Fav 45 LLC v McBain

[*1] Fav 45 LLC v McBain 2014 NY Slip Op 50292(U) Decided on February 20, 2014 Civil Court Of The City Of New York, New York County Stoller, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 20, 2014
Civil Court of the City of New York, New York County

FAV 45 LLC, Petitioner/Landlord,

against

Genever McBain, et al., Respondents/Tenants.



59732/2010

Jack Stoller, J.

FAV 45 LLC, the petitioner in this proceeding ("Petitioner"), commenced this summary proceeding against Genever McBain, the respondent in this proceeding ("Respondent")[FN1] seeking possession of 45 First Avenue, Apt. 2L, New York, New York ("the subject premises") on the ground of nonpayment of rent. Respondent interposed a number of defenses in this matter, with an emphasis on Respondent's claim of rent overcharge.

At trial, Petitioner proved that it is the proper party to commence this proceeding, that it has had a landlord/tenant relationship with Respondent, that it has complied with the registration requirements of MDL §325, that it demanded rent pursuant to RPAPL §711(2), that the subject premises is rent-stabilized and Petitioner registered the rent with the New York State Division of Housing and Community Renewal ("DHCR").

Petitioner introduced into evidence a one-year lease commencing May 1, 2009 with a monthly rent of $1,673.50. The lease has since expired, as of April 30, 2010 and no renewal lease has been entered into evidence. Petitioner introduced into evidence a rent ledger for the subject premises. The rent ledger shows six months of rent arrears from March of 2010 through August of 2010 which, at $1,673.50 per month, add up to $10,041.00. Despite the fact that the rent ledger did not credit any payments during this time period, Petitioner's prima facie witness testified that Petitioner credited tenders of rent Respondent made after August of 2010 to the earliest month that rent was owed.

Respondent testified on her behalf on her case. She testified that she has lived at the subject premises since May 1, 2004, and that at that time no one who worked for the Petitioner said anything to indicate that the subject premises was rent-stabilized, that her first lease had no rent stabilization rider as required by 9 N.Y.C.R.R. §2522.5(c)(1) ("Rent Stabilization Rider"), that no one told her how her rent was calculated, that she received no Rent Stabilization Riders in her subsequent leases, and that she was never served with annual rent registrations as required by [*2]9 N.Y.C.R.R. §2528.3(b). Respondent also introduced into evidence canceled checks for rent paid. Respondent had designated which month she intended the checks to be credited to.

On cross-examination, Respondent acknowledged that the leases that she signed contain riders that purport to incorporate Rent Stabilization Riders by reference, although Respondent testified on redirect examination that she doesn't know what "incorporate by reference" means.

Respondent called Petitioner's prima facie witness as her own witness. Respondent used her direct examination of Petitioner's prima facie witness to underscore that the DHCR registration shows that Petitioner, although having previously registered the subject premises with DHCR, submitted an amended registration for the subject premises for 2003 through 2012 on July 24, 2013, making some changes.

Petitioner's prima facie witness testified again on Petitioner's rebuttal case. Petitioner's prima facie witness identified clauses appearing in riders for leases to the subject premises that incorporate by reference Rent Stabilization Riders, testifying that the meaning of those clauses is that tenants who signed leases are given Rent Stabilization Riders at the time leases are signed. Petitioner's prima facie witness also testified that she had a Rent Stabilization Rider delivered to Respondent by certified mail and introduced the Rent Stabilization Rider and certified mail slip into evidence.

Chanie Sheinwexler, an employee of Petitioner for twenty years, testified that she handles DHCR registrations for Petitioner, and that she filed the registration statements with DHCR; that she mailed copies to tenants by regular mail prior to 2008; and that she sent them to tenants by certified mail from 2008 through 2010. Through this witness, Petitioner introduced into evidence a business record showing mailings to Respondent for 2008, 2009, and 2010. She also testified that the clause to the lease rider incorporating by reference a Rent Stabilization Rider is standard in the leases that Petitioner prepares; that these riders show tenants how the prior rent was calculated; and that the Rent Stabilization Riders are not executed by the tenants.

Jordan Sakellaridis, another employee of Petitioner, who testified that she has worked for Petitioner for twenty-three years, testified that the Rent Stabilization Riders are given to tenants when they sign leases, but that Petitioner does not save them because they are not signed by tenants.

