Savoy Park Owner LLC v West
Annotate this CaseDecided on March 24, 2008
Civil Court of the City of New York, New York County
Savoy Park Owner LLC, Petitioner,
against
Condor West, Respondent.
251493/07
Petitioner
Robert I. Miller, Esq. Rappaport, Hertz, Cherson & Rosenthal
Respondent
Condor West, pro se
Ruben Andres Martino, J.
This is a nonpayment proceeding. The parties have stipulated to the facts and submitted documents including the original lease, Rent Stabilization Lease Rider, landlord's Rent Increase Computation forms, renewal lease signed by tenant, a deemed lease renewal respondent did not sign, DHCR Registration Rent Roll and a rent history. The parties did not submit any additional papers. The landlord's prima facie case is conceded except as to the monthly rent and amount owed through February 29, 2008. The issue presented to the Court is whether the preferential rent from the original lease and first lease renewal continues as long as the respondent is the tenant of the apartment.
Respondent and petitioner's predecessor entered into a two year lease for this rent stabilized apartment commencing April 1, 2003 and ending March 31, 2005. The lease has $705 as the monthly rent. The Rent Stabilization Lease Rider which was apparently signed by the tenant over three months before the actual lease, contains a section showing the calculation of the rent. The legal rent is shown to be $860 and the preferential rent is $730. Landlord's records contain an internal Rent Increase Computation form which corresponds to the rider except at the bottom where it states "Inside Transfer $705." This is the rent amount on the lease. Neither the lease nor rider have any other information regarding the preferential rent. The tenant thereafter executed a renewal lease for two years commencing April 1, 2005 at a preferential rent of $750.82. The standard DHCR renewal form lists the legal rent, increase based on the legal rent, the preferential rent and the increase based on the preferential rent. Petitioner, the new owner, offered the next renewal lease to commence April 1, 2007 at the legal regulated rent without a [*2]preference. Tenant did not sign and landlord deemed the lease signed for a two year term. Petitioner commenced this nonpayment case seeking rent at the legal regulated rent. Respondent defends claiming that the preference must be continued.
Rent Stabilization Law §26-511(c)(14) became effective on June 6, 2003 and provided in part that:
"Where the amount of rent charged to and paid by the tenant is
less than the legal regulated rent for the housing accommodation,
the amount of rent for such housing accommodation which may
be charged upon renewal or upon vacancy thereof may, at the
option of the owner, be based upon such previously established
legal regulated rent, as adjusted by the most recent applicable
guidelines increases and other increases authorized by law."
This provision was meant to end application of the former "Collingwood Rule" which held that if an owner ever charged a preferential rent it could not be revoked and became the new legal rent even after the tenant moved out (see Aijaz v Hillside Place, LLC, 8 Misc 3d 73, 798 NYS2d 840 [AT 2d Dept 2005]). The effect of the Collingwood Rule had already been softened in 2001 by the case of Matter of Missionary Sisters of Sacred Heart, Ill v New York State Division of Housing Community Renewal, 283 AD2d 284, 724 NYS2d 742 (1st Dept 2001). In that case an owner and tenant agreed to a preferential rent that was only for the term of the lease. The court held that the owner was not required to continue a rent preference if the parties had contracted for a rent preference for only a limited term. The court recognized that preferences, being lower than the legal regulated rent, were contractual and could be determined by the parties.
After the passage of the 2003 amendment a number of courts have analyzed the effect of the law on various lease agreements. The Appellate Term Second Department held in 2005 that contractual agreements supercede the effect of Rent Stabilization Law §26-511(c)(14). In Aijaz v Hillside Place LLC, supra , a tenant sued for rent overcharge. Her initial lease stated that she would receive a preferential rent for the term of the lease and any renewal leases subject to adjustment per Rent Stabilization. The landlord relied on the 2003 amendment and was charging tenant the full legal rent. The Appellate Term held that the amendment was not intended to prevent parties from contracting or stipulating to preferences which extend into renewal periods. Since the parties agreed that the preference would be for the entire tenancy there was an overcharge based on a contract cause of action.[FN1] A similar result was reached in 448 West 54th Street Corp v Doig Marx, 5 Misc 3d 405, 784 NYS2d 292 (NYC Civil Ct 2004). There, a landlord moved to strike a tenant's defense raising a preferential rent and the respondent moved for summary judgment. The original lease from 1992 provided for a preference during the "terms of tenant's occupancy." The preference continued through September 2003 when landlord offered a renewal without the preference based on the 2003 change of the Rent Stabilization Law. The Hon. Anthony J. Fiorella held that the express terms of the lease provided for the preference to last for the entire tenancy. The 2003 amendment was not meant to [*3]apply to that situation and the contract controlled. Summary judgment was granted in favor of the tenant.
In Les Filles Quatre LLC v McNuer, 9 Misc 3d 179, 798 NYS2d 899 (NYC Civ Ct 2005), the respondent moved for summary judgment in a holdover proceeding for failure to renew the lease arguing that although the initial lease and first renewal provided for termination of a rent preference at the end of the term, subsequent renewals containing a preference evidenced a clear intention that future increases would continue to be based on the preference. The original lease stated that "landlord agrees to accept less than the legal rent for the term of this lease." A rider added that the lease could be renewed and the rent paid would be based on the preferential rent. All subsequent renewals were on the standard DHCR form and contained a rent preference but were silent as to the duration of the preference. The Hon. Peter M. Wendt held that the initial lease and first renewal did not grant preferences for the entire term of the tenancy. At most they provided for one renewal lease at the preference. The court reasoned that without a specific provision granting a preferential rent for the life of the tenancy the 2003 amendment could apply and the landlord could charge the previously established legal rent. The decision states that "a lease provision granting a preferential rent for one renewal lease is not required to be carried forward in subsequent renewal leases for the term of the tenancy" (id. at 185).
