333 E. 49th Partners, L.P. v Siebert

[*1] 333 E. 49th Partners, L.P. v Siebert 2007 NY Slip Op 51381(U) [16 Misc 3d 1111(A)] Decided on July 10, 2007 Civil Court, New York County Cohen, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 10, 2007
Civil Court, New York County

333 EAST 49TH PARTNERS, L.P., Petitioner,

against

MARJORIE SIEBERT, Respondent, -and- "JOHN" SIEBERT, Under-Respondent.



62647/06



Lawrence P. Wolf, Esq.

Attorney for Petitioner

6 Hemlock Hills

Chappaqua, New York 10514

Keith S. Barnett, Esq.

Attorney for Respondent

321 Broadway, Suite 300

New York, NY 10007

David B. Cohen, J.

INTRODUCTION

In this licensee holdover proceeding, petitioner seeks to recover possession of a rent-stabilized apartment claiming that respondent, who had sublet the apartment from the tenant whose lease expired on December 31, 2004, is occupying the premises beyond the term of the tenant's lease, without the permission of the owner.

QUESTION PRESENTED

Did respondent, a sublessee residing in an apartment after the expiration of the tenant's lease, gain tenancy rights by virtue of either a waiver on the part of petitioner-landlord or illusory tenancy?

FINDINGS OF FACT

At trial, the following witnesses testified on behalf of petitioner: Anthony Paccione, a neighbor; Dolores Salaman, of the legal department of petitioner; and Christopher Orpheus, an agent of petitioner. The following witnesses testified on behalf of respondent: Leonard Flamm, the tenant of record; Marjorie Siebert and William Siebert, respondent and under-respondent.

Respondent Marjorie Siebert resides in Apartment 8T (the "apartment"), a rent-stabilized unit located at 333 East 49th Street, New York, New York. Petitioner, 333 East 49th Partners, L.P., is the owner of the premises. Petitioner's predecessor in interest and the tenant of record, Leonard Flamm ("Flamm" or "prime tenant"), entered into a lease in 1973. The lease provided that subleasing was permitted only with the consent of the landlord, and that rent accepted from a subtenant would not change the status of a subtenant to that of a tenant. Throughout the years, Flamm has signed renewal [*2]leases; the last lease term ended on December 31, 2004.[FN1]

In 1997, Flamm and respondent reached an oral agreement, without the consent of the landlord, that she would occupy the apartment while Flamm remained the tenant of record. Respondent paid rent to Flamm, who would then pay rent to petitioner. The rent Flamm charged respondent was equivalent to the rent charged Flamm by petitioner. Flamm did not occupy the apartment for the past 14 years, and had never co-occupied the apartment with respondent. Flamm testified that he sublet the apartment previously to another subtenant for approximately five years, and when that subtenant moved out, Flamm approached respondent regarding the apartment.

Around 1990, an attempt by the building owner to convert the building into a cooperative "busted," and although he purchased a different coop where he now lives, he wished to hold on to the apartment for possible future financial benefit, such as negotiating a buy-out of his tenancy or purchasing the apartment as an insider in the event of another attempted cooperative conversion plan.[FN2]

Respondent has been occupying the apartment for about nine and a half years. Respondent and her son, William, moved into the apartment in August 1997. Respondent testified that, after having been given the apartment key by Flamm, she hired petitioner's employee, Isuf Cerovic, to work on the floor and paint the apartment prior to her moving in. She also testified to the following: (1) every time respondent walked into the building, the doorman on duty would say hello to her and address her by her first name; (2) the doormen accepted deliveries made to her; (3) a porter and a doorman made the elevator available to her when she moved in; (4) they assisted her when her son moved out of the apartment to attend college; (5) the doormen retained the apartment key for her when she went away; (6) she received holiday cards from the building staff and, since 1997, personally tipped everyone listed on the cards; (7) the superintendent replaced a kitchen pipe for her; and (8) she gave the superintendent access to the apartment for purposes of installing windows.

