Opinion
08-06-2024
LIGHTER REAL ESTATE NUMBER ONE, L.L.C., Plaintiff, v. Jacob SCHRADER and Amy Schrader, Defendants.
Rosenberg & Estis, P.C., New York, NY (Cori A. Rosen of counsel), for plaintiff. Law Office of Clifford Olshaker, P.C., Elmhurst, NY (Clifford B. Olshaker of counsel), for defendants.
Rosenberg & Estis, P.C., New York, NY (Cori A. Rosen of counsel), for plaintiff.
Law Office of Clifford Olshaker, P.C., Elmhurst, NY (Clifford B. Olshaker of counsel), for defendants.
Gerald Lebovits, J.
BACKGROUND
This action concerns whether a landlord may sue a rent-stabilized tenant for use and occupancy (U&O). Plaintiff, Lichter Real Estate Number One, L.L.C., is the landlord of a building located at 175 West 76th Street in Manhattan. (NYSCEF No. 1 at ¶ 4 [verified complaint].) Defendants, Jacob and Amy Schrader, rented two combined apartments from landlord. (Id. at ¶¶ 6-7.) Plaintiff and defendants entered into a lease agreement in September 2006. After some modifications to the lease, the lease term was set to expire on December 31, 2016. (Id. at ¶¶ 7-9.)
In April 2016, defendants alleged that their apartment was rent stabilized, that plaintiff did not register the apartment with the Division of Housing and Community Renewal, that the legal regulated rent surpassed the allowed legal rent, and that defendants were entitled to a refund for the overcharge. (Id. at ¶ 11.) Plaintiff then registered the apartment with DCHR, gave defendants a rent credit, and reduced their rent. (Id. at ¶¶ 14-16.)
In July 2016, defendants brought an action against plaintiff for rent overcharges and attorney fees. (See Schrader v. Lichter Real Estate Number One, L.L.C., 2020 N.Y. Slip Op. 32501[U], *1-2, 2020 WL 4365389 [Sup. Ct., NY County 2020, Barbara Jaffe, J.].) In the interim, plaintiff offered a renewal lease to defendants. (NYSCEF No. 1 at ¶ 21.) Plaintiff then offered another renewal lease in September 2018. (Id. at ¶ 24.) Defendants did not sign either renewal lease. (Id. at ¶ 25.)
Defendants paid the rent in full until August 2016. They then began to withhold part of the rent each month. (Id. at ¶ 23.) Defendants reduced their payments again in August 2019. (Id. at ¶ 26.) Defendants’ last rent payment was in March 2022. (NYSCEF No. 9 at 9.)
In July 2020, Judge Jaffe granted plaintiff's motion for summary judgment dismissing the overcharge action. (See Schrader, 2020 N.Y. Slip Op. 32501[U] at *16.) Judge Jaffe concluded that other than overcharges in 2015 and 2016—which plaintiff refunded to defendants as a rent credit—defendants had offered no proof of overcharge. (Id. at *13.) Judge Jaffe therefore dismissed the action.
According to plaintiff, "Defendants continued to withhold payment of the monthly Legal Regulated Rent and failed to remit payment of the balance of the Legal Regulated Rent withheld during the pendency of the Overcharge Action" and vacated the premises on August 2, 2022. (NYSCEF No. 1 at ¶¶ 33-34.) In December 2022, plaintiff brought this action for breach of contract.
Plaintiff now moves under CPLR 3212 for summary judgment on its complaint and to dismiss defendants’ affirmative defenses under CPLR 3211 (b) or CPLR 3212. (NYSCEF No. 8 [notice of motion].) The motion is granted. Defendants cross-moves to stay this action pending the passage of New York Senate Bill S2943B/New York Assembly Bill A4047B and Senate Bill S2980C/Assembly Bill A6216B. The cross-motion is denied as academic.
S2943B and A4047B were vetoed by Governor Hochul in December 2023. (See 2023 NY Senate Bill S2943B, 2023 NY Assembly Bill 2023-A4047B.) NY Senate Bill S2980C/NY Assembly Bill A6216B were approved and effective December 22, 2023. (See L 2023, ch 760, part B, § 2.)
