45-55 Realty LLC v Covin

[*1] 45-55 Realty LLC v Covin 2006 NY Slip Op 51728(U) [13 Misc 3d 1208(A)] Decided on September 14, 2006 Civil Court Of The City Of New York, Kings County Heymann, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 14, 2006
Civil Court of the City of New York, Kings County

45-55 Realty LLC, Petitioner,

against

Marie Covin, Respondent.



53390/06



Attorney for Petitioner-Landlord:

Jill A. Myer, Esq.

157 East 57 Street

New York, NY 10022

1-212-980 5889

respondent appeared pro-se.

George M. Heymann, J.

Petitioner moves for renewal and reargument of this Court's decision/order dated 6/21/06 which marked this non payment proceeding "off calendar" pending a determination by the Division of Housing and Community Renewal [DHCR] regarding the respondent's complaint that the petitioner failed to offer her a renewal lease on the same terms and conditions as the expiring lease to include a preferential rent. (See, NYLJ, 7/20/06, p. 24,col.3; 2006 NY Slip Op 51234 (U))

FACTS

In the Court's prior decision it stated that "[t]he entire issue of whether a preferential rent must be included in the current and future lease renewal between the parties hinges on the interpretation of the 3/15/00 stipulation", drafted by the petitioner's attorney, which reads, in relevant part, as follows:

Parties to sign a new lease effective 8/99 - 2 years [FN1]

T's rent will be at a preferential amount of $580 per mo. All T's increases willbe taken off that amount

LL may include legal rent + register at that amt. (Emphasis added)

At the time that this Court conducted its initial hearing the respondent stated that she had filed her complaint with DHCR on 11/28/05 and was awaiting a decision. Based upon that representation, the Court set a temporary rent to be paid by the respondent until a determination was made by DHCR. Moreover, in an effort to expedite the process, the Court sent a letter directly to DHCR on 6/22/06, with copies to both parties, requesting an expedited hearing/adjudication. As a result, on August 3, 2006, DHCR forwarded to the Court, and the parties, copies of two Orders: the first, dated 12/14/05 [Docket No. TI 210144 R], denying a rent overcharge complaint; and the second, dated 2/2/06 [Docket No. TL 210001 RV], terminating the proceeding regarding the preferential rent on the ground that the petitioner "commenced a [*2]Holdover Proceeding in the Civil Court, which has concurrent jurisdiction with DHCR, which will address the issue raised by the tenant."[FN2]

Regarding the Legal Regulated Rent [LRR], the Order dated 12/14/05 stated that "[a]ll rent adjustments subsequent to the base date [September 28, 2001] for the complainant, have been lawful according to the Rent Stabilization Law and Code."According to DHCR's calculation chart for the period 8/1/2005 - 7/31/2007, it was determined that the LRR and the Collectible Rent [CR] is $799.89 ($739.87 [rent] + 47.90 [6.50% increase] + 15.12 [MCI] = $799.89).[FN3]

It is these two Orders that form the crux of petitioner's motion to renew and reargue, seeking a final judgment for the arrears that remain unpaid and an order directing the respondent to sign the renewal lease that was offered without a preferential rent.

PETITIONER'S CONTENTIONS

Petitioner argues that the respondent appeared before this Court on 6/21/06 with "unclean hands" for her failure to disclose the above mentioned DHCR Orders denying and dismissing her complaints, respectively. Counsel contends that these omissions display a "pattern of disingenuous misconduct" by "intentionally deceiv[ing] the Court ... and wasting the Court's time by her deceit, requiring the Judge to write the DHCR seeking to expedite a proceeding closed four and one half months earlier". Petitioner's counsel further states that such conduct "cannot be countenanced by this Court and must not be rewarded."

Petitioner further maintains that the amendments to the Rent Stabilization Code [RSC] in 2003 allows for a new lease without a preferential rent, notwithstanding the prior "so ordered" stipulation entered into between the parties on 3/15/00.

DISCUSSION

For the reasons set forth below, the Court grants the petitioner's motion in part, and denies it in part.

