Opinion
032975/19
07-01-2020
LNV CORPORATION, Petitioners, v. Mohammad R. AMIN, et al., Respondents (Occupants).
Petitioners are represented by: Stein, Wiener and Roth, L.L.P. Respondents are represented by: Pro se
Petitioners are represented by: Stein, Wiener and Roth, L.L.P.
Respondents are represented by: Pro se
David J. Bryan, J. The Decision and Order on this Inquest is as follows: For the reasons stated herein, the inquest is GRANTED. Petitioner has satisfied its prima facie burden in this holdover and may apply for a judgment of possession when appropriate given the coronavirus pandemic.
Background
This matter was brought as a residential holdover case by Notice of Petition and Petition. The petitioner alleges service of a 90-day Notice to Vacate dated December 28, 2018 upon Luis Estrada, Maria Estrada, Zucely Estrada, and "Tenants". The notice indicated in part that the property located at 508 Morris Park Avenue, Bronx, NY 10460 has been sold at a foreclosure sale and is now owned by LNV Corporation. The matter appeared on the Court's calendar on August 22, 2019 to October 2, 2019 and the matter was adjourned for Zucely Estrada to seek counsel. On October 2, 2019 the matter was adjourned to October 29, 2019 for settlement or trial. On October 29, 2019 Zucely Estrada reached a settlement by stipulation with petitioner for a final judgment of possession with execution of the warrant stayed to January 31, 2020 so respondent might vacate. On October 29, 2019 the matter was adjourned to December 4, 2019 for an inquest against all non-appearing parties. Inquests were adjourned on December 4, 2019 and December 16, 2019 and postcards were sent to respondents on both occasions.
On January 27, 2020 an inquest was held against Amin as well as John and Jane Doe. During the inquest petitioner presented a referee's deed pursuant to LNV Corporation v. Mohammad R. Amin a/k/a Mohammad R. Ramin et. al. , Index 35447/2013 E conveying the premises to petitioner and away from Amin a/k/a Ramin. The Court was able to determine that John and Jane Doe were tenants of the former owner and that Luis, Maria and Zucely Estrada were tenants as well. The Court asked petitioned counsel what steps had been taken to comply with RPAPL § 757's requirement that the court's file must be sealed when a holdover is brought against the former tenants of the foreclosed owner. Counsel was unable to answer other than to state that inasmuch as John and Jane Doe were named, no one's privacy was compromised. The Court noted that the Estradas were also tenants and their names remained in the public domain. After submission, the Court reserved decision as to the judgment of possession after inquest. Upon further consideration, the Court finds that petitioner has satisfied its prima facie burden in this holdover and may apply for a judgment of possession when appropriate given the coronavirus pandemic.
Discussion
The Court begins its analysis of RPAPL § 757 by noting it is contained within the larger body of newly enacted laws encompassed within the "Housing Stabilization and Tenant Protection Act of 2019" (HSTPA). The Court analyzes the provisions of the HSTPA considering the legislative intent of the Act to be the protection of tenants and the preservation and maintenance of affordable housing stock. RPAPL § 757 protects tenants remaining in foreclosed homes during summary holdover proceedings brought against them by the new owners. RPAPL § 757 requires that summary holdover proceedings against tenants of the foreclosed owner be sealed so that those tenant's identities are protected. This decision will discuss the factors encountered by the Court on inquest in the application of and enforcement of RPAPL § 757.
Given that the HSTPA and RPAPL § 757 are only a few months old, the Court has found no current authority showing the application of RPAPL § 757. Inasmuch as RPAPL § 757 is a statute focused on protecting the financial reputation and credit score of tenants , the Court makes an analogy to RPL § 227 F, a similar statute that follows a long struggle to remove the impact of tenant screening companies (TSC) on prospective tenants because of prior landlord and tenant proceedings commenced pursuant to Article 7 of the RPAPL.
See, S4084A (ACTIVE) - Sponsor Memo at https://www.nysenate.gov/legislation/bills/2019/S4084.