DISCUSSION
I. Summary Judgment
1. Plaintiff contends that defendants became month-to-month tenants when their lease expired on December 31, 2016, and they continued to occupy the apartment. (NYSCEF No. 11 at 6.) Plaintiff provides an affidavit from Joshua Schwartz, plaintiff's owner, who represents that Judge Jaffe agreed that the legal regulated rent for the apartment starting at 2015 was $9,644.57 per month. (NYSCEF No. 9 at 6; see generally Schrader, 2020 N.Y. Slip Op. 32501[U] *6-14.) Plaintiff also submits a letter, dated August 2, 2016, in which defendants told plaintiff that they would pay $5,700 per month during the pendency of the overcharge action. (NYSCEF No. 24.) Defendants did not pay rent from August 2016 through March 2017. (NYSCEF No. 21 at 1 [ledger].) Plaintiff shows that defendants continued to pay $5,700 per month from April 2017 until August 2018, approximately $3,000 per month between August 2019 until March 2020, and then stopped paying rent altogether. (See id.; NYSCEF No. 9 at 8-9 [Schwartz’s affidavit].) Plaintiff has established its prima facie case for sums owed from August 2, 2016, through August 2, 2022.
According to defendants, plaintiff accepted defendants’ $5,700 rent payments after the lease expired and therefore that $5,700 is the proper rent amount. (NYS-CEF No. 39 at 9-11.) Defendants contend "that acceptance of a rent lower than that of the expired lease will serve to ‘negate the existence of the original contract’ " and the court "will infer a new agreement based upon the parties’ actions." (Id. at 11, quoting Bahamonde v. Grabel, 34 Misc.3d 58, 61, 939 N.Y.S.2d 226 [App. Term, 2d Dept., 9th and 10th Jud. Dists. 2011].) In supplemental briefing, defendants contend that Real Property Law § 232-c " ‘abolished the common-law rule that a holdover tenant may be held as a tenant for a new term.’ " (NYSCEF No. 59 at 4, quoting Samson Mgt., LLC v. Hubert, 92 A.D.3d 932, 933, 939 N.Y.S.2d 138 [2d Dept. 2012].) Defendants therefore contend that there is an issue of fact about the amount of rent owed each month.
[1,2] The court agrees that defendants are not month-to-month tenants. The expiration of a rent-stabilized lease does not create a month-to-month tenancy "because the respective rights and responsibilities of a landlord and tenant under a month-to-month tenancy cannot be reconciled with the respective rights and responsibilities of a landlord and tenant of a rent-stabilized apartment." (Fairfield Beach 9th, LLC v. Shepard-Neely, 74 Misc.3d 14, 15, 159 N.Y.S.3d 799 [App. Term, 2d Dept., 2d, 11th, & 13th Jud. Dists., 2021].) Nonetheless, plaintiff may still sue for U&O, as opposed to unpaid rent. If a tenant "remains in possession on the expiration of a permit granting exclusive possession, it is a holdover and, pursuant to common law, there is implied a continuance of the tenancy on the same terms and subject to the same covenants as those contained in the original instrument." (New York v. Pennsylvania R. Co., 37 N.Y.2d 298, 300, 372 N.Y.S.2d 56, 333 N.E.2d 361 [1975]; accord Oxford Towers Co., LLC v. Wagner, 58 A.D.3d 422, 422-423, 872 N.Y.S.2d 431 [1st Dept. 2009] [holding that parties’ agreement to keep an apartment rent stabilized does not eliminate plaintiff's use and occupancy claim].)
[3] 2. In opposing summary judgment for U&O, defendants contend that a recent chapter amendment to the Emergency Tenant Protection Act (ETPA) of 1974 means that Judge Jaffe’s determination of the lawful regulated monthly rent should not be used as the basis for "an award of damages against the Defendants." (NYSCEF No. 59 at 8 [defendants’ supplemental brief].) This argument is unpersuasive.