While it is evident that the respondent's failure to apprise the Court of the above referenced DHCR Orders resulted in this matter being marked "off calendar" pending a DHCR determination regarding the respondent's entitlement to a preferential rent, counsel states that she, too, did not know that DHCR had already decided the issues of the preferential rent and the LRR and CR. Counsel then proceeds to discredit the respondent for her omissions and "misconduct" requesting that the Court not reward her for her "deceit".

Clearly, had this information been made available to the Court at the time of the hearing, the Court could have rendered a final determination without the necessity of removing this [*3]proceeding from its calendar and requiring the petitioner to make the instant motion to restore this proceeding and reargue the substantive issues a second time.

Although the petitioner criticizes the respondent's actions, it is interesting to note that the Orders annexed to the moving papers as Exhibits 1 and 3 clearly show that copies of same were mailed to the petitioner as well as the respondent and petitioner's counsel offers no explanation whatsoever as to why her client did not inform her of these determinations. Thus, while the respondent, according to the petitioner's attorney, came into Court with "unclean hands", petitioner's attorney came into Court with "empty hands", not having the very same documents that were sent to her client by DHCR and in her client's possession. Regardless of petitioner's assertion that the respondent should not be "rewarded" for her conduct, this Court will determine this matter solely upon the law and its interpretation of the stipulation in question, as there was no proof that the respondent "intentionally" failed to produce these Orders any more than the petitioner, who is equally at fault in that regard.

More significantly, however, petitioner's motion fails to adequately address the most important issue in this proceeding - whether the petitioner is required to offer a current renewal lease for the period 81/05 - 7/31/07 containing a preferential rent based upon the "so ordered" stipulation cited above.

Petitioner's counsel bases her entire argument on Footnote 2 of the 12/14/05 Order [Docket No. TI 210144 R] (Exhibit 1) which states in pertinent part:

Where a tenant pays a preferential rent (i.e. a rent less than the Legal Regulated Rent), the owner may, at his or her option, charge the higher regulated rent upon renewal or vacancy. Such legal regulated rent shall be previously established' pursuant to section 2521.2(b)(1)(2) of the Rent Stabilization Code. (Emphasis added)

Following the footnote was a "General Note" that directed the owner (petitioner herein) "to base the future rent increases on the lawful rent as established by this Order."

In response to this Court's 6/22/06 correspondence to DHCR, the Court received a letter, dated 8/3/06, from Roderick J. Walters, Supervising Attorney, DHCR, wherein he stated that DHCR could not examine the terms of the 3/15/00 stipulation as they were outside the four year base date and therefore were not considered in DHCR's determination. Thus, while DHCR is proscribed by statute from considering the prior stipulation (RSC § 2521,2(a),(b),(c)), the Court maintains ongoing jurisdiction of its cases, and will not set aside a "so ordered" stipulation made in open court absent a showing of fraud, collusion, mistake or accident. Petitioner has not put forth any evidence that any of those factors come into play here. Although the stipulation does not, at this juncture, provide the respondent with a statutory right to challenge the petitioner's actions in a DHCR administrative hearing (i.e.: rent overcharge), it does create a contractual agreement between the parties enforceable in court if within the six (6) year statute of limitations. (CPLR §213)

At the second hearing, conducted on 9/8/06, petitioner's counsel averred that the stipulation was no longer valid by virtue of the subsequent change in the statutory laws which precluded DHCR from going back beyond a four year period from the filing of a complaint to determine the LRR, further relying on DHCR's statement that the stipulation between the parties predated the base date of 9/28/01 and therefore could not be examined. Counsel interprets this language as a nullification of the prior stipulation because it pre-dated the base date for DHCR [*4]review and as a direction to her client to renew the respondent's lease without the preferential rent. However, there is no mandate on the parties that prohibits a stipulation from being made to circumvent this statutory limitation, or the Court from enforcing it. DHCR clearly states that an owner may at his or her option agree to a preferential rent beyond the term of a current lease or subsequent renewals. (See, DHCR Footnote 2, supra .) Counsel further declares that a motion to modify or vacate the stipulation was not required because it was invalidated by operation of law once the new statutes with the four year limitation for establishing the LRR became effective.