Petitioner also introduced into evidence on its rebuttal case two more rent ledgers, one of which was from the system Petitioner used prior to the system that produced the rent ledger Petitioner introduced on its prima facie case. The earlier rent ledger that Petitioner introduced also showed that six months of rent at $1,673.50 a month was outstanding, from March of 2010 through August of 2010, inclusive, for a total amount of arrears of $10,041.00.

Respondent moved to dismiss the petition on the ground that Petitioner could not make a prima facie case, to wit, that Petitioner's evidence was conflicted with regard to the manner in which Petitioner credited rent payments. Petitioner's prima facie witness testified that they were credited to the earliest month that rent was due. However, the rent ledger Petitioner introduced into evidence on its rebuttal case ("the earlier ledger") credited rent payments in the months in which they were made, not to the earliest month of arrears. Respondent's canceled checks in evidence showed that she designated the month that she intended the tender to pay for, and the earlier ledger showed that Petitioner honored Respondent's intentions, which is proper. Snide v. Larrow, 62 NY2d 633, 634 (1984), Home & City Sav, Bank v. Bilinski, 177 AD2d 73, 76 (3rd [*3]Dept. 1992). All the ledgers in evidence, whether introduced on Petitioner's prima facie case or Petitioner's rebuttal case, show no rent paid from March 2010 through August 2010, inclusive. Respondent's canceled checks in evidence do not show any payments from March 2010 through August 2010. Petitioner's witness' testimony does not contradict this basic fact. Petitioner has proven at trial that Respondent did not pay rent from March 2010 through August 2010, and Respondent has not stated a basis upon which to dismiss the proceeding for any purported failure to prove this point.

As Respondent's lease expired on April 30, 2010 and has not been renewed, Respondent also moves to dismiss so much of Petitioner's case against her as seeks a judgment for rent arrears subsequent to April 30, 2010. Without a lease in effect, Respondent argues, Petitioner does not state a cause of action against her sounding in nonpayment of rent. See Solow v. Wellner, 86 NY2d 582, 589-90 (1995), Fasal v. La Villa, 2 Misc 3d 137A (App. Term 1st Dept. 2004), Fucile v. LCR Dev., Ltd., 2011 NY Slip Op. 32256U (Dist. Ct. Nassau Co.). Respondent premises her argument in part on the holding of Samson Mgt. LLC v. Hubert, 92 AD3d 932 (2nd Dept. 2012), that landlords of rent-stabilized apartments may not deem leases to have been renewed if they offer a renewal lease to a tenant that does not execute the renewal lease.

Respondent's argument proves too much. If there is no contractual landlord/tenant relationship entitling a landlord to a cause of action for nonpayment of rent, it follows that a rent-stabilized tenant with an expired lease is subject to a holdover proceeding for no reason other than expiration of the lease. Such a result has no support in the Rent Stabilization Code, and Samson, supra, does not hold otherwise. Shuhab HDFC v. Allen, 37 Misc 3d 1222A (Civ. Ct. NY Co. 2012). Samson, supra, stands for the proposition that a holdover after the expiration of a lease without a fully-executed renewal does not entitle a landlord to deem a lease renewed for an entire year at a higher amount of rent, in derogation of RPL §232-c. Samson, supra, does not, however, alter the proposition that a landlord/tenant relationship continues after the expiration of a rent-stabilized lease on a month-to-month basis at the same rent as the parties had previously agreed to so long as the tenant remains in possession. Sacchetti v. Rogers, 12 Misc 3d 131A (App. Term 1st Dept. 2006). See Also B.N. Realty Assoc. v. Lichtenstein, 96 AD3d 434, 435 (1st Dept. 2012) (in the absence of a tender of a renewal lease in a rent-stabilized apartment where the tenant remains in possession, a landlord is still entitled to rent as, inter alia, a matter of quantum meruit). As Petitioner seeks a judgment on the same amount of monthly rent as the monthly rent per the lease that expired on April 30, 2010, Respondent therefore does not state grounds upon which to dismiss Petitioner's cause of action.

