIT SUBMITTED IN SUPPORT OF THE SUMMARY JUDGMENT MOTION WAS WITHOUT EVIDENTIARY VALUE; THE DEFICIENCIES IN THE ORIGINAL SUBMISSION CANNOT BE CURED IN REPLY; FAILURE TO REGISTER AN APARTMENT WITH THE CITY DHCR AND INCREASING THE RENT DO NOT DEMONSTRATE A FRAUDULENT SCHEME TO DEREGULATE (FIRST DEPT). ​

The First Department, reversing Supreme court, determined: (1) the summary judgment motion should have been supported by plaintiff’s affidavit, not the attorney’s affidavit; (2) papers submitted in reply cannot be used to remedy deficiencies in the original submission; and (3), to demonstrate a fraudulent scheme to deregulate an apartment, it is not enough to show the landlord did not register the apartment with the NYC Division of Housing and Community Renewal (DHCR) and increased the rent:

CPLR 3212(b) states, “A motion for summary judgment shall be supported by affidavit . . . The affidavit shall be by a person having knowledge of the facts.” Plaintiff failed to submit an affidavit. While he submitted his attorney’s affirmation, “[s]uch an affirmation . . . is without evidentiary value” … . Although plaintiff submitted his complaint, it is not verified, so it cannot be used in lieu of an affidavit (see CPLR 105[u] …).

… [I]n Ampim v 160 E. 48th St. Owner II LLC (208 AD3d 1085 [1st Dept 2022]), [we] said, “an increase in rent and failure to register [an] apartment with . . . DHCR . . ., standing alone, are insufficient to establish a colorable claim of a fraudulent scheme to deregulate the apartment” … .

… Plaintiff failed to demonstrate an increase in rent, or that landlord misrepresented the legal regulated rent … .

Plaintiff did show an increase in rent through documents submitted in reply. However, a movant may not use reply papers “to remedy . . . basic deficiencies in [his] prima facie showing” … . Tribbs v 326-338 E 100th LLC, 2023 NY Slip Op 01950, First Dept 4-13-23

Practice Point: The attorney affidavit submitted in support of the summary judgment motion was not based on first-hand knowledge and therefore had no evidentiary value.

Practice Point: Re: a summary judgment motion, deficiencies in the original submissions cannot be cured in reply.

Practice Point: Failure to register an apartment with the NYC DHCR coupled with raising the rent do not demonstrate a fraudulent scheme to deregulate.

 

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IN THIS SIDEWALK SLIP AND FALL CASE, THE MASTER LEASE VIOLATED GENERAL OBLIGATIONS LAW 5-321 WHICH PROHIBITS A LEASE AGREEMENT FROM PROVIDING THE LANDLORD BE INDEMNIFIED FOR LIABILITY FOR THE LANDLORD’S OWN NEGLIGENCE (FIRST DEPT). ​

The First Department, in this sidewalk slip and fall case, in a decision too complex to fairly summarize here, determined a provision of the master lease violated General Obligations Law 5-321:

General Obligations Law § 5-321 states that “[e]very covenant, agreement or understanding in or in connection with or collateral to any lease of real property exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his agents, servants or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed to be void as against public policy and wholly unenforceable.”

The Court of Appeals, in Hogeland v Sibley, Lindsay & Curr Co. (42 NY2d 153 [1977]) and Great N. Ins. Co. v Interior Constr. Corp. (7 NY3d 412 [2006]), established an exception to General Obligations Law § 5-321. Parties to a lease agreement may execute a provision requiring the tenant to indemnify the landlord from the landlord’s own negligence. However, the lease must also contain an insurance provision “allocating the risk of liability to third parties” because “[c]ourts do not, as a general matter, look unfavorably on agreements which, by requiring parties to carry insurance, afford protection to the public” … . Accordingly, the Court of Appeals reasoned that when an indemnity clause is coupled with an insurance procurement provision, a tenant is obligated to indemnify the landlord for its share of liability, and such agreement does not exempt the landlord from liability to the plaintiff, but allocates the risk to a third party through insurance … . Insurance procured by the tenant in satisfaction of the indemnity clause provides the injured plaintiff with adequate recourse for the damages suffered … .