The Court disagrees with this position as there is nothing in the statute that gives it retroactive affect to binding agreements that have already been ratified by the parties, as in this case, where preferential rents continued after the agreement was signed until the present.

Therefore, as this Court stated in its 6/21/06 decision:

Although at first blush it would appear that the petitioner is correct that there is no specific language that states that a preferential rent will continue in perpetuity, the phrase "All T's increases will be taken off that amount [preferential rent]" (emphasis added) must be given its natural meaning and, if there is any ambiguity, it must be resolved in favor of the respondent who did not draft the agreement. Clearly, the words "all" and "increases", which refer to the plural, cannot be limited to the one lease renewal that the parties agreed to enter into after the stipulation was signed in open court. If that was the intent of petitioner's substitute counsel then his or her vagueness in the draftsmanship, of not specifically stating that such preferential rent is for that lease only, must be construed to the contrary, especially with the inclusion of the words "all" and "increases" in reference to the preferential rent.

Notwithstanding the language of RSL §26-511(c)(14) which enables a landlord to renew a lease without a preferential rent, exceptions have been carved out in those instances where the parties have negotiated an agreement that allows for a preferential rent to " endure beyond the terms of the lease into renewal periods' (Aijaz v. Hillside Place, LLC , 8 Misc 3d 73, 76 [2005])." Colonnade Management, LLC v. Warner, 2006 NY SlipOp 26055 (AT 1). See, also, Matter of Century Operating Corp.v. Popolizio, 60 NY2d 483; Matter of Missionary Sisters of Sacred Heart Ill v. DHCR, 283 AD2d 284, 724 NYS2d 742 (AD 1st Dept., 2001); 782 PPS Corp. v. Rodriguez, NYLJ, 6/1/01, p.22, col.4 (Civ. Ct., Bronx, Heymann, J.); 448 W 54th St. Corp v. Doig-Marx, 5 Misc 3d 405, 784 NYS2d 292 (Civ.Ct. NY Co., Fiorella, J.), aff'd 11 Misc 3d 126A (AT1, 2006).

As stated by the Appellate Term, 2nd and 11th Judicial Districts, in Aijaz v. Hillside Place, LLC , supra , the recent "amendment was not intended to preclude the parties to a lease or stipulation from agreeing to a rent preference that would endure beyond the term of the lease into renewal periods....Since plaintiff [tenant] and defendant's predecessor [landlord] here agreed upon a preferential rent that would last for the life of the tenancy, plaintiff was entitled to have this term of his lease carried over into all the renewal leases."

Similarly, in Colonnade Management, LLC v. Warner, supra , the Appellate Term, 1st Department, citing Aijaz v. Hillside Place, LLC , supra , went even further to find that "[s]ince the parties' intent is clearly and unambiguously manifested in the written agreement, the agreement controls, and tenant is entitled to the benefit of the preferential rent provision throughout his tenancy."

In 190 Washington Ave., Assoc., Inc. v. Velasquez, 10 Misc 3d 1060(A), 2005 NY SlipOp 52038 (U), (District Court, Nassau Co., Fairgrieve, J.), the lease contained a rider [*5]pertaining to a discounted rent based on certain conditions set forth therein. The rider clearly delineated the specific time period for which the rider would remain in effect as follows:

It is acknowledged and agreed to that the above option will be in effect for the period October 01, 1999 through September 30, 2000 the term of this lease only.(Emphasis added).

Upon renewal, the landlord will at his discretion, have the option of revoking the rent payment option offered herein, or continuing the option on subsequent renewals which will reflect the established guideline increases in effect at the time of renewal.

The landlord reserves the right to modify this option in any way he sees fit on subsequent renewals offered.

