Opinion
20030002
08-19-2020
Gary SMITH, Plaintiff, v. MORGAN WEBSTER MANOR, LLC, Defendant.
Gary Smith, plaintiff, pro se. Laura A. Burgess, Esq., for defendant.
Gary Smith, plaintiff, pro se.
Laura A. Burgess, Esq., for defendant.
Thomas J. DiSalvo, J.
Facts of the Case.
This came on before the court on its small claims docket. The plaintiff had previously rented an apartment from the defendant pursuant to a short term lease. The plaintiff's claim against the defendant was divided into two separate parts. The first claim demanded the return of the security deposit of three hundred dollars ($300.00). The second claim was for damages in the amount of two thousand one hundred sixty dollars ($2,160.00) for the additional cost of monthly mortgage payments made by the plaintiff as a result of a drop in his credit rating allegedly caused by the defendant.
The "Request for Small Claims Action" cited the defendant as "Webster Manor Apartments". However, the name of the defendant set out on the lease between the parties was "Morgan Webster Manor, LLC". The caption is amended accordingly.
The plaintiff and his wife had been in the process of building a new house. Since the construction of the house was ongoing, the plaintiff entered into a short term lease with the defendant for a period of December 1, 2017 through April 7, 2018. The main lease itself was seven pages long. Said pages, except for page seven, consisted of two single spaced columns of terms. The monthly rent payment was $1,227.00, which included a "pet rent" of $35.00. The lease required a $300.00 security deposit. Page one of the lease refers the tenant to "special provisions on the last page". On page seven the pertinent portion of the special provisions stated "You are required to give us at least 60 days written notice if you intend to vacate the Apartment at the end of the lease term." No penalty of failure to provide said written notice is set out in the lease.
Attached to the lease and made a part thereof was a two page "Utility and Servicese Addendum", a two page "Animal Addendum", a two page "Bed Bug Addendum", a two page "Community Policies and Regulations Addendum", a one page "Lease Buy-Out Agreement", a one page "Lease Addendum For Enclosed Garage, Carport, or Storage Unit", a one page "Mold Information and Prevention Addendum", a one page "No-Smoking Addendum", a one page "Lease Addendum for Satellite Dish or Antenna". All of said addendums consisted of two single spaced columns of terms. Attached to said addendums was a one page "Liability Insurance/Insurance Exemption Addendum and a one "Schedule B Disclosure of Information on Lead-Based Paint Hazards" Both of the latter attachments consisted of half page single spaced terms. Thus the entire lease in question was twenty two pages long.
On January 18, 2018 Tessa McCauley, Property Manager of the defendant sent an e-mail to the plaintiff regarding a possible extension of the lease term and reminding the plaintiff that the plaintiff was required to provide the defendant with a "60 days written notice" of an intent to vacate the apartment. A written notice of "Intent To Vacate" on April 7, 2018, dated March 22, 2018, was signed by the plaintiff and provided to the landlord. Said written notice was acknowledged by the defendant via a signature of a representative of said landlord. The plaintiff did not seek an extension of the lease term and vacated the apartment at the end of the original lease term.
Subsequent to plaintiff's vacating of the apartment, the defendant sent the plaintiff a bill for two months rent in the amount of $1,541.72, apparently prorated for the April 7th departure of the plaintiff. From that amount the defendant deducted $240.12 of the $300 deposit, since the defendant paid the gas bill directly to the utility company for the apartment in the amount of $59.88, which would normally be added to the rent in accordance with the lease. This resulted in a net bill to the plaintiff of $1,301.60. Interestingly the defendant did not file a counterclaim for said amount.
Paragraph "42" of the lease, entitled "SECURITY DEPOSIT DEDUCTIONS AND OTHER CHARGES", states in pertinent part as follows: "You will be liable for the following charges, if applicable: unpaid rent, unpaid utilities, unreimbursed service charges, repairs or damages ...."