Respondent also moves to dismiss so much of the proceeding as seeks a judgment for rent arrears that accrued after the rent demand, as Petitioner did not demand the subsequently-accruing rent pursuant to RPAPL §711(2). The predicate rent demand in this proceeding demanded payment of rent for February of 2010 and March of 2010 and was served as of March 10, 2010. This proceeding was subsequently commenced by filing of a notice of petition and petition on March 16, 2010. As noted above, Petitioner seeks a judgment in part for rent arrears that accrued subsequent to March of 2010, but there is no evidence that, following the commencement of this proceeding, Petitioner demanded payment of rent pursuant to RPAPL §711(2).

In support of her motion, Respondent cites 1587 Broadway Restaurant Corp. v. Magic [*4]Pyramid, Inc., N.Y.L.J. Dec. 19, 1979 at 10:2 (App. Term 1st Dept.) for the proposition that Petitioner cannot obtain a judgment against Respondent for the subsequently-accruing rent without serving another demand. However, two subsequent cases, C.F. Monroe v. Nemeth, N.Y.L.J. Oct. 25, 1994, at 25:1 (App. Term 1st Dept.), and GSL Enterprises v. Newlinger, N.Y.L.J. May 24, 1996 at 25:6 (App. Term 1st Dept.), both stand for the proposition that it is the established practice of Housing Court for a landlord to amend the petition to date to entitle a landlord to a judgment for all rent due at the time of a trial. Based in part upon this authority, one Court has held that there is no need for a subsequent rent demand during the pendency of the nonpayment proceeding. Bldg. Mgt. Co. v. Benmen, 36 Misc 3d 1225A (Civ. Ct. NY Co. 2012). Another Court has held that a landlord's continued application for payment of ongoing use and occupancy during the pendency of motion practice during a nonpayment proceeding put the tenant on notice of the landlord's demand for rent in a manner sufficient to satisfy a requirement that subsequent demands for rent be served. JDM Wash. St. LLC v. 90 Wash. Rest. Assoc., LLC, 36 Misc 3d 769, 772-73 (Civ. Ct. NY Co. 2012).

As noted above, this nonpayment proceeding was commenced on March 16, 2010 and the trial did not conclude until January 24, 2014, a delay in resolution attributable in part to motion practice and attributable in part to the fact that the Court granted Respondent leave to obtain discovery against Petitioner. In that motion practice, by an affidavit supporting a motion made in May of 2010, Petitioner set forth that Respondent owed rent for April 2010 and May 2010, subsequent to the commencement of the petition; by an affidavit supporting a motion made in September of 2010, Petitioner set forth that Respondent owed for April of 2010 through September of 2010, also subsequent to the commencement of the petition; an order of the Court in October 18, 2010 granting Respondent leave to obtain discovery also directed Respondent to pay ongoing use and occupancy on or before the fifth of the month; and by an affidavit supporting Petitioner's motion for summary judgment in March of 2013, Petitioner set forth that Respondent owed $10,041.00, the same amount Petitioner seeks a judgment for after trial.[FN2]

An important purpose of a rent demand is to give a tenant an opportunity to avoid litigation by paying accrued rent arrears prior to the commencement of a nonpayment proceeding. Strong L.P. v Dakar Rest., Inc., 28 Misc 3d 1213A (Civ. Ct. Kings Co. 2010), 545 W. Co. v. Schachter, 16 Misc 3d 431, 432 (Civ. Ct. NY Co. 2007). This policy is salutary, as it has the potential to conserve judicial resources, reduce costs for landlords and tenants alike, and relieve tenants from adverse incidental consequences that may accrue to them upon the mere occurrence of being sued in a summary proceeding. See Denza v. Independence Plaza Assoc. LLC, 17 Misc 3d 1122A (S. Ct. NY Co. 2007), Weisent v. Subaqua Corp., 16 Misc 3d 1115A (S. Ct. NY Co. 2007), citing White, et al. v. First American Registry, Inc., et al., 2007 U.S. Dist. LEXIS 18401, 2007 WL 703926 (S.D.NY) (discussing the adverse consequences to a tenant's credit history upon being sued in a summary proceeding). In order for the rent demand to be effective in its purpose in the prevention of litigation, it must actually demand payment of an amount that will prevent litigation, i.e., a reasonable approximation of the rent that is due. 542 Holding Corp. v. [*5]Prince Fashions, Inc., 46 AD3d 309, 310 (1st Dept. 2007), Dendy v. McAlpine, 27 Misc 3d 138A (App. Term 2nd Dept. 2010), IG Second Generation Partners, LP v. 166 Enterprises Corp. & Urban Outfitters, Inc., N.Y.L.J. Aug. 5, 2003 at 18:1 (App. Term 1st Dept.).