The need for a specific provision in the lease stating that a preference was for the entire tenancy if a landlord must include it in renewal leases was found in Colonnade Mgt v Warner, 11 Misc 3d 52, 812 NYS2d 209 (AT 1st Dept 2006). The court held:
"Thus, where an owner and tenant expressly agree that
a preferential rent will last for the life of the tenancy,
the tenant is entitled to have such a lease provision
carried over into subsequent renewal leases
(citation omitted).
The preferential lease rider under review
unequivocally and explicitly provides for a rent concession
for the duration of the tenancy. Since 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
(citations omitted)" (id. at 53).
What happens if the rent preference lease provisions are ambiguous? That was the issue faced in the case of East Side Managers Associates, Inc v Goodwin, 18 Misc 3d 1102(A), WL 437290 (NYC Civil Court 2007). That was a holdover proceeding for failure of the tenant to renew a lease. The original 1998 lease contained a preference provision negotiated by the parties. The tenant agreed to repair and improve the apartment at her own expense and landlord agreed to a give a preferential lease. The landlord drafted the lease. The preferential lease provision did not state for how long the preference was to continue. The Hon. Gary F. Marton held that the lease was ambiguous to the extent that it did not specify whether the preferential rent was to be in force for a definite or an indefinite period. Using principles of contract construction he reasoned that the ambiguity had to be resolved against the drafter of the lease and the tenant was entitled to a preference for the duration of the tenancy. He denied the [*4]landlord's motion for reargument and explained that the 2003 amendment and the case of Missionary Sisters, supra , provide that a landlord does not have to continue a preference if it is not contractually required in the lease. However, he found that the ambiguous preferential rent provision had to be interpreted against the drafter and was meant to last for the entire tenancy. The non-specific lease provision, as interpreted by the court, fell within the established exception to the 2003 amendment and landlord could not exercise its option to end the preference.
The effect of the 2003 amendment and the various cases interpreting preferences can be summarized in the following chart: Lease says preference for entire tenancy Lease says preference for lease term only Lease is silent as to duration of preference Lease is ambiguous as to duration Pre 6/20/03 amendment preference continues preference ends per Missionary Sisters preference continues preference continues Post 6/20/03 amendment preference continues preference ends at landlord's option preference ends at landlord's option depends on intent and lease construction
The 2003 amendment allows an owner to end a rent preference in all cases except where there is an express agreement between the parties extending it beyond the original lease term or a court finds, under the facts of a particular case, that such was the intent in interpreting an ambiguous preference agreement.
In the instant case respondent and the petitioner's predecessor entered into a lease agreement commencing April 1, 2003. This was before the 2003 amendment and after the decision in Missionary Sisters, supra . The parties executed one renewal containing a preferential rent. Neither the original lease, rider nor renewal expressly provide that the preference is to last for the entire tenancy. The original lease terms, including the preference, were effective for two years until the lease ended subject to Rent Stabilization. Renewal leases must be offered under the same terms and conditions as the original lease except for the duration and amount (Rent Stabilization Code, 9 NYCRR §2523.5). Prior to the 2003 amendment, this meant that a preferential rent provision had to be part of all subsequent lease renewals. That changed with the amendment. As stated in Les Filles Quatre LLC v McNeur, supra at 185, "Thus, the 2003 amendment provides that for lease provisions granting preferential rents, there is an exception to the requirement of the Rent Stabilization Code (9 NYCRR)n §2523.5(a) that renewal be on the same terms and conditions as the vacancy lease." Without an express provision extending the preference for the entire tenancy, petitioner could end the preference. Unlike the facts in East Side Managers, supra , there is no ambiguity here for the Court to resolve. The initial lease provided for a two year preference and the renewal for an additional two year period. In East Side Managers, supra , the parties negotiated a preference in return for work done by the tenant in the apartment. This fact was stated in the preference provision. How long a preference was contemplated as consideration for the work done? The answer could not be found in the lease contract. The court had to decide this ambiguity and did so against the landlord who drafted the lease. Here, there is nothing in the lease or renewal suggesting that the parties intended to extend the preference for the entire tenancy. The preferential rent provision, like all of the other terms in the lease, lasted for the duration of the agreement and could be renewed per law. The law, now changed, allows the petitioner to end the preference at its option.
Accordingly, based on the stipulated facts and evidence presented, the court finds that petitioner could end the rent preference. Final judgment in favor of petitioner for $6536.77 representing the rent owed through February 29, 2008 at $982.30 per month, which is the legal regulated rent. The issuance of the warrant is stayed five days after service of a copy of the [*5]judgment with notice of entry.
____________________________
Hon. Ruben Andres Martino
A.S.C.J.
March 24, 2008
Harlem, New York
Footnotes
Footnote 1:There was no cause of action for
a statutory overcharge because the landlord never sought rent above the legal regulated rent.
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