Petitioner sent a notice to cure, dated November 12, 2003, addressed to Flamm, stating that Flamm illegally sublet the apartment and had until November 27, 2003, to cure the problem. A holdover proceeding [FN3] was commenced in March 2004 (L&T Index No. 059797/04) against Flamm and "John Doe and Jane Doe." Both Flamm and respondent appeared and answered. Respondent tendered petitioner a check, dated July 8, 2004, in the amount of $5294.20 (the equivalent of exactly five months rent, at $1058.84 per month), with the notation "without prejudice." The back of the check was stamped: "Accepted w/o prejudice to landlord's rights. Bldg Management Co. dba Devon Management Co." By stipulation dated July 20, 2004, the proceeding was discontinued without prejudice, and all motions were withdrawn. Petitioner cashed the check on July 28, 2004. [*3]

Flamm's lease term ended on December 31, 2004, and he did not renew.[FN4] Flamm does not dispute that he does not reside in and no longer has any possessory interest in the apartment. There is no evidence that respondent paid monthly rent for any period after the end of Flamm's lease. On January 30, 2006, petitioner sent respondent a notice of termination stating that since the prime tenant's lease expired on December 31, 2004, respondent had until February 26, 2006 to vacate the apartment. Respondent did not vacate and remains in possession.

On March 16, 2006, this holdover proceeding commenced. Petitioner claims that respondent remained in the apartment as an illegal licensee after the expiration of the lease. In asserting that she has gained tenancy rights, respondent raises two defenses: waiver and illusory tenancy.

CONCLUSIONS OF LAW

Waiver

Respondent argues that the acceptance of the one rent check in July 2004 combined with petitioner's knowledge of respondent's unlawful occupancy constitutes a waiver entitling her to tenancy rights in the apartment. This court finds that, although petitioner waived its right to object to the sublease arrangement between respondent and Flamm, the wavier did not create tenancy rights which would allow respondent to remain in the apartment after the end of Flamm's lease.

"[P]roof of knowledge by the landlord of the existence of a breach of the lease over a period of years will establish a knowing waiver by the landlord of the right to act on that breach" (Le Tam Realty Corp. v Hand, NYLJ, July 16, 1980[App Term, 1st Dept] citing Ilfin Co., Inc. v Gatto, NYLJ, Nov. 26, 1979, at 6, col 1 [App Term, 1st Dept]). Also, "knowledge acquired by an agent acting within the scope of his agency is imputed to his principal and the latter is bound by such knowledge although the information is never actually communicated to it" (Seward Park Hous. Corp. v Cohen, 287 AD2d 157, 167 [1st Dept 2001] quoting Center v Hampton Affiliates, 66 NY2d 782, 784 [1985]; Farr v Newmann, 14 NY2d 183, 187 [1964] [internal quotation marks omitted]). The knowledge of the landlord's maintenance staff, porters, security personnel, and resident superintendent are imputed to the landlord (Seward Park Hous. Corp., 287 AD2d at 167; Landmark Props. v Olina, 33 HCR 104A [Nassau Dist Ct 2002]).

In the present case, petitioner had actual knowledge of Flamm's tenancy because Flamm had signed the renewal leases and paid the rent checks. Petitioner is imputed with the knowledge of the building staff of respondent's occupancy of the apartment for nearly ten years. Therefore, petitioner had constructive knowledge of respondent's sublease arrangement for a number of years and thus waived its right to challenge the subtenancy. The fact that the July 2004 rent check was "without prejudice" does not affect the court's conclusion. Acceptance of a check "without prejudice" is [*4]generally recognized as a preservation of rights (see Zobe, L.L.C. v United N. Bancshares, Ltd., 251 AD2d 237 [1st Dept 1988] [commenting that rights could be reserved by endorsing checks with "without prejudice"]; Gottlieb v Aragones, NYLJ, July 17, 1996 [App Term, 1st Dept]). However, "New York case law regards acceptance of rent monies with knowledge of a breach as a waiver" (Le Tam Realty Corp. v Hand, NYLJ, July 16, 1980, supra). Since petitioner had knowledge of Flamm's subleasing arrangement and continued to accept rent payments from him over a period of years, petitioner waived its right to object to the subleasing arrangement long before it accepted respondent's check "without prejudice."