As the rent demand in this proceeding has been otherwise effectuated, the rent demanded therein was the amount Respondent would have had to have paid at that time in order to prevent litigation. As Respondent did not pay the rent demanded, the purpose of the demand had already been fulfilled at the time that a nonpayment petition has been served and filed. Accordingly, just as a Housing Court petition may seek other charges that a predicate notice may not have demanded, such as attorneys' fees, Petitioner may also proceed as it has and obtain a judgment for subsequently-accruing rent. The Court therefore denies Respondent's motions to dismiss and finds that Petitioner has proven its prima facie case of entitlement to a judgment for $10,041.00. The burden thus shifts to Respondent to prove her affirmative defenses.

As noted above, Respondent's primary defense in this proceeding is one for rent overcharge. Under normal circumstances, the legal regulated rent for the purposes of determining an overcharge is the rent charged on the base date, which is four years prior to the filing of a rent overcharge claim, 9 N.Y.C.R.R. §2520.6(f)(1), plus legal adjustments thereafter. 9 N.Y.C.R.R. §2526.1(a)(3)(I). The answer raising the rent overcharge defense was served on March 22, 2010. Four years prior to March 22, 2010 is March 22, 2006.[FN3] The monthly rent charged as of March 22, 2006, according to a lease in evidence, was $1,495.00. Respondent then entered into a two-year lease commencing on May 1, 2006. Under N.Y.C. Admin. Code §26-510(b), the Rent Guidelines Board ("RGB") establishes rent adjustments for the units subject to Rent Stabilization. The adjustment for a two-year renewal lease commencing May 1, 2006 is 5.5 percent. RGB Order 37. A 5.5% increase over $1,495.00 is $1,577.23. The rent on the lease commencing May 1, 2006 was $1,562.38. Respondent then entered into a one-year lease commencing on May 1, 2008. The adjustment for a one-year renewal lease commencing May 1, 2008 is 3 percent. RGB Order 39. A 3% increase over $1,562.38 is $1,609.25. The rent on the lease commencing May 1, 2008 was $1,609.14. Respondent then entered into a one-year lease commencing on May 1, 2009. The adjustment for a one-year renewal lease commencing May 1, 2009 is 4.5 percent. RGB Order 40. A 4.5% increase over $1,609.25 is $1,681.66. The rent denoted on the lease commencing May 1, 2009 as the legal regulated rent for a one-year renewal was $1,733.69, although the lease provided that Respondent was entitled to a preferential rent of $1,673.50. Respondent's rent has not increased since that time.

Respondent argues that the Court should consider the rent history prior to four years before the interposition of her rent overcharge defense. A widening body of appellate authority has liberalized the prohibition against inspection of a rent history prior to four years before the interposition of the defense. Matter of Grimm v State of New York Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358, 366 (2010), Thornton v. Baron, 5 NY3d 175 (2005), 72A Realty Assoc. v. Lucas, 101 AD3d 401 (1st Dept. 2012). Factors that [*6]warrant an investigation regarding the legality of the rent in effect four years prior to the interposition of the claim are: (1) the tenant alleges circumstances that indicate the landlord's violation of the Rent Stabilization Law and Rent Stabilization Code in addition to charging an illegal rent; (2) the evidence indicates a fraudulent scheme to remove the rental unit from rent regulation; and/or (3) the rent registration history is inconsistent with the lease history. Matter of Pehrson v Division of Hous. & Community Renewal of the State of NY, 34 Misc 3d 1220A (S. Ct. NY Co. 2011).

Evidence at trial shows that there is no controversy that Petitioner has violated the Rent Stabilization Code in two ways. The first is that two leases subsequent to the first lease between the parties were not renewal leases on forms prescribed by DHCR which show the RGB increases and give the tenant the choice between a one- and two-year renewal. The second is that the lease between the parties that commences on May 1, 2009 that is on such a form purports that the legal regulated rent between the parties is $1,733.69, a rent that has no support according to the calculations the Court shows above, and purports that the monthly rent of $1,673.50 is a "preferential" rent, although the prior leases made no such distinction.

