Licht v Moses
Decided on December 7, 2004
Civil Court of the City of New York, Kings County
RACHEL LICHT, Petitioner,
LILLIAN MOSES, Respondent.
George M. Heymann, J.
Respondent has moved for an order dismissing this non payment proceeding on the ground that it violates the provisions of the Second Partial Consent Decree in Williams v. NYCHA, 81 Civ. 1801 (SDNY, 1995) by seeking to collect the Section 8 subsidy portion of the rent directly from the respondent.
As will be discussed in more detail below, this non payment proceeding addresses a landlord's right to "opt out" of a Section 8 lease - a "hot button" issue in the landlord-tenant field that is mushrooming daily and cries out for legislative and/or judicial intervention by the appellate courts for definitive guidelines to be followed and adhered to.[FN1]
Regardless of the outcome of this specific case, there are a myriad of decisions reaching opposite conclusions, virtually all of which are from courts of concurrent jurisdiction, as well as conflicting opinions by various administrative agencies.[FN2] [*2]
It is interesting to note that the respondent's attorney in this proceeding claims that several of the decisions cited and relied on by the petitioner have no precedential value because they are outside of the jurisdiction of the New York City courts (i.e.: Westchester County).[FN3] Yet, ironically, all of those cases are in the 2nd Judicial Department and, thus, any future Appellate Division decisions on those matters, if they are being appealed, would clearly impact on the courts with jurisdiction in three of the five counties within the City of New York, including Kings County, as well as the three counties immediately surrounding the City of New York (i.e.: Nassau, Suffolk and Westchester). Therefore, these cases should not be dismissed out of hand as irrelevant, as they were decided by a court of competent jurisdiction [FN4] and, although the rulings are persuasive as opposed to being mandatory upon this Court, they nonetheless provide valuable insight in this growing debate. In fact, a Queens County Housing Court Judge recently referred to those cases in Westchester County and upon analyzing them arrived at the same determination: that a landlord is not obligated to continue the Section 8 subsidy upon a lease renewal.[FN5]
At this juncture, it all boils down to a matter of each individual judge seeking to interpret the complex federal and state laws which have given rise to this conflict of intellectual reasoning, and which, in turn, is having a major impact on a significant number of Section 8 landlords and tenants throughout the city and state of New York.
The respondent, a 90 year old widow, has resided in her rent stabilized apartment (a non-eviction co-op) for 27 years. She lives with her disabled daughter and both are participants in the Section 8 program and have been receiving rent subsidies for the past 14 years. According to respondent's counsel, the prior owner of the subject premises last offered a lease renewal to the respondent in 2001 and when that expired on May 31, 2003 he refused to offer her another [*3]renewal lease. Counsel further claims that the prior owner continued to accept Section 8 payments until he sold the subject premises to the petitioner on or about April, 2004. Thereafter, the respondent filed a complaint with the New York State Division of Housing and Community Renewal (DHCR) based on the landlord's failure to provide her with a lease renewal. On September 14, 2004, DHCR issued an Order finding that the lease offered to the respondent by the petitioner on March 11, 2004 with a commencement date of June 1, 2003 was not a valid lease offer and that petitioner was required to renew the tenant's lease "...on the same terms and conditions as provided in the expiring lease..." Respondent contends that petitioner did not offer a lease renewal but commenced this proceeding instead, in violation of the Williams Consent Decree, seeking to collect the Section 8 portion of the respondent's rent.