Although petitioner's knowledge resulted in a waiver of its right to object to the illegal sublease, petitioner's waiver did not create tenancy rights in the respondent. A tenancy may not generally be created by waiver (Missionary Sisters of the Sacred Heart, Inc. v Weiss, NYLJ, Mar. 31, 1999 [App Term, 1st Dept]; Plon Realty Corp. v D'Abbracci, NYLJ, Nov. 14, 1997 [App Term, 1st Dept]; Gottlieb v Aragones, NYLJ, July 17, 1996, supra). A tenancy can only be created by a waiver when there is sufficient evidence of intent on the landlord's part to enter into a tenancy relationship with the subtenant (Gottlieb v Aragones, NYLJ, July 17, 1996, supra). In the present case, there was no evidence of petitioner's intent to enter into such a relationship with respondent. Petitioner's rent profile list shows that all charges for the apartment after December 31, 2004 were for "use and occupancy" and not "base rent." Petitioner accepted no rent payments from respondent corresponding to the period after December 31, 2004. There was no evidence of either petitioner offering respondent a lease or respondent requesting one. Finally, even if petitioner did accept rent from respondent, the lease indicates that such acceptance should not be construed as a manifestation of intent to create tenancy rights. These facts demonstrate that petitioner, although waiving its right to challenge the sublease, did not intend to enter into a tenancy relationship with respondent.[FN5] Therefore, respondent has no tenancy rights based on waiver that would entitle her to remain in the apartment after December 31, 2004, and petitioner has the right to challenge the illegal occupancy.

Illusory Tenancy

The second defense respondent raises is that, as a consequence of the prime tenant's illusory tenancy, respondent has established independent tenancy rights. An illusory tenancy is generally defined as "a residential leasehold created in a person who does not occupy the premises for his or her own residential use and subleases it for profit, not because of necessity or other legally [*5]cognizable reason" (Badem Bldgs. v Abrams, 70 NY2d 45, 52-53 [1987]). [FN6] "[W]hile there should be a showing of at least constructive knowledge on the part of the landlord of the subleasing arrangement, there is clearly no requirement that there be evidence of collusion on the part of the landlord before an illusory tenancy will be found. While the landlord apparently did not benefit, it did know or should have known of the subterfuge, which was clearly within the knowledge of the former superintendent of the building" (Primrose Mgt. v Donahoe, 253 AD2d 404, 405-406 [1st Dept 1998 mem] [emphasis added]). This court must determine (1) whether or not petitioner had constructive knowledge of the sublease, and (2) whether or not the prime tenant profited.

This court already determined that petitioner had constructive knowledge of respondent's subleasing arrangement (see supra at pp. 5-6).[FN7] As for profit, since neither Flamm nor petitioner were overcharging respondent on the rent, respondent cannot claim that Flamm or petitioner were directly profiting on an illegally high rent. However, holding onto an apartment to speculate and profit from a possible cooperative conversion is also profiteering, which satisfies the element of profit in illusory tenancy (see Art Omi Inc. v Vallejos, NYLJ, Apr. 11, 2007, at 18, col 1 [Civ Ct, New York County] citing Avon, 116 AD2d at 284-285, Yellon v Reiner-Kaiser Assocs., 89 AD2d 561, 562-63 [2d Dept 1982], and Rocconi v Strong, 132 Misc 2d 190, 192 [1986]). Avon and Yellon involved a "future cooperative conversion" whose plans were more than mere speculation but rather were in the process of being realized (Avon, 166 AD2d at 282 [ eviction' plan for cooperative conversion had been submitted to the Attorney-General]; Yellon, 89 AD2d at 562 [tenant was informed of an "offering plan to convert the building . . . to co-operative ownership"]). Although in the present case, there was no evidence indicating an actual pending cooperative conversion plan, the degree of possibility that the cooperative conversion will take place need not necessarily be high; the fact that mere negotiations were conducted but fell through is still enough to be a "possible" cooperative conversion (see Rocconi v Strong, 132 Misc 2d at 191). Ultimately, the existence of a profiteering motive must depend on the subjective belief of the principal actor that keeping the apartment in his name could reap a future profit.