… Article 13 of the master lease requires Regent [the landlord] to be indemnified for all claims “provided however that the same shall not arise from the willful acts of Landlord during the term of this Lease.” On its face, we find that this provision violates General Obligations Law § 5-321. Bessios v Regent Assoc., Inc., 2023 NY Slip Op 01583, First Dept 3-23-23

Practice Point: A lease which requires the landlord to be indemnified for its own negligence violates General Obligations Law 5-321 unless the lease also requires the tenant to procure insurance which will compensate the injured party for the landlord’s negligence.

 

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PLAINTIFFS-TENANTS DID NOT SHOW DEFENDANT LANDLORD ENGAGED IN A FRAUDULANT SCHEME TO DEREGULATE; THEREFORE THE DEFAULT FORMULA TO SET THE BASE DATE RENT PURSUANT TO THE RENT STABILIZATION CODE SHOULD NOT BE USED (CT APP).

The Court of Appeals, reversing the Appellate Division, determined that the default formula for determining the plaintiffs-tenants’ legal regulated rent pursuant to the Rent Stabilization Code should not be used because there was no evidence of a fraudulent scheme to deregulate. Rather defendants’ deregulation was based upon a misinterpretation of the law:

Matter of Regina Metro. Co., LLC v New York State Div. of Hous. and Community Renewal was decided after Supreme Court granted plaintiffs’ motion (35 NY3d 332 [2020]). There, this Court made clear that, under the pre-Housing Stability and Tenant Protection Act of 2019 law applicable here, “review of rental history outside the four-year lookback period [i]s permitted only in the limited category of cases where the tenant produced evidence of a fraudulent scheme to deregulate and, even then, solely to ascertain whether fraud occurred—not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations” … . In fraud cases, because the reliability of the base date rent has been tainted, “this Court sanctioned use of the default formula to set the base date rent” … . Regina also held that “deregulation of [ ] apartments during receipt of J-51 benefits was not based on a fraudulent misstatement of fact but on a misinterpretation of the law [and so] a finding of willfulness is generally not applicable to cases arising in the aftermath of Roberts [and] [b]ecause conduct cannot be fraudulent without being willful, it follows that the fraud exception to the lookback rule is generally inapplicable to Roberts overcharge claims” … .

Plaintiffs failed to meet their burden on summary judgment. Defendants’ deregulation of the apartments was based on this same “misinterpretation of the law” involved in Regina and therefore that conduct did not constitute fraud … . Defendants’ subsequent re-registering of the apartments occurred after the four-year lookback period, and plaintiffs have failed to offer evidence that it somehow affected the reliability of the actual rent plaintiffs paid on the base date. Casey v Whitehouse Estates, Inc., 2023 NY Slip Op 01351, CtApp 3-16-23

Practice Point: In order to use the default formula pursuant to the Rent Stabilization Code, there must have been a fraudulent scheme to deregulate on the part of the landlord. Here there was no evidence of a fraudulent scheme as opposed to a misinterpretation of the law.

 

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DEFENDANTS IN THIS ICY-STEP SLIP AND FALL CASE DID NOT DEMONSTRATE THEY WERE OUT-OF-POSSESSION LANDLORDS WHO WERE NOT RESPONSIBLE FOR ICE AND SNOW REMOVAL; DEFENDANTS DID NOT SUBMIT THE LEASE IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants in this icy-steps slip and fall case did not demonstrate they had transferred possession and control of the property such that they were not responsible for removal of ice and snow. The lease was not submitted in support of defendants’ motion for summary judgment:

… [T]he defendants’ submissions failed to establish, prima facie, that they were out-of-possession landlords. The defendants did not submit a copy of any lease, and the deposition testimony submitted in support of the motion failed to establish, prima facie, that the defendants had transferred possession and control of the premises … . Moreover, the deposition testimony submitted in support of the motion included testimony that the defendants were responsible for maintaining the property, including snow removal, and had engaged in snow removal on the premises. The defendants thus also failed to establish, prima facie, that they had no duty, by contract or course of conduct, to remove snow and ice from the premises … . Maharaj v Kreidenweis, 2023 NY Slip Op 01185, Second Dept 3-8-23

Practice Point: Here the defendant landlords did not submit the lease in support of their motion for summary judgment in this icy-step slip and fall case. Therefore the defendants did not demonstrate they were out-of-possession landlords not responsible for ice and snow removal.

