480-486 Broadway, LLC v No Mystery Sound, Inc.
Annotate this CaseDecided on February 6, 2006
Civil Court of the City of New York, New York County
480-486 Broadway, LLC, Petitioner,
against
No Mystery Sound, Inc., Respondent-Tenant, "XYZ" CORP., "JANE DOE" AND "JOHN DOE," Respondents-Undertenants.
090755/05
For Petitioner:
Borah, Goldstein, Altschuler, Schwartz
& Nahins, P.C.
377 Broadway
New York, New York 10013
For Respondents:
Jeffrey S. Ween & Associates
150 Broadway, Suite 1616
New York, New York 10038
Saliann Scarpulla, J.
In this summary holdover proceeding, respondents No Mystery Sound, Inc., "XYZ" Corp.,"Jane Doe" and "John Doe" (collectively referred to as "Mystery") move for leave to conduct discovery. Petitioner 480-486 Broadway, LLC ("Broadway") moves, pursuant to CPLR 3211[a] and [b], for an order striking Mystery's affirmative defenses and dismissing [*2]its breach of the implied warranty of habitability counterclaim on the ground that Mystery is not a tenant protected by either Article 7-C of the Multiple Dwelling Law ("Loft Law"), the Emergency Tenant Protection Act of 1974 ("ETPA") or the Rent Stabilization Code. Alternatively, Broadway moves for leave to conduct discovery and an order directing Mystery to tender use and occupancy pendente lite.
Mystery entered into a written agreement with Izbar Realty Corp. to rent the fourth floor apartment of 484 Broadway in or about August 1990 for a period of three years. Mystery continued thereafter as a month-to-month tenant. Broadway became owner of 480-486 Broadway in 2004. On July 29, 2005, Broadway served a thirty day notice of termination upon Mystery. Mystery did not vacate the premises by the expiration of the term on August 31, 2005. In or about September 2005, Broadway commenced this holdover proceeding.
In or about October 2005, Mystery filed an answer asserting various affirmative defenses: (1) that its owner Aleks DeCarvalho has always utilized the subject premises as his residence and place of business with Broadway's full knowledge and consent; (2) that 484 and 486 Broadway together constitute a horizontal multiple dwelling containing at least six residential units which must be registered as an interim multiple dwelling or multiple dwelling and is subject to the ETPA and Rent Stabilization Law and Code; (3) that the applicability of the Rent Stabilization Law entitles it to a renewal lease; (4) that Broadway commenced this proceeding in retaliation for litigation that Mystery commenced in Supreme Court seeking damages for Broadway's failure to maintain the premises in habitable condition; and (5) that Broadway breached the warranty of habitability. As its first counterclaim, Mystery alleged a breach of the implied warranty of habitability and as its second counterclaim, Mystery alleged that pursuant to the lease agreement, it was entitled to an award of legal fees.
Mystery now moves for leave to conduct discovery on the ground that discovery is needed to determine whether the subject premises constitutes a horizontal multiple dwelling and is subject to rent stabilization protection. Mystery alleges that 484 and 486 Broadway share the same block and lot number, maintain common ownership, and are serviced by one heating system. The subject premises is situated in a M1-5B zoning district, which Mystery maintains allows for mixed use and/or live-work space when the tenant is an artist certified by the City of New York Department of Cultural Affairs. Mystery submits DeCarvalho's artist certification. In addition, while both 484 and 486 Broadway lack certificates of occupancy, Broadway is in the process of obtaining a residential certificate of occupancy for 486 Broadway.
Mystery also submits the affidavit of Aleks DeCarvalho, indicating that he has maintained the premises as both his residence and place of business since the inception of the tenancy with Broadway's full knowledge and consent. DeCarvalho states that the Department of Housing Preservation and Development issued two violations to the previous owner of the premises in response to his complaints about certain conditions there, which shows that his tenancy is residential. DeCarvalho also asserts that the previous tenant of the subject premises was also a residential tenant, because the premises was outfitted for [*3]residential use when he moved in, and that 484 and 486 Broadway are internally interconnected.