The petitioner avers that she was unaware of the respondent's rent stabilized status when she purchased the apartment, or that the prior owner had accepted subsidy payments from the NYCHA Section 8 program. When she discovered that the respondent's last lease expired on May 31, 2003 and had not yet signed a renewal lease, petitioner sent a letter to the NYCHA Leased Housing Department informing them that she decided not to sign the HAP Contract with Section 8 and that she has notified the tenant about her decision. [Pet. Exhibit A][FN6] Petitioner states that she offered the respondent a rent stabilized lease and notified her that she would henceforth be responsible for the full amount of the monthly rent. [Pet. Exhibit B][FN7] Petitioner never received any Section 8 checks and the respondent refused to return an executed copy of the lease renewal and refused to pay the rent. At that point, the petitioner commenced the instant non payment proceeding. As a result, the respondent, in turn, filed a harassment complaint against the petitioner with the DHCR alleging that the petitioner refused to accept respondent's Section 8 subsidy. [Pet. Exhibit C] On August 6, 2004, both parties attended a conference at the DHCR. On August 10, 2004, a letter was sent to the parties summarizing said conference and concluding that "...there is no evidence that the owner has harassed the tenant by initiating the pending nonpayment action...". The letter, [Pet. Exhibit D], written by a Senior Attorney for DHCR reads in relevant part as follows: Following the conference I contacted Section 8. They confirmed that as Ms. Licht was the owner she did not have to accept the Section 8 program. Instead, since the tenant is subject to an eviction currently, she would qualify for an emergency transfer to an apartment where her Section 8 subsidy would be accepted.[*4] Therefore, it is determined that the owner is within her rights to initiate the nonpayment action seeking the $170 difference in rent which is not being received from Section 8 since the owner has refused to participate in that program. The tenant must pay the full $524 monthly rent or must apply for an emergency transfer so she can move to an apartment where the owner will accept the Section 8 subsidy. If the tenant does choose to remain and pay the higher rent, the owner is entitled to renew the lease and receive guideline increases added to[the] $524. (Emphasis added)
The respondent never challenged or appealed the DHCR ruling on her complaint.
The Federal Housing and Community Development Act of 1974 (42 U.S.C. §1437f) created the Section 8 rental assistance program which provided for two types of housing assistance: tenant- based which is tied directly to the tenant; and project- based which covers all apartments in a particular housing development. In the former, the tenant may leave the building and take the subsidy to a new apartment. In the latter, if the tenant leaves the building he or she loses the subsidy. In tenant- based subsidies, such as in the case at bar, the landlord enters into a Housing Assistance Payments (HAP) Contract with the Public Housing Agency (PHA) that administers the program. In New York City the Leased Housing Department of the New York City Housing Authority (NYCHA) is the largest provider of subsidies to tenants.
According to the Department of Housing and Urban Development (HUD) regulations (24 CFR § 982.309 (b)) the terms of the HAP contract are as follows:
(1) The term of the HAP contract begins on the first day of the lease term and ends on the last day of the lease term.
(2) The HAP contract terminates if any of the following occurs:
(i)The lease is terminated by the owner or the tenant;
(ii) The PHA terminates the HAP contract; or
(iii) The PHA terminates assistance for the family.
"ENDLESS LEASE" / "OPT-OUT"
On October 1, 1999 major changes in the Section 8 program became effective. Among them was the permanent elimination of the "take one, take all" provision which required a landlord who voluntary accepted a tenant with a Section 8 voucher to thereafter accept all tenants who have vouchers and the "endless lease" provision which had required landlords to renew Section 8 leases in perpetuity. Under the current federal law, as amended, landlords can now terminate their relationship with Section 8 at the end of a tenant's lease term.[FN8] [*5]
The rationale for the landlords' disenchantment with the Section 8 program prior to the recent amendments was expressed in Cosmopolitan Associates, LLC v. Ortiz, NYLJ, 11/12/04, p. 20, col. 4: The Section 8 program which was devised as a voluntary subsidy program, allowed landlords to rent apartments to persons who might otherwise not be able to afford such apartments, upon the promise that a portion of the rent will be paid by the Government agency charged with administering rental assistance funds. Over the years, though, landlords began to resent the obligations placed upon them, particularly since the statute, as originally drafted, was deemed to require a landlord, once having accepted one Section 8 tenancy, to accept all other Section 8 applicants. The voluntariness, then, was present only in the initial acceptance. Coupled with this 'take one take all' requirement, was the 'endless' or perpetual lease provision of the USC. A landlord, then, often wound up accepting tenants to whom they might not otherwise have offered a lease and keeping them as tenants far longer than they would have desired. These and other requirements of the HAP contract produced the undesirable result of pushing landlords away from Section 8 tenancies. The benefit of guaranteed monthly governmental subsidy, which
was the primary incentive for acceptance of a Section 8 tenancy, was eventuallyoverridden by landlords' perception of undue constraint. [FN9]
The crux of the respondent's argument in the instant matter is that the petitioner landlord, whose predecessor had entered into a Section 8 lease with the respondent, cannot "opt out" of the program and must renew the respondent's rent stabilized lease on the same terms and conditions as the previous leases which included a Section 8 subsidy as a "material term and condition" of said lease. In support of this contention the respondent relies on the holdings in M 1849 LLC v. Innis, NYLJ, 11/10/04, p. 20, col. 3; Tibout Estates LLC v. Coleman, NYLJ, [*6]10/19/04, p.20; Bran-Trav Development LLC v. Matus, NYLJ, 8/11/04, p.17, col.1; and Kouznetski v. Verga Associations, NYLJ, 7/10/02, p. 29, col. 2.