As previously stated the defendant sent plaintiff a bill for $1,301.60 because of the plaintiff's failure to provide defendant with the 60 days written notice that it would be vacating the premises at the end of the term of the lease. Since the plaintiff/tenant failed to pay said sum to the defendant/landlord, the bill was referred to a debt collection agency. Plaintiff contends that when he and his wife refinanced the mortgage on their new home in November of 2019 their credit rating had been reduced from 834 to 690, which resulted in the mortgage lender charging a higher interest rate and a higher monthly mortgage payment, which resulted in an increase in the cost of his mortgage to the tune of $2,160.00 for the period in question. Thus the plaintiff's claim included a demand for reimbursement of that amount.
Issues Presented
May the landlord apply the deposit to an amount charged for outstanding rent accrued for the tenants failure to give the landlord sixty days written notice of his intent to vacate the premises?
May the defendant be held liable for the increased cost of plaintiff's monthly mortgage payment?
Legal Analysis - Deposit
General Obligations Law § 7-108 (1-a) (b) states as follows:
"The entire amount of the deposit or advance shall be refundable to the tenant upon the tenant's vacating of the premises except for an amount lawfully retained for the reasonable and itemized costs due to non-payment of rent, damage caused by the tenant beyond normal wear and tear, non-payment of utility charges payable directly to the landlord under the terms of the lease or tenancy, and moving and storage of the tenant's belongings. The landlord may not retain any amount of the deposit for costs relating to ordinary wear and tear of occupancy or damage caused by a prior tenant."
The gas bill was "payable directly to the landlord under the terms of the lease".
In effect the defendant/landlord herein argues that the failure of the plaintiff/tenant to provide sixty days written notice to vacate the apartment amounts to "reasonable and itemized costs due to non-payment of rent", because the landlord needs said time to make the apartment presentable to rent said apartment to a subsequent tenant. As previously stated the lease did not set out a penalty for the tenant's failure to provide the sixty days written notice to vacate the apartment. In any event the charging of two months rent or even a pro-rated amount of two months rent appears to be more in the form of liquidated damages rather than "reasonable and itemized costs due to non-payment of rent". In analyzing the facts herein, reference is made to Asquith v. Redevelop Albany, LLC, 65 Misc 3d 892, 110 N.Y.S.3d 905 [1985]. In that case the court held
"With respect to the subject security deposit, the Court finds that defendant did not comply with the legal requirement that a landlord provide to a tenant who vacates an apartment a written statement itemizing the reasons for retaining all or a portion of the tenant's security deposit. General Obligations Law Section 7-108(1-e), which became effective on July 14, 2019 provides that
" ‘Within fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit.’ "
Id at 894, 908.
In the instant case a letter dated April 13, 2018 was sent by the defendant to the plaintiff at his last known address along with a "move out inspection" form. Said letter indicated that the plaintiff owed $1,301.60 to the defendant. The move out inspection form stated that the said additional charge was because of "insufficient notice/did not give 60 days" and because of the payment of the tenant's gas bill of $59.88.
"A clause in a contract is one for liquidated damages if ‘the amount of actual loss is incapable or difficult of precise estimation’ and the stipulated amount of damages ‘bears a reasonable proportion to the probable loss’ ( Truck Rent—A—Ctr. v. Puritan Farms 2nd , 41 NY2d 420, 425, 393 N.Y.S.2d 365, 361 N.E.2d 1015 ; see BDO Seidman v. Hirshberg , 93 NY2d 382, 396, 690 N.Y.S.2d 854, 712 N.E.2d 1220 ; Vernitron Corp. v. CF 48 Assoc., 104 AD2d 409, 478 N.Y.S.2d 933 ). Whether a contractual provision represents a liquidated damages provision is a question of law *42 for the court to resolve (see United Tit. Agency, LLC v. Surfside—3 Mar., Inc. , 65 AD3d 1134, 1135, 885 N.Y.S.2d 334 ). Liquidated damages provisions will be upheld only if the amount fixed is a "reasonable measure of the probable actual loss in the event of a breach" ( Central Irrigation Supply v. Putnam Country Club Assoc., LLC , 57 AD3d 934, 935, 871 N.Y.S.2d 319 ). If the amount fixed is grossly disproportionate to the amount of actual damages, then the liquidated damages provision amounts to a penalty and will not be enforced (see BDO Seidman v. Hirshberg , 93 NY2d at 396, 690 N.Y.S.2d 854, 712 N.E.2d 1220 ; Truck Rent—A—Ctr. v. Puritan Farms 2nd , 41 NY2d 420, 393 N.Y.S.2d 365, 361 N.E.2d 1015 ; Central Irrigation Supply v. Putnam Country Club Assoc. , LLC, 57 AD3d at 935—936, 871 N.Y.S.2d 319 )." ( G3-Purves Street, LLC v. Thomson Purves, LLC , 101 AD3d 37, 41-42, 953 N.Y.S.2d 109,113 [2nd Dept. 2012] ).