See, RPL § 227 F — Denial on the basis of involvement in prior disputes prohibited: No landlord of a residential premises shall refuse to rent or offer a lease to a potential tenant on the basis that the potential tenant was involved in a past or pending landlord-tenant action or summary proceeding under article seven of the real property actions and proceedings law. There shall be a rebuttable presumption that a person is in violation of this section if it is established that the person requested information from a tenant screening bureau relating to a potential tenant or otherwise inspected court records relating to a potential tenant and the person subsequently refuses to rent or offer a lease to the potential tenant.
TSC's are utilized by landlords to advise them as to their decisions to accept the applications of prospective tenants. The advice provided is customized by landlords setting their own criteria for acceptance or exclusion. A landlord may determine that any litigation against a tenant excludes them from a prospective tenancy. Another landlord may determine that a certain number of cases or type of litigation (e.g. a nuisance holdover) would exclude a prospective tenant all together. Courts have found that being placed on what is effectively a tenant blacklist as a result of the commencement of a housing court proceeding makes obtaining another rental or cooperative apartment nearly impossible. This result has been held to constitute irreparable harm. Even if a tenant were to prevail in part or in whole in any such housing court proceeding, they remain subject to blacklisting due to the practice of TSCs disseminating incomplete information regarding the outcome of these housing court proceedings. See , Nieborak v. W54-7 LLC , 2016 N.Y. Slip Op. 31040[U], 2016 WL 540692 [Sup. Ct., N.Y. County 2016] ; See also , Pultz v. Economakis , 8 Misc. 3d 1022[A], 2005 N.Y. Slip Op. 51238[U], 2005 WL 1845635 [Sup. Ct., N.Y. County 2005]. Tenant advocates have long sought to have these "blacklisting" companies deprived of the necessary data to report on tenants involved in New York City Housing Court proceedings.
Some aspects of the TSC business model are illustrated in Wenning v. On-Site Mgr., Inc., 2016 WL 3538379, 2016 U.S. Dist. LEXIS 81126 [S.D.N.Y. June 22, 2016] In that case two individuals were denied apartments based upon a report generated by On-Site Manager, Inc. (On-Site) upon the request of prospective landlords. While that case concerns itself with inaccuracies and remedies under the Fair Debt Collections Practices Act (FDCPA), the business of gathering information regarding tenants is described.
Since 2009, On-Site has obtained data relating to New York City Housing Court proceedings from LexisNexis Risk Data Retrieval Services LLC and its successors ("Lexis"). Before that, On-Site purchased Housing Court data directly from the New York State Office of Court Administration ("OCA"). Lexis is an established and experienced vendor, and On-Site believed it a reputable source of accurate information concerning Housing Court Proceedings. Lexis obtains information directly from the paper files in the Housing Court clerk's office, which it translates into a daily stream of data made available to companies like On-Site (emphasis added)
(internal citations to the record omitted).
Wenning v. On-Site Mgr., Inc., 2016 WL 3538379, 6, 2016 U.S. Dist. LEXIS 81126, 18-19 [S.D.N.Y. June 22, 2016].
In Wenning, one of the two tenants, Correa, was the subject of a negative report from On-Site indicating that he had a New York City Housing Court case and this report was used to deny him a new apartment. The lawsuit alleged that Correa had sublet an apartment from Scroczynski, another respondent. Correa rented an apartment allegedly believing that Scroczynski had the right to rent the apartment to him. The landlord disagreed and Scroczynski and Correa were the subject of a residential holdover case in Housing Court based upon an impermissible sublet. The landlord served a Notice of Termination and commenced a holdover against Correa and Scroczynski. Correa quickly executed a stipulation agreeing to a final judgment of possession with several months to vacate as long as use and occupancy was paid at the rent stabilized rate. Correa then vacated the apartment as agreed.