The common denominator in M 1849 LLC, Tibout Estates LLC and Bran-Trav Development LLC, supra , is their reliance on the holding in Kouznetsky, supra , that "[t]he Rent Stabilization Code of the City of New York provides that renewal leases must be provided 'on the same terms and conditions as the expired lease' (RSC §2522.5[g])." (Emphasis added) However, in Kouznetsky, unlike in the other cases, the initial lease contained, at the tenant's request, a handwritten addendum to the pre-printed standard lease form, numbered "33" which provided: "Owner will accept Section 8 subsidy to tenant". As a result of this addition to the lease itself, the court went on to state: In view of this provision, the fact that the landlord did not intend a term or condition of the expiring lease to be incorporated into the renewal lease is immaterial (citations omitted). Thus, at bar, paragraph 33 of the initial lease concerning the Section 8 subsidy being part of the original binding lease agreement became incorporated into subsequent lease renewals (citations omitted) and defendant [landlord] is bound to accept the Section 8 subsidy on the plaintiffs' [tenants'] behalf. (Emphasis added)
It is clear, based on the limited, fact- specific circumstances regarding that particular lease in question, that the court in Kouznetski, supra , was correct in determining that renewing the lease "on the same terms and conditions" required the continuation of the Section 8 subsidy. That does not mean, however, that such a holding is the sine qua non that must be followed in every instance, as did my colleagues in M 1849 LLC, Tibout Estates LLC and Bran-Trav Development LLC, supra .
In 1999, two years prior to the Kouznetski decision, this Court held in 1801 Weeks Avenue, Inc v. Crawford, 182 Misc2d 251,[FN10] that the HAP contract and rent stabilized lease were two separate and distinct entities, although they ran concurrent with each other. Unless the terms of the lease directly incorporate by reference the landlord's obligation to accept the Section 8 subsidy, as it did in Kouznetski, supra , the two contracts are not "inextricably merged" as noted in Cosmopolitan Associates LLC, supra , and the provisions of the Section 8 HAP Contract do not become material terms of the rent stabilized lease.
Although a landlord must offer a rent stabilized tenant a lease renewal on the same terms and conditions as the existing lease, there is no concomitant obligation on the part of a PHA to enter into a HAP Contract or for the tenant to renew the lease. Thus, while the two separate contracts are juxtaposed to run concurrently from the commencement date of the lease until its termination date, the HAP Contract does not have any independent status. Unlike the provisions of the lease which can be enforced regardless of the existence of a HAP Contract, the HAP Contract cannot stand on its own. It is the rent stabilized lease alone that carries with it all [*7]the obligations and protections set forth in the rent stabilization laws vis a vis the landlord and the tenant of record. The sole purpose of the HAP Contract is to provide a mechanism to assist the tenant financially to ensure that the legally regulated rent set forth in the lease will be paid. While the landlord is duty bound to establish the fixed lawful rent that can be charged to the tenant during the lease term, the amount of the subsidy can vary upwards or downwards based upon the tenant's financial ability as determined by the tenant's obligation to re-certify on an annual basis. A substantial increase in the family's income or failure to re-certify could result in termination of the subsidy. Notwithstanding such termination, the lease itself, and the tenant's obligation to pay the entire rent as agreed upon therein, survives until its expiration.