The parties dispute whether Petitioner provided Respondent with Rent Stabilization Riders, a dispute that, if resolved in Respondent's favor, is another factor that warrants an examination of the rent history for more than four years prior to the interposition of the defense. Grimm, supra,15 NY3d at 366, Conason v. Megan Holding, LLC, 109 AD3d 724, 726 (1st Dept. 2013). However, assuming arguendo that the Court resolves this dispute in Respondent's favor, and assuming arguendo that these factors are sufficient to warrant an examination of the rent history for the entirety of the tenancy prior to the four-year period before the interposition of the rent overcharge defense, Respondent is missing a crucial element of a rent overcharge defense: any allegation that Petitioner at some point increased the rent by an amount higher than allowed by the Rent Stabilization Code and RGB orders. After Respondent obtained discovery from Petitioner regarding individual apartment improvements to the subject premises, Respondent declined to pursue at trial a challenge to the legality of the amount charged to Respondent in her first lease commencing May 1, 2004.

Rather, Respondent argues that Petitioner's purported failure to annex a Rent Stabilization Rider to her leases renders her leases void ab initio and, deprived of a base date rent, require invocation of DHCR's default formula to set Respondent's rent, Grimm, supra, 15 NY3d at 366 n.1, which Respondent argues would set the rent at $852.14 instead of $1,673.50.

Leases are void ab initio if they violate public policy by, for example, providing that a rent-stabilized tenant shall not maintain an apartment as his or her primary residence. 390 W. End Assocs. v. Harel, 298 AD2d 11, 12 (1st Dept. 2002), Draper v. Georgia Props., 230 AD2d 455, 458 (1st Dept. 1997). Failure to provide a Rent Stabilization Rider does not rise to this level. Johnson v S.W. Mgt., LLC, 2013 NY Misc. LEXIS 4810 (S. Ct. NY Co. 2013). Rather, the tenant's remedy for a failure to provide a Rent Stabilization Rider is an order from DHCR to provide the tenant with such a rider and, upon failure of the landlord to provide a Rent Stabilization Rider within twenty days afterward, the owner shall not be entitled to collect any guidelines lease adjustments authorized for any current from the commencement date of such lease. 9 N.Y.C.R.R. §2522.5(c)(3). Regulations are generally subject to same canons of construction as statutes. ATM One, LLC v. Landaverde, 2 NY3d 472, 477 (2004). Where a law [*7]expressly describes a particular thing to which it shall apply, an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded. Town of Riverhead v. NY State Bd. of Real Prop. Servs., 5 NY3d 36, 42-43 (2005). As the remedy for the failure to provide a Rent Stabilization Rider is other than finding that a lease is valid ab initio, the Rent Stabilization cannot be construed to graft onto it the remedy that Respondent urges.

The Court also notes that after the interposition of Respondent's answer raising the defense with regard to the failure to provide a Rent Stabilization Rider, Petitioner has not renewed Respondent's lease nor sought to collect a rent higher than the rent in the current lease of $1,673.50, the remedy Respondent would obtain anyway for failure to provide a Rent Stabilization Rider as outlined in 9 N.Y.C.R.R. §2522.5(c)(3).

Accordingly, the Court dismisses Respondent's defenses. The Court awards Petitioner a final judgment in the amount of $10,041.00 against Respondent. The Court stays issuance of the warrant through February 25, 2014 for payment of $10,041.00.

The parties are directed to pick up their exhibits withing 30 days or they will either be sent to the parties or destroyed at the court's discretion and in compliance with DRP-185.

This constitutes the decision and order of this Court.

Dated:New York, New York

February 20, 2014

________________________________

HON. JACK STOLLER

J.H.C. Footnotes

Footnote 1: Genever McBain is the only respondent to appear in this proceeding, so the Court refers to her as "Respondent" for convenience's sake.

Footnote 2: After the order of the Court on October 18, 2010, Respondent has been paying ongoing monthly rent in full, so the $10,041.00 Petitioner alleged is owed in both its summary judgment motion and at trial represents the same months of March 2010 through August of 2010.

Footnote 3: Service and filing of an answer with a rent overcharge defense has the same effect for this purpose as the filing of a rent overcharge complaint. Autopark, Inc. v. Bugdaycay, 7 Misc 3d 292, 297 (Civ. Ct. NY Co. 2004), citing 78/79 York Assocs. v. Rand, 180 Misc 2d 316 (App. Term 1st Dept. 1999).