The Housing Court case against Correa is analogous to the position of a tenant after foreclosure. Correa was the sub-tenant of Alexander Scroczynski, the prime tenant and Correa contends that he believed that Scroczynski had the right to sublet the apartment. In short, Correa was named as a respondent so that he could be removed if the landlord prevailed against Scroczynski, not because of any fault of Correa. The analogy to the instant matter is that tenants in premises that have been sold as a consequence of foreclosure proceedings did not default on the mortgages and their eventual eviction is a consequence of the landlord's default, not due to any fault of their own.
Correa's cause of action against On-Site arose when he sought to obtain a new home. On-Site was used by two of the landlords that Correa submitted applications to for a new apartment. One of the two landlords required On-Site to use an algorithm to reject any prospective tenant with any housing court record. This landlord indicated that they might reconsider if a letter of explanation was provided by the petitioner in the prior case, but this request was rejected by the petitioner-landlord. The second prospective landlord also rejected Correa on the same basis of having a housing court record, but Correa's request for a letter of explanation from the petitioner in the prior case was granted and provided to the prospective landlord. The Court in Wenning identified a host of problems with the reporting by On-Site that may well be endemic to the industry. These problems include a lack of mitigating information (such as the fact that Correa was also victimized by Scroczynski and that he paid the use and occupancy required and exited as agreed), and a lack of understanding of housing court proceedings (the report described the holdover action as a "Forcible Entry/Detainer" with associated pejorative assessments).
The Court notes On-Site changed its terminology; in lieu of "Forcible Entry/Detainer," it now uses the term "Civil Action for Possession." See, Wenning v. On-Site Mgr., Inc., 2016 WL 3538379, 6, 2016 U.S. Dist. LEXIS 81126, 19-20 [S.D.N.Y. June 22, 2016].
The intent of the legislature in passing RPAPL § 757 was that the tenants remaining in a property after a foreclosure sale will constitute a separate class of tenants. It is clear that the HSTPA intended that tenants in possession after foreclosure would not suffer a negative impact of their credit ratings or their ability to obtain new housing because of their involvement in a holdover after foreclosure brought against their landlord. It is notable that the remedy provided to this class of tenants was not only to prohibit the use of TSC reports to deprive tenants of housing but to remove their identities from the stream of commerce. The concerns of the legislature that credit and tenant reporting agencies would paint these tenants with an overly broad brush is echoed by Judge Kaplan in White v. First Am. Registry, Inc. , 2007 WL 703926, 2007 U.S. Dist. LEXIS 18401 [S.D.N.Y. Mar. 7, 2007].
The inclusion of judgments in the calculation of credit scores was repealed by the National Consumer Assistance Plan in 2017. While not explicitly included in the credit scoring, the information is available to potential lenders or others seeking to assess whether to extend credit. For more information regarding the National Consumer Assistance Plan see http://www.nationalconsumerassistanceplan.com. See also Removal of public records has little effect on consumers' credit scores by Jasper Clarksberg and Michelle Kambara https://www.consumerfinance.gov/about-us/blog/removal-public-records-has-little-effect-consumers-credit-scores/.
This lawsuit arises by reason of the nature of defendants' business, which consists of selling landlords the opportunity to consult a list of individuals who have been involved in landlord-tenant litigation. As defendants doubtless well understand, risk averse landlords are all too willing to use defendants' product as a blacklist, refusing to rent to anyone whose name appears on it regardless of whether the existence of a litigation history in fact
evidences characteristics that would make one an undesirable tenant. Thus, defendants have seized upon the ready and cheap availability of electronic records to create and market a product that can be, and probably is, used to victimize blameless individuals. The problem is compounded by the fact that the information available to defendants from the New York City Housing Court ("NYCHC") is sketchy in the best of cases and inaccurate and incomplete in the worst. Any failure by defendants to ensure that the information they provide is complete, accurate, and fair heightens the concern -- and there has been ample reason for heightened concern.