It is the opinion of this Court that this interpretation is not in conflict with the purpose and intent of the Rent Stabilization Code which was established to preserve New York City's housing stock. While these laws are meant to assure, inter alia, that landlords do not charge tenants more than the legally regulated rent, as determined on an annual basis by the Rent Guidelines Board, and that landlords maintain a certain standard of living in their properties, as required and monitored by the Housing Quality Standards (HQS) on the federal level and the Housing Maintenance Code (HMC) on the local level, they were not created to prevent a property owner from earning a living or even making a profit on his or her investment, as long as there is no detriment to the health and safety of those who occupy those buildings. As noted earlier, the Section 8 program began as a voluntary one and landlords should be entitled to use their own business judgment to determine whether they wish to continue it, lease term by lease term.[FN11] To hold otherwise is akin to a life sentence without parole.[FN12]
Another recurring position in all of the above cited cases which hold that a landlord cannot "opt out" of a Section 8 lease is that the state laws regarding rent stabilized apartments preempt the federal statutes pertaining to the subsidies relevant thereto, relying on In the Matter of Mott v.New York State Division of Housing and Community Renewal, 211 AD2d 147; 628 NYS2d 712 (AD 2nd Dept., 1995). The issue in Mott, Ibid., which pre-dated the 1996 federal amendments to the Section 8 statutory scheme, pertained exclusively to "whether the rents subsidized under 42 USC § 1437f (section 8 of the United States Housing Act of 1937, as amended) are subject to regulation under the Emergency Tenant Protection Act of 1974" (Emphasis added), as contrasted with who the participants of the section 8 program will be.[FN13] It makes no reference whatsoever as to whether a landlord must continually renew the HAP Contract upon the expiration of each lease term when a tenant chooses to renew his or her rent stabilized lease and, thus, is clearly distinguishable from the case at bar. Under the heading "Federal Preemption" the court stated: In determining whether a State Law is invalid under the doctrine of Federal preemption, the first line of inquiry is whether the Federal law involved contains an express preemption provision (citation omitted). If it does not, one must look to whether the State law 'conflicts with federal law or would frustrate the federal scheme, or unless the courts discern from the totality of the circumstances that Congress sought to occupy the field to the exclusion of the States' (citation omitted). A State law can also be invalid if it 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of the federal law.'(citations omitted) Ibid. at 151, 715
Based on this reasoning, not allowing landlords to "opt out" of Section 8 HAP Contracts at the end of a lease term would "stand as an obstacle" to the voluntariness of the program and "would frustrate the federal scheme" which sought to eliminate the problem of "endless leases". As the federal amendments regarding the "take one, take all" and "endless lease" provisions only pertain to subsidies and do not in any way affect the regulation of the rent, this Court finds that such provision are not preempted by the Rent Stabilization Code.
APPLICATION OF THE LAW TO THE FACTS OF THIS CASE
Based upon the relevant case law, statutes and administrative rulings, this Court is of the opinion that a landlord does have the choice to, either voluntarily accept the continuation of a Section 8 subsidy, or "opt out" of the program.
While the Court has sympathy for the respondent, who is a woman of considerable [*9]age with a long term tenancy, and her disabled daughter, those factors alone cannot be determinative, where as here, the Court's interpretation of the law requires a result that, unfortunately, is unfavorable to them.[FN14] Similarly, it is apparent that these factors were not persuasive enough to warrant a contrary result by the DHCR after a review of the respondent's complaint and conference with all parties present.
Although the respondent asserts that she is a rent stabilized tenant and currently participates in the Section 8 program, the only documentary evidence submitted to the Court to support her contention are three pages (1, 5 & 7) of what is purported to be a "Section 8 Lease For Family With Rental Certificate".[Resp. Exhibit 2] This "document" has a commencement date of "6/1/00" and a termination date of "5/31/01". Not only is it an incomplete copy, it does not contain any page with the signatures of any parties thereto, nor is it even the "last offered renewal" which "expired on May 31, 2003". [Attorney's Affirmation ¶ 5] Moreover, respondent never offered any proof a rent stabilized lease. Contrary to the holdings in M 1849 LLC, Tibout Estates LLC, Bran-Trav Development LLC, and Kouznetski, supra , the respondent did not enter into a Section 8 lease with the prior landlord until 13 years after the commencement of her tenancy, as opposed to its inception. [See, Attorney's Affirmation ¶4] Thus, there is nothing in this record to enable the Court to ascertain that respondent's Section 8 subsidy was "intertwined" with her status as a rent stabilized tenant, as was the situation in Kouznetski, supra .