The recent amendment to the ETPA provides that establishing the elements of common-law fraud is no longer needed to show that a landlord engaged in fraudulent deregulation of a rent-stabilized apartment (as needed to go beyond the four-year lookback period for rent-determination purposes). (See L 2023, ch 760, part B, § 2.) In March 2024, that section was further amended by S8011. (See L 2024, ch 95, § 4, amdg. Uncons Laws § 8625.) Under the current legal framework, whether a landlord engaged in a fraudulent deregulatory scheme is determined based on "all of the relevant facts and all applicable statutory and regulatory law and controlling authorities, provided that there need not be a finding that all of the elements of common law fraud" were satisfied to find fraudulent deregulation, if the "totality of the circumstances" indicates that improper deregulation occurred. (Id.)
Defendants argue that because Judge Jaffe reached her conclusion in part on the absence of a showing of common-law fraud, her decision "did not take into account Lichter’s conduct in deregulating the Apartments" before the four-year lookback period. (NYSCEF No. 59 at 9.) Defendants therefore contend that Judge Jaffe’s decision must now be reconsidered (and rejected), such that it may not form the basis of an award of post-2016 U&O. Plaintiff counters that S8001 is "inapplicable and cannot change the determinations made by Justice Jaffee because that action is not a pending action to which the new law could possibly apply." (NYSCEF No. 58 at 4.)
The court agrees with plaintiff. S8011, as enacted by the Legislature in 2024, provides that a tenant raising the fraud-exception to the four-year lookback period for rent calculations need not satisfy the common-law elements of fraud. (See L 2024, ch 95, § 4.) But this statute expressly provides that it applies only "to any action or proceedings in any court ... on the effective date of this act." (Id. at § 5.) This language explicitly foregoes any retroactive application; it is prospective. (See Matter of Regina Metro. Co., LLC v. New York State Div. of Hous. & Community Renewal, 35 N.Y.3d 332, 370, 130 N.Y.S.3d 759, 154 N.E.3d 972 [2020] ["[I]t takes a clear expression of the legislative purpose ... to justify a retroactive application" of a statute."] [internal quotation marks omitted].) To read S8001 as retroactive would be contrary to Legislature’s clear intent.
Judge Jaffe’s July 2020 decision was a final judgment: it completely resolved defendants’ overcharge claims. (See Burke v. Crosson, 85 N.Y.2d 10, 15, 623 N.Y.S.2d 524, 647 N.E.2d 736 [1995] ["[A] ‘final’ order or judgment is one that disposes of all of the causes of action between the parties in the action or proceeding and leaves nothing for further judicial action apart from mere ministerial matters."].) And although defendants initially appealed that judgment, they withdrew their notice of appeal in May 2021—years before S8001 was enacted. (NYSCEF No. 56 at 1.) Given that S8001 has no retroactive effect on final judgments entered before its enactment, it does not apply here.
[4] 3. Defendants further contend that plaintiff's summary-judgment motion should be denied because plaintiff does not, but should, apply defendants’ $9,000-security deposit to the amount it seeks in U&O. (NYSCEF No. 39 at 11.) They further contend that plaintiff violated General Obligations Law § 7-103 by not maintaining the security deposit in a separate account. They argue that no discovery has been completed on this issue and therefore that plaintiff's motion for summary judgment should be denied. (Id. at 12.) The court disagrees. Although "[a] landlord who violates Section 7-103 of the General Obligations Law cannot use the security as an offset against unpaid rents," its "[v]olation of the statute gives rise to an action in conversion and the right to immediate return of the funds." (23 E. 39th St. Mgt. Corp. v. 23 E. 39th St. Dev., LLC, 134 A.D.3d 629, 631, 23 N.Y.S.3d 33 [1st Dept. 2015] [emphasis added].) For this reason, this claim is not a defense to summary judgment.
[5] 4. Plaintiff requests interest under CPLR 5001 running from the date of the July 2020 overcharge decision. Plaintiff argues that the July 2020 decision is a reasonable intermediate point. Defendants contend that the lease does not have an interest provision and that there is no way to know "what amount ... the Defendants owe Plaintiff." (NYSCEF No. 59 at 11.)