The only portion of the "14 Day Notice" which satisfies the statute relative to being an itemized statement is the $60.00 charge for the unpaid gas bill. The defendant would not be able to retain the balance of the $300.00 deposit nor charge the defendant for the pro-rata amount of two months rent as both items would be unenforceable liquidated damages. Certainly Real Property Law § 227-e imposes a duty on the landlord to mitigate its damages. That section in and of itself casts doubt on any automatic damage claim on the part of the defendant. Finally, language such as "insufficient notice/did not give 60 days [notice]" would not satisfy the "reasonable and itemized costs due to non-payment of rent" requirement of General Obligations Law § 7-108 (1-a) (b) as same or similar language would lack the specificity implicit in the terms of the statute.
Legal Analysis -Damage to Plaintiff's Credit Rating
The plaintiff's claim for reimbursement for the additional cost incurred by him upon his refinance of his mortgage is a claim for consequential, special or extraordinary damages, "... which are recoverable in a breach of contract action only upon a showing that they were foreseeable and within the contemplation of the parties at the time the contract was made (see, Kenford Co. v. County of Erie , 73 NY2d 312, 319, 540 N.Y.S.2d 1, 537 N.E.2d 176, lv. dismissed 74 NY2d 712, 543 N.Y.S.2d 393, 541 N.E.2d 422 )." ( Williams v. Associated Mutual Insurance Company, 211 AD2d 865,867, 621 N.Y.S.2d 206,208 [3d Dept. 1995] ). In that case the plaintiff was unable to close on a piece of real estate due to a default judgment entered against him, when the insurance company failed to defend him in a wrongful death suit as was required by the insurance policy in question. The court stated as follows:
Special damages are "Those which are the actual, but not the necessary, result of the injury complained of, and which in fact follow it as a natural and proximate consequence in the particular case, that is, by reason of special circumstances or conditions." (Black's Law Dictionary 468 [Revised 4th Edition 1968] ).
"We conclude that the consequential damages claimed by plaintiff to have arisen as a result of his inability to close on the contract for the sale of his property and business, as well as the damages for mental anguish, altered standard of living, damage to plaintiff's credit rating and other similar damages, are not recoverable in this breach of contract action (see, Sweazy v. Merchants Mut. Ins. Co. , 169 AD2d 43, 571 N.Y.S.2d 131, lv. dismissed 78 NY2d 1072, 576 N.Y.S.2d 221, 582 N.E.2d 604 ; DiBlasi v. Aetna Life & Cas. Ins. Co. , 147 AD2d 93, 103—104, 542 N.Y.S.2d 187 )."
Id.
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In this case, there is no evidence that the refinance of the plaintiff's real property approximately twenty months after it was purchased was contemplated by the parties at the time they entered into the lease agreement. Thus, the claim for special or consequential damages alleged to have been suffered by the plaintiff cannot be sustained.
Conclusion.
The court finds that the defendant is liable to the plaintiff for $240.12 relative to partial reimbursement of the security deposit. Therefore, judgement shall enter in favor of the plaintiff and against the defendant in that sum together with the filing fee of $15.00 for a total of $255.12. That the claim for special or consequential damages, allegedly suffered by the plaintiff relative to an adverse change in his credit rating, is hereby dismissed. This constitutes the decision and order of this court.