In the "Order Directing Lease Renewal" [Resp. Exhibit 1] the rent administrator stated that: If the DHCR issues an Order which impacts on a lease signed during the pendency of a proceeding, the Agency's order takes precedence. However, if a tenant unreasonably refuses to sign a lease, Section 2524.3 provides that the owner may commence a proceeding to evict in a court of competent jurisdiction.
Here, there was no lease in effect and respondent has refused to sign the one tendered by the petitioner at the DHCR's direction. A fortiori, the DHCR did, in fact, make a ruling, as previously noted, that the petitioner "did not have to accept the Section 8 program" and was "within her rights to initiate the nonpayment action seeking the $170 difference in rent which is not being received from Section 8 since the owner has refused to participate in that program." [Pet. Exhibit D] Respondent never sought an administrative review of that decision and there is no basis for this Court to countermand it.
As a result of this determination, the mandates of the Williams Consent Decree were not violated and, in any event, as conceded by the respondent, the petitioner did, in fact, file an appropriate certificate with NYCHA seeking to evict the tenant.
Finally, the Court notes in passing, that the Petitioner's "unawareness" of the respondent's rent stabilized status when she purchased the apartment, or that the prior owner had accepted Section 8 subsidies would not muster any empathy from this Court had it reached the opposite conclusion in its interpretation of the law on this subject.. CAVEAT EMPTOR - let the [*10]buyer beware! [FN15]
Accordingly, the respondents motion to dismiss this proceeding is denied in its entirety.
This constitutes the decision and order of the Court.
Dated: December 7, 2004
George M. Heymann, JHC
Footnote 1: In Cosmopolitan Associates v. Ortiz, NYLJ, 11/12/04, p. 20, col. 1, the court opined that "The instant case presents no novel or unique issues, in fact, this legal soil has been tilled often by my colleagues of late, in response to various landlords' approach to the USC amendment" [which terminated "endless leases" enabling landlords to "opt out" of the Section 8 program].
Footnote 2: See, e.g.: NYCHA Leased Housing Department Memorandum (LHD # 03-26) dated July 22, 2003 regarding "Landlords Attempting To Opt Out of Section 8 For Rent Stabilized Tenants" in which it stated that "landlords of occupied rent stabilized apartments must offer a continuation of Section 8 subsidy as a condition of renewals with their tenants". On November 5, 2004, the Director of the Leased Housing Department issued Memorandums LHD # 04-42 and LHD # 04-43 in which he announced a new Department policy in which tenants with a subsidy suspended for 6 or more consecutive months shall be removed from the program's data base as active voucher holders, except tenants in rent stabilized apartments where the owners are attempting to discontinue participation in the program ("opt out") in order to avoid conflict with policy enunciated in LHD # 03-26, supra . cf. DHCR Administrative Review, In the Matter of the Administrative Appeal of Highland Management Corp., dated November 6, 2002, which held that the landlord was not obligated to offer the tenant a Section 8 renewal lease.
Footnote 3: See, NYCHA Memorandum, Ibid., wherein the Director of the Leased Housing Department announced that Section 8 landlords were not to follow the DHCR and Westchester court opinions as they have no jurisdiction in New York City. "We shall abide by this policy unless and until ordered to do otherwise by a State court with jurisdiction in New York City."
Footnote 4: See, McKinney's Judiciary Law §2 (Courts of Record)
Footnote 5: Cosmopolitan Associates v. Ortiz, supra at footnote 1. See, also, RSA Reporter, November, 2004, p. 4.
Footnote 6: Although both the affirmation of petitioner's counsel and petitioner's affidavit indicate that this letter was dated March 11, 2003, as it appears on the letter itself, it is clear from the facts of this case, and the statement by the petitioner in the letter that she purchased her apartment on "01/23/04" that the year 2003 was a typographical error and should have read March 11, 2004.
Footnote 7: The letter stated in part: "Based on my decision not to sign contract with Section 8 Program, you as a tenant have two options. You may stay in this apartment as long as you wish and pay me your rent in full without Section 8 subsidy or you can request a transfer to another apartment accepting Section 8 subsidy of your choice in the same neighborhood."