Broadway opposes Mystery's request for discovery and moves, pursuant to CPLR 3211[a] and [b], for an order striking Mystery's affirmative defenses and dismissing its breach of the implied warranty of habitability counterclaim, or, alternatively, for leave to conduct discovery to determine whether the subject premises is being utilized for residential or commercial use, and for an order directing Mystery to tender use and occupancy pendente lite.
Broadway argues that (1) because the subject premises was rented exclusively for commercial purposes and was not alleged to have been residentially occupied prior to 1974 and/or during the April 1, 1980 through December 1, 1981 window period set forth in the Loft Law, Mystery is not protected by the Loft Law, and thus, not eligible for protection by the ETPA; (2) failure to register the subject premises as a multiple dwelling does not constitute a defense to a holdover proceeding, and in any event, 486 Broadway is registered as an interim multiple dwelling; (3) a retaliatory eviction defense only applies to proceedings dealing with residential tenancies and thus Mystery is precluded from asserting this defense; and (4) the warranty of habitability does not apply to commercial tenancies.
Broadway submits the affidavit of John Birnbaum, vice-president/retail counsel of Vornado Realty, LP, Broadway's managing member. Birnbaum states that Broadway became the owner of the subject premises in 2004, that the subject premises is commercial and that he has no reason to believe that the premises is being used residentially. Further, the lease, which provides that the premises shall be used for business only, and the zoning classification for the area, which indicates that it is a manufacturing district, both confirm the commercial nature of the premises. Birnbaum also states that 484 and 486 Broadway use separate facilities and do not constitute an integrated structure. Those premises' sub-basements do not connect, they have separate elevators and stairways, have separate Con Edison accounts, and have roofs of different heights.
Discussion
The resolution of this holdover proceeding revolves around whether Mystery is able to prove that the subject premises is a de facto horizontal multiple dwelling entitled to protection under either the Loft Law or the ETPA. Broadway argues that discovery is unnecessary because Mystery has not alleged Loft Law protection and is therefore also unable to claim ETPA protection. Mystery claims, however, that it needs discovery to show that the premises is a horizontal multiple dwelling subject to the Loft Law and/or the ETPA.
In light of Mystery's uncontroverted allegation that the premises was outfitted as a residential unit at the inception of its lease in August 1990, and also the uncontested fact that Broadway did not even own the premises until 2004, Mystery has adequately shown that it may discover facts during the course of discovery to support an allegation that the premises was converted to residential use during the window period of applicability for the Loft Law. The Court will therefore permit Mystery to conduct discovery to support its claim that the subject premises may be entitled to Loft Law protection, and will not, at this time, dismiss [*4]Mystery's affirmative defenses and counterclaims.
Mystery further argues that, even if the premises is not covered under the Loft Law, it still may qualify as an interim multiple dwelling entitled to protection under the ETPA. In opposition, Broadway argues that the applicability of the ETPA is limited to residential tenancies covered by the Loft Law, and cites Wolinsky v. Kee Yip Realty Corp., 2 NY3d 487 (2004) and Gloveman Realty Corp. v. Jefferys, 11/26/2003 N.Y.L.J. 30, (col. 1) modified 18 AD3d 812 (2nd Dept. 2005) to support its argument.
The Court agrees with Mystery that, even if the premises is not covered by the Loft Law, the premises may nevertheless be covered by the ETPA. In Wolinsky v. Kee Yip Realty Corp., 2 NY3d 487 (2004), tenants lived in a building situated in a zoning district that permitted use for light manufacturing and joint living-work space for artists. Tenants illegally converted the premises to residential space. The tenants did not claim to be artists and did not claim protection under the Loft Law. Rather, they solely claimed protection under the ETPA. In these circumstances, the Court of Appeals held that the tenants' residential occupancies of the commercially leased units did not fall under the ambit of the ETPA, because ETPA coverage does not extend to tenancies that are illegal and incapable of becoming legal because of applicable zoning restrictions. Wolinsky, 2 NY3d at 493.
Contrary to Broadway's interpretation, the Court of Appeals in Wolinsky did not hold that ETPA applicability is only limited to those tenancies also covered by the Loft Law. Indeed, the Court of Appeals acknowledged the possibility that the ETPA could provide protection to tenancies capable of becoming legalized, noting, however, that in this case the City of New York had not "acted to amend the Zoning Resolution to include purely residential use . . or to rezone tenants' neighborhood . . . such steps could make residential loft units like tenants legal or capable of being legalized." Wolinsky, 2 NY3d at 493.