 

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AN ALBANY LOCAL LAW ADDED RESTRICTIONS TO EVICTION PROCEEDINGS AND RENT INCREASES WHICH ARE NOT IN THE STATE’S REAL PROPERTY ACTIONS AND PROCEEDINGS LAW AND REAL PROPERTY LAW; THE LOCAL LAW WAS THEREFORE PREEMPTED BY THE STATE LAW (CONFLICT PREEMPTION) (THIRD DEPT). ​

The Third Department, in a full-fledged opinion by Justice Clark, determined the Albany Local Law governing evictions conflicted with the state Real Property Actions and Proceedings Law and Real Property Law and was therefore preempted by state law. The entire Local Law F section 2 was nullified. Local Law F section 2 added sections 30-324 through 30-331 to the Code of the City of Albany:

We agree with Supreme Court that Local Law F § 2 is preempted by state law. To that end, the Code of the City of Albany § 30-327 requires a landlord seeking to evict a tenant to prove the additional element of “good cause,” which grounds are enumerated in the Code of the City of Albany § 30-328. This additional element contravenes the statutory construction of RPAPL 711, which permits a landlord to seek eviction following the expiration of a tenant’s lease or following a tenant’s default on rent. By adding an element, the Code of the City of Albany §§ 30-327 and 30-328 “prohibit[ ] conduct specifically permitted by State law or impose[ ] restrictions on rights granted by the State”… . Similarly, the Code of the City of Albany §§ 30-327 and 30-328 contradict Real Property Law § 228, as they require a landlord seeking to evict a tenant at will or by sufferance who has provided 30 days’ notice to also establish good cause for the eviction. Further, the Code of the City of Albany § 30-328 interferes with a landlord’s right to increase rent in compliance with Real Property Law § 226-c, as it imposes the additional requirement that a landlord must rebut a presumption that a rent increase of 5% or more is unconscionable. Therefore, despite defendants’ good intentions, the Code of the City of Albany §§ 30-327 and 30-328 impose restrictions on rights granted to landlords by state law and, thus, Supreme Court properly declared those provisions nullified by conflict preemption … . Pusatere v City of Albany, 2023 NY Slip Op 01124, Third Dept 3-2-23

Practice Point: Here an Albany Local Law added restrictions to eviction proceedings and rent increases which are not in the state’s Real Property Actions and Proceedings Law and Real Property Law. The Local Law was therefore preempted by the state law (conflict preemption). Ultimately the entire Local Law was nullified.

 

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THE TENANT WAS NOT ENTITLED TO A YELLOWSTONE INJUNCTION BECAUSE THE RELIEF WAS SOUGHT AFTER THE DEADLINE IN THE NOTICE TO CURE; THAT DEADLINE WAS CONTROLLED BY THE LEASE AND THEREFORE WAS NOT EXTENDED BY THE COVID-RELATED EXECUTIVE ORDERS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the tenant was not entitled to a Yellowstone injunction because the relief was not sought before the deadline in the notice to cure, which is controlled by the lease. The time-limit extensions in response to COVID do not apply to the notice-to-cure deadline which is contractual:

… [T]he landlord served a notice to cure on the tenant on May 15, 2020, and the cure period ended on June 1, 2020, in accordance with the terms of the lease. When the tenant did not cure the alleged defects, the landlord served a notice of termination on June 2, 2020. The tenant commenced this action and moved for a Yellowstone injunction on June 15, 2020, well after the cure period expired.

Executive Order 202.8, and the subsequent orders extending that order, did not toll the cure period since the cure period, set by contract, was not “prescribed by [a] procedural law[ ] of the state” or “any other statute, local law, ordinance, order, rule, or regulation” (9 NYCRR 8.202.8). Moreover, filing of new non-essential matters through the New York State Courts Electronic Filing System was available in the five New York City counties, including Kings County, as of May 25, 2020 … . Prestige Deli & Grill Corp. v PLG Bedford Holdings, LLC, 2023 NY Slip Op 01019, Second Dept 2-22-23

Practice Point: The deadlines extended by the COVID Executive Orders do not apply to contractual deadlines (here the deadline for seeking a Yellowstone injunction after the tenant’s receipt of a notice to cure).