In ruling for the petitioner in this nonpayment proceeding, the court aptly stated:

Furthermore, the evidence introduced at trial establishes that the petitioner made it crystal clear that the rent discount was only applicable during the period of the lease and could be discounted at the end of each lease term. Thus, there is no contractual claim by respondents that support an obligation of petitioner to offer a discounted rent during the periods that respondents occupy the apartment from October 2004 and forward. (Citing, Aijaz v. Hillside Place, LLC , supra )

In the case at bar, where there is no such clarity in the stipulation of 3/15/00 as to a finite period of its application, petitioner would have this Court find that it was limited to the then proposed lease only. However, if that were the case, what purpose was being served by the additional verbiage regarding future increases? The word "all" is infinite, without end. By stating that the petitioner may include the legal rent and register it, counsel was protecting the petitioner in the event a future vacancy occurred, but the language that "All T's increases will be taken off" the preferential rent, implies that there will be ongoing reductions in the collectible rent.

In 448 W 54th St. Corp v. Doig-Marx, supra , the parties had agreed to a preferential rent during the terms of the tenant's occupancy. Subsequent to the statutory amendments to the RSC regarding preferential rent, the landlord offered the tenant a renewal lease which for the first time was based on the LRR as opposed to the preferential rent. The tenant disputed the applicability of the new law and, as in the instant matter, refused to sign the renewal lease.

In directing the landlord to provide the tenant with a renewal lease based on the preferential rent, the court held that the application of the amended statute to the tenant's lease "would substantially and severely impair the contract by depriving the tenant of the benefit of the bargain on the most central term of any lease - the amount of rent to be paid.".

The court went on to state:

It is a well-established rule of construction that the written or typewritten portions of an agreement represent an express manifestation of the parties' actual intentions and take precedence over any inconsistent provisions in the printed form. (Citation omitted)

It is clear from the above discussion that the wording in the preferential rent rider is controlling and must be enforced according to its terms. The wording contained therein is neither restrictive nor conditional. ..... Petitioner's unilateral change of position predicated in [the statutory amendments] is simply lacking in merit. To conclude otherwise would then allow the petitioner to walk away from its contractual obligation without redress. [*6]

Applying this reasoning to the stipulation at hand, it becomes evident, as discussed above, that said stipulation was not restricted only to the immediate lease renewal for the two year period of 8/1/05 - 7/31/07, but contemplated the continuation of a preferential rent in future lease renewals.

Regarding the accumulated arrears owed by the respondent, re-calculating the figures supplied by the petitioner in Exhibit 4, and as amended by an affirmation this date as requested by the court to reflect a preferential rent of $707.14, the Court determines the respondent owes $ 1170.88 through September 2006.

Accordingly, the petitioner's motion to renew and reargue is granted and upon renewal and reargument the Court adheres to that portion of its prior decision which concluded that the "so ordered" stipulation entered into between the parties on 3/15/00 obligates the petitioner to provide for a preferential rent for the remainder of the respondent's tenancy. However, the landlord may increase the LRR in accordance with the Rent Guideline Board's increases at the time of each successive lease renewal before reducing the collectible rent. The petitioner is directed to offer the respondent a stabilized renewal lease containing a preferential rent in the same amount as previously given within ten (10) days upon receipt of this decision and the respondent is directed to return the requisite signed copies to the petitioner within ten (10) days of receipt thereof.

The petitioner is awarded a final judgment in the amount of $ 1170.88, warrant forthwith, execution stayed thirty (30) days from the entry of this order.

This constitutes the decision and order of the Court.

Dated: September 14, 2006

GEORGE M. HEYMANN, J.H.C. Footnotes

Footnote 1: As a result of this stipulation, the commencement and expiration dates of respondent's tenancy were changed to 8/1 and 7/31, respectively, for all subsequent renewal leases.

Footnote 2: According to the petitioner, the holdover proceeding was dismissed by a different Housing Court Judge one day after the respondent filed her complaint for "Failure to Renew on the Same Terms and Conditions" and never notified DHCR. Nor did she renew her claim thereafter.

Footnote 3: This amount is $.97 less than the amount calculated by the Court in its 6/21/06 decision. The difference is due to the fact that both counsel and the Court incorporated the MCI into the base rate having been in effect prior to the end of the lease term and then multiplying by the 6.50% increase.