The court agrees with plaintiff. July 29, 2020—the date of Judge Jaffe’s overcharge decision—is a reasonable midpoint between August 2016—when defendants ceased paying the rent in full—and August 2022, when defendants vacated the premises. CPLR 5001 allows for plaintiff to collect interest notwithstanding a lack-of-interest provision in the lease. And given the court’s conclusions above, the amount of rent owed, and therefore interest owed, is determinable.
[6] 5. Plaintiff requests attorney fees it incurred in this action. Plaintiff contends that the parties’ 2009 lease provides that defendants must reimburse defendant for "legal fees and disbursements for legal actions or proceedings brought by Owner against [tenant] because of a lease default by [tenants] or for defending lawsuits brought against Owner because of [tenants’] actions." (NYSCEF No. 19 at ¶ 19 [A] [5] [lease].) This provision, however, was crossed out by someone with the initials "CE." Defendants contend, and plaintiff does not dispute, that "CE" stands for Claire Eisenberg—"a party authorized to sign on behalf of plaintiff." (NYSCEF No. 59 at 12.) Further, the lease was signed by both plaintiff and defendants, presumably with ¶ 19 (A) (5) already crossed out. (See NYSCEF No. 19 at 18.) For these reasons, the court concludes that the parties intended to eliminate the lease provision requiring defendants to reimburse plaintiff's attorney fees.
II. Affirmative Defenses
Plaintiff moves to dismiss all of defendants’ affirmative defenses. Defendants do not oppose this branch of plaintiff's motion.
[7] 1. Plaintiff argues that defendants’ affirmative defense—for failure to state a cause of action—should be dismissed. This court disagrees with plaintiff's rationale. An "assertion of that defense in an answer should not be subject to a motion to strike." (Tribbs v. 326-338 E 100th LLC, 215 A.D.3d 480, 482, 188 N.Y.S.3d 18 [1st Dept. 2023] [internal quotation marks omitted].) Nonetheless, given this court’s conclusion on the summary-judgment portion of this motion, this cause of action is dismissed as academic.
2. Plaintiff argues that defendants’ affirmative defenses for failure to state a claim, a set-off due to plaintiff's receipt of Covid-19 relief, bad faith, breach of warranty of habitability, accord and satisfaction, equitable estoppel, laches, inequitable conduct and unclean hands, and failure to satisfy conditions precedent in the lease are conclusory and therefore should be dismissed. (NYSCEF No. 11 at 9.) The court agrees. The branch of plaintiff's motion to dismiss these defenses is granted.
[8] 3. Plaintiff argues that defendants’ personal-jurisdiction defense must be dismissed. The court agrees with plaintiff. CPLR 3211 (e) provides that "an objection that the summons and complaint, … was not properly served is waived if, having raised such an objection in a pleading, the objecting party does not move for judgment on that ground within sixty days after serving the pleading." Defendants did not move to dismiss this action for lack of personal jurisdiction within 60 days of serving their answer. Defendants waived this defense.
The branch of plaintiff's motion to dismiss defendants’ affirmative defenses is granted.
Accordingly, it is
ORDERED that the branch of plaintiff's motion seeking summary judgment, on its claims against defendants is granted, and plaintiff is awarded a judgment against defendants of $529,785.60 in U&O, with interest running at the statutory rate from July 29, 2020; plus costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that the branch of plaintiff's motion seeking to dismiss defendants’ affirmative defenses is granted; and it is further
ORDERED that the branch of plaintiff's motion seeking an award of attorney fees is denied; and it is further ORDERED that defendants’ cross-motion to stay this action is denied as academic; and it is further
ORDERED that that plaintiff shall serve a copy of this order with notice of its entry on defendants, and on the office of the County Clerk (by the means set forth in the court’s e-filing protocol, available on the e-filing page of the court’s website, https://ww2.nycourts.gov/courts/1jd/supctmanh/E-Filing.shtml), which shall enter judgment accordingly.