Although a cooperative conversion plan fell through around 1990 (about seven years before respondent commenced her sublet), the prime tenant never resided in the apartment for the past 14 years but still held on to it because, according to his own testimony, he wanted either to negotiate a buy-out of his tenancy or to purchase the apartment as an insider in the event of a cooperative conversion. Flamm believed that the building might reap a future financial benefit for him, a belief which is sufficient for this court to find that the prime tenant held onto the apartment for the purpose of profiteering. Therefore, the court finds that there was an illusory tenancy, which created tenancy [*6]rights in respondent.

CONCLUSION

For the reasons set forth herein, the petition is dismissed. Petitioner is directed to provide respondent with a rent-stabilized lease in her name within twenty (20) days (see Greer v Erwin, NYLJ, Sept. 22, 1993, at 22, col 6 [Civ Ct, New York County]).

The clerk is directed to mail a copy of this decision to all parties.

This constitutes the decision and order of this court.

Dated:July 10, 2007

New York, NY

______________________________

DAVID B. COHEN, J.H.C.

TO: Footnotes

Footnote 1:Flamm signed the window guard notices, except for a few which are signed "Leonard Flamm" in handwriting that does not match his signature on the other notices. Respondent testified that possibly it was she who signed Flamm's name.

Footnote 2:At trial, there was no evidence indicating that an actual conversion plan had been offered since 1990.

Footnote 3:The name of the petitioner in the 2004 proceeding is "Bldg Management Co. Inc.", which is the managing agent of the petitioner-owner herein.

Footnote 4:Prior to the commencement of the instant proceeding, petitioner commenced an illegal sublet proceeding (L&T 95258/04) and a non-primary residence proceeding (L&T 51920/05) against Flamm and undertenants "John Doe/Jane Doe," which apparently were never consolidated. On May 5, 2005, the illegal sublet proceeding was marked "off calender." The parties went to trial on the non-primary residence proceeding, which was dismissed without prejudice because of a procedural defect in the notice served on Flamm.

Footnote 5:

The cases cited in respondent's brief do not establish tenancy rights for the subtenant who submitted rent payments to the landlord. In Birnbaum v Corbett, NYLJ Dec. 27, 1990 [App Term, 2d & 11th Jud Dists], the court stated that the landlord's acceptance of rent constituted a waiver of its right to maintain a proceeding on the ground that the occupant was a licensee. However, the court did not declare that the occupant gained tenancy rights. In Katechis & Katechis v Rodenas, 17 HCR 430 [Civ Ct, Bronx County 1988], the landlord waived its right to object to a subtenant's occupancy of an apartment, but the court's decision did not give the subtenant any rights as a tenant.

Footnote 6:The fact that the prime tenant once lived in the apartment as his primary residence does not preclude a finding that he subsequently sublet for profit (see 270 Riverside Drive, 195 Misc 2d at 50).

Footnote 7:

Petitioner argues that West 46 Equities Inc. v Henry, NYLJ, Sept. 8, 1997, at 26, col 6 [holding that no illusory tenancy lies where the prime tenant and subtenant conspired to hide the subtenant from the landlord] is controlling. However, that case is inapplicable since the respondent herein did not hide from the landlord but lived openly in the apartment and had daily interaction with the doormen and regular interaction with the other building staff.