White v. First Am. Registry, Inc. , 2007 WL 703926, 1, 2007 U.S. Dist. LEXIS 18401, 3-4 [S.D.N.Y. Mar. 7, 2007]
The Court has concerns regarding the instant matter due to the provisions of RPAPL § 757 as modified under the HSTPA. It is clear that the legislature intended that tenants remaining in homes lost after judgments of foreclosure should not be the subject of a negative tenant profile or poor credit rating based upon the filing of a summary proceeding. Senator Kevin Parker's sponsor memo makes it clear that the objective was "To seal court records regarding a tenant's eviction due to foreclosure and to ensure that credit scores of lessees of foreclosed properties are not adversely affected."
Sponsor Memo at https://www.nysenate.gov/legislation/bills/2019/S4084.
The Court's inquiries permits judicial notice that there appears to be no affirmative duty established on petitioner to identify the respondents as tenants after foreclosure. Often petitioner will establish standing or jurisdiction by a relevant document such as a referee's deed after foreclosure or a 90-day predicate notice. However, there appears to be no expectation that the file will be identified as a tenant holdover after foreclosure sale against the original landlord. Despite the high propensity of one- and two-family homes lost to foreclosure in this county, this Court has never had a petitioner on inquest or through stipulation of settlement prepared to address compliance with RPAPL § 757. While foreclosures have diminished in the public's perception, New York City's "outer boroughs" are still being impacted on a large scale. Foreclosures in the past five years have increased 313% in Staten Island and have approximately doubled in Brooklyn and Queens. The Bronx has lost approximately 40% of its homeowners since 2008, and it is particularly notable that foreclosure auctions are rising, indicating no shortage of holdovers after foreclosure awaiting filing in Housing Court. Therefore, there will be an ongoing class of individuals for whom RPAPL § 757 was intended to protect. This consequence is only exacerbated by the unprecedented amount of vast and sudden unemployment resulting from the coronavirus pandemic of 2020.
See: Aftermath: Affordable Homeownership in New York City , by John Baker, Leo Goldberg, Caroline Nagy and Ivy Perez. Published by Center for New York City Neighborhoods. https://s28299.pcdn.co/wp-content/uploads/2018/10/CNY002-AH-Summit-Report_v7_FINAL_online.pdf See also: 2019 Annual Foreclosure Report: NYC Foreclosures Dip 6% Y-o-Y https://www.propertyshark.com/Real-Estate-Reports/NYC-Foreclosure-Report
If a methodology that would identify cases subject to RPAPL § 757's requirements could be implemented, the operation of the judgments obtained would also require modification. Practically speaking, most residential holdovers of tenants after foreclosure will require a judgment of possession. The landlord will need a method to compel the tenant to leave even if a stipulated agreement is reached for the tenant to vacate. The "stick" of the judgment and warrant of eviction is often required to assist the landlord in obtaining possession with or without the intervention of the Marshall or Sheriff. However, absent some other remedy a residential judgment of possession must be obtained against an entity, not an anonymous person. To achieve RPAPL § 757 objectives there must be a method to maintain the anonymity of the tenant after foreclosure while maintaining the effectiveness of the judgment of possession.
As previously stated, a tenant's identity is captured at the start when case is filed in the clerk's office. If the Court seals the matter on its own motion or on petitioner's motion, the tenant's identity has already entered the stream of commerce with the consequent damage to their credit rating and ability to obtain housing. If a remedy is to be found, it must come by having an affirmative duty put upon the petitioner to identify the case as a post foreclosure case and a method must be implemented at the point in time of filing by the clerk to safeguard the tenant's identity. Conclusion
It should be noted that there is no penalty in the HSTPA for failure to comply with § 757.
Although the inquest reveals that this holdover is not in compliance with RPAPL § 757, the inquest is GRANTED. Petitioner has satisfied its prima facie burden in this holdover and may apply for a judgment of possession when appropriate given the coronavirus pandemic. As noted above, the Court is without a clear method to enforce the statute and sealing the file would be moot at this stage as the respondent's identities are already known and in the Court's computer system. This Court will not seek to lock the barn door after the horse has left.
This is the decision of the Court.