 

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THE TENANT MADE GOOD FAITH EFFORTS TO CURE THE DEFAULTS CITED BY THE LANDLORD AND WAS ENTITLED TO A YELLOWSTONE INJUNCTION TOLLING TENANT’S TIME TO CURE (FIRST DEPT). ​

The First Department, in a full-fledged opinion by Justice Gonzalez, determined the tenant liquor-store had made good faith efforts to cure the defaults cited by the landlord and was entitled to a Yellowstone injunction tolling the tenant’s time to cure the defaults. The opinion lays out the fact in a level of detail which cannot be fairly summarized here:

In keeping with public policy against forfeiture, courts grant Yellowstone relief on “far less than the normal showing required for preliminary injunctive relief” … . The tenant need only demonstrate that (1) it holds a lease; (2) it received a notice of default, notice to cure, or threat to terminate the lease; (3) it requested injunctive relief prior to the termination of the lease or expiration of the cure period; and (4) it is prepared to cure the alleged default by any means short of vacating the premises … ,. Once the tenant establishes these elements, the motion court may exercise its discretion to issue a Yellowstone injunction tolling the tenant’s time to cure … . Elite Wine & Spirit LLC v Michelangelo Preserv. LLC, 2023 NY Slip Op 00631, First Dept 2-7-23

Practice Point: If a tenant has made good faith efforts to cure the defaults cited by the landlord, a court may grant the tenant a Yellowstone injunction tolling the tenant’s time for curing the defaults. The Yellowstone criteria are laid out in the opinion.

 

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PLAINTIFF FELL THROUGH A STOREFRONT WINDOW IN DEFENDANT PLANET ROSE’S KARAOKE BAR; GIVEN THE CIRCUMSTANCES, THE FAILURE TO INSTALL TEMPERED GLASS MAY HAVE BEEN NEGLIGENT; BY THE TERMS OF THE LEASE, THE OUT-OF-POSSESSION LANDLORD, DEFENDANT 219 AVE. A, COULD NOT BE HELD LIABLE (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined the defendant 219 Ave. A was an out-of-possession landlord which, by the terms of the lease, was not obligated to repair or maintain the premises where plaintiff’s fall occurred. Plaintiff was standing on a couch in defendant Planet Rose’s karaoke bar when she fell backwards through a storefront window:

… [T]he owner of Planet Rose acknowledged that when vandals smashed another window in the storefront years earlier, the glazier recommended tempered glass as the best option for a storefront, and she accepted that recommendation. She also testified that there were many times over the years that patrons stood on the couch, as shown in photographs posted on Planet Rose’s social media. Thus, the record presents issues of fact as to whether defendants were negligent in failing to use tempered glass in the window to prevent a foreseeable injury … .

… Given the evidence that patrons of the karaoke bar sometimes stood on the couch, plaintiff’s conduct was not extraordinary or unforeseeable, and it therefore cannot be said that the setup at the bar merely furnished the occasion for the harm … .

219 Ave. A demonstrated that it had relinquished sufficient control of the premises to be deemed an out-of-possession landlord, and as such, was not contractually obligated to make repairs or maintain the premises … . Accordingly, its liability is limited to claims “based on a significant structural or design defect that is contrary to a specific statutory safety provision,” which are not at issue here … . Kitziger v 219 Ave. A. NYC LLC, 2023 NY Slip Op 00239, First Dept 1-19-23

Practice Point: Because patrons of defendant karaoke bar stood on the couch to dance, plaintiff’s fall through the storefront window was foreseeable and the failure to install tempered glass may have been negligent. This was not a case where the condition (the glass storefront window) merely furnished the occasion for the accident, as opposed to a proximate cause. By the terms of the lease the out-of-possession landlord was responsible only for structural repairs which were not at issue.

 

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