Wolinsky follows a line of cases that have held that rent stabilization protection under the ETPA can be afforded to premises that are not covered by the Loft Law, so long as the premises are capable of being legalized.For example, in Tan Holding Corp. v. Stewart Wallace, 187 Misc 2d 687 (App. Term 1st Dept. 2001), the Appellate Term, First Department held that ETPA coverage could apply even in the absence of Loft Law protection, so long as the premises could be legalized under current zoning restrictions. Similarly, in Miller v. Margab Realty LLC, 6 Misc 3d 1012A (NY Sup. Ct. 2001), the court held that the Legislature did not specifically narrow the applicability of the ETPA to residential tenancies covered by the Loft Law, and that rent stabilization protection under the ETPA can be afforded to units that are not covered by the Loft Law. See also 182 Fifth Ave. v. Design Dev. Concepts, Inc., 300 AD2d 198 (1st Dept. 2002); Wilson v. One Ten Duane Street Realty co., 123 AD2d 198 (1st Dept. 1987); 315 Berry Street Corp. v. Huang, 6 Misc 3d 1007A (NY Civ. Ct. 2003).
The Second Department case relied upon by Broadway, Gloveman Realty Corp. v. Jefferys, 11/26/2003 N.Y.L.J. 30, [col. 1] modified 18 AD3d 812 (2nd Dept. 2005) is not dispositive of whether the applicability of the ETPA is limited to residential tenants also covered by the Loft Law. While in Gloveman the Second Department stated that the [*5]defendants' lofts were not eligible for protection under the Loft Law and were also not entitled to the protections of the ETPA, in its the short decision the court did not discuss the factual findings upon which it relied, offered no explanation for its holding, and, notably, did not discuss whether it concurred with the lower court's finding that the premises at issue were capable of being legalized.
Based on Wolinsky and the pre-Wolinsky cases discussed above, even if the subject premises is not covered by the Loft Law, Mystery's defenses and counterclaim will not be stricken. Mystery has presented significant factual allegations concerning whether the premises was set up for residential use when DeCarvalho moved in, e.g., that DeCarvalho resided and maintained his place of business in the premises and Broadway knew of DeCarvalho's residential/business occupancy of the premises; that there was no certificate of occupancy for the premises; that the premises is located in a zoning district that allows for live-work space for artists and DeCarvalho is certified as an artist; and that the premises could be viewed as a horizontal multiple dwelling containing six units. Mystery has therefore presented an issue of fact as to whether the tenancy is capable of becoming legalized and whether the subject premises is eligible for or exempt from protection under the ETPA.
As stated above, Mystery's request for discovery is granted. Broadway has also requested discovery as an alternative to dismissal of the affirmative defenses and counterclaims, and the Court will grant that request. Both parties have demonstrated ample need to conduct discovery. See New York University v. Farkas, 121 Misc 2d 643 (NY Civ. Ct. 1983). Their requests for disclosure are tailored to obtain information necessary to clarify the factual issues. See Smilow v. Ulrich, ___Misc.3d___, 2005 NY Slip Op 25515 (NY Civ. Ct. Dec. 1, 2005).
Broadway's unopposed request for use and occupancy pendente lite is also granted.
In accordance with the foregoing, it is
ORDERED that respondents No Mystery Sound, Inc., "XYZ" Corp.,"Jane Doe" and "John Doe's" motion for leave to conduct discovery is granted; and it is further
ORDERED that petitioner 480-486 Broadway, LLC's motion to dismiss or for alternative relief is granted only to the extent that 480-486 Broadway, LLC may conduct discovery and may collect use and occupancy for the period commencing September 2005 until the final disposition of this proceeding, and the motion is otherwise denied; and it is further
ORDERED that respondent No Mystery Sound Inc. pay use and occupancy from September 2005 going forward during the pendency of this proceeding at the rate of the last month's rent during the tenancy.
This constitutes the decision and order of the Court.
Dated:New York, New York
February , 2006
E N T E R: [*6]
_____________________________
J.C.C.
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