Footnote 8: See, Pub. L. No. 104-134, 110 Stat 1330-281; HR Rep. 104-461 (February 1, 1996) (United States Housing Act of 1996) states: " H.R. 2406 of the United States Housing Act of 1996, fundamentally changes the public housing and Section 8 rental assistance programs, both of which are under the jurisdiction of the Department of Housing and Urban Development (HUD). *** The 'take one, take- all'provision is repealed. *** The 'endless' lease provision is eliminated. The Committee believes that these and other revisions contained in H.R. 2406 will eliminate some of the most egregious conditions that have caused owner dissatisfaction with choice based housing, while retaining needed tenant protection. Furthermore, these changes will encourage other apartment owners to participate in the program, thereby expanding the universe of affordable housing for low-income families."
Footnote 9: See, also, 30 Eastchester LLC v. Healy, 2002 WL 553709 (City Ct, New Rochelle); 2002 NY Slip Op. 40066 (U). In Salute v. Stratford Greens Garden Apartments, 136 F3d 293, 300 (2d Cir. 1998), the court stated: "We think that the voluntariness provision of Section 8 reflects a congressional intent that the burdens of Section 8 participation are substantial enough that participation should not be forced on landlords... The 'take one, take all' and 'endless lease' provisions were part of the statute when the voluntariness provision was adopted, and they reflect the kind of burdens that the federal government may impose on participating landlords. These burdens are one side of a coin, and the voluntariness provision is the other. The repeal of the 'take one, take all' and 'endless lease' provisions does not effect the voluntariness of the Section 8 program, which remains as voluntary today as it was when originally enacted."
Footnote 10: See, Scherer, Residential Landlord -Tenant Law, § 5:141 (Lease requirements for Section 8 housing): "HUD regulations no longer require leases for section 8 tenants to be automatically renewed. 24 CFR § 982.309(b). See also, 1801 Weeks Ave., Inc. v. Crawford, 182 Misc2d 251, 697 NYS2d 503."
Footnote 11: By way of analogy, conventional wisdom held that landlords who offered a tenant a preferential rent were required to do so in each successive lease renewal until the termination of the tenancy itself. However, on May 22, 2001, the Appellate Division, 1st Department, turned this longstanding belief on its head in Matter of Missionary Sisters of the Sacred Heart v. New York State Division of Housing and Community Renewal (DHCR), 283 AD2d 284, 289, where the court held that "...the agreements by their own terms, set forth the legally allowable rent that could have been charged under the Rent Stabilization Code; the concession, or preferential rent that would be charged; the specific term for which the discounted rent would apply; and the clearly defined reason why the lower rent was offered. There is nothing in either the lease or the renewal that might in any way indicate the concession or preference was indefinite, rather it was specifically tied to economic conditions prevailing at the time the lease was executed, and was to apply for that particular lease term." (Empasis in original); See also, 782 PPS Corporation v. Rodriguez, NYLJ, 6/6/01, p. 22, col. 4; RSA Reporter, June, 2001, p. 9.
Footnote 12: See, Seminara Pelham, LLC v. Formisano, NYLJ, 10/13/04, p. 21, col. 1, (City Ct., Westchester Co.), in which the court stated: "...the sole purpose and effect of the 1996 Amendment was to clarify the seminal issue of who will participate in the program itself - - that is, to specify that a landlord may, at the end of the lease term decide to forego the burdens and benefits of its Section 8 participation, just as a tenant may make a similar decision. The elements of the landlord - tenant relationship, once both parties decide to continue it, remains undisturbed. Since Section 8 is a federal program, for which the federal government has promulgated a host of regulations, it is to this Court, axiomatic that federal law should, or at least may if Congress so chooses, have a say in performing the gate keeping function of who should participate in the program itself. *** The 1996 Amendment does nothing more than further refine this federal gatekeeping function by permitting the landlord to, at its initiative, have the gate raised to permit its escape from Section 8 when the current lease term is over."
Footnote 13: Ibid.
Footnote 14: Mindful of respondent's age and her daughter's disability, the Court contacted its DSS liaison and, after a lengthy discussion, was assured that if the respondent sought his assistance he could almost guarantee that she would get the funds necessary to pay all the arrears due and owing as a result of this proceeding and / or an emergency transfer to another Section 8 apartment.
Footnote 15: "...A successor- in-interest to real property takes the premises subject to all the rights, remedies and obligations of the predecessor in interest." Kouznetski, supra .