Opinion
077656/2003.
Decided October 17, 2003.
Edward Joseph Filemyr IV, New York City, for petitioner.
Harlem Legal Services, Inc., New York City (Bill Leavitt of counsel), for respondent.
Recitation, as required by CPLR 2219 (a), of the papers considered in reviewing respondent's motion and petitioner's cross-motion.
Papers Numbered
Respondent's Notice of Motion for Summary Judgment 1
Petitioner's Notice of Cross Motion to Dismiss Counterclaim 2
Respondent's Reply Affirmation 3
Petitioner's Reply Affirmation 4
Respondent's Sur-Reply Affirmation 5
After oral argument. (Tape 66120; start 4877.)
Respondent moves to dismiss the nonpayment petition for not stating that the premises is rent-stabilized and, alternatively, for leave to serve counterclaims. Respondent asserts that petitioner breached her warranty-of-habitability and overcharged her rent from August 1999 through July 2003. Petitioner, a cooperative corporation, cross-moves for an order to dismiss respondent's counterclaims.
Respondent has lived in the subject premises, 546 West 156th Street, apartment 10, since 1994. Before the City of New York conveyed the building to petitioner under the TIL program on September 27, 1989, respondent resided at apartment 22 in the same building. She did not purchase the shares allocated to either apartment.
Respondent alleges that the premises are subject to the rent-stabilization laws and that the petition should be dismissed because it misstates the apartment's rent-regulatory status. Respondent also argues that petitioner overcharged her. Petitioner disagrees and argues that the premises are not subject to stabilization and that respondent cannot raise overcharge counterclaims.
Respondent concedes that the City of New York converted the building to an HDFC cooperative corporation. (Leavitt Affirmation in Support of Summary Judgment at ¶ 4.) When a building is converted into an HDFC through the TIL program, the building generally becomes statutorily exempt from the Rent Stabilization Code. ( 512 E 11th St. HDFC v. Grimmet, 181 AD2d 488, 488-489 [App Div, 1st Dept 1992, mem].) Arguing that this general rule does not apply here, respondent cites to 40 Downing St. HDFC v. Anderson (NYLJ, Apr. 3, 1995, at 28, col 3 [App Term 1st Dept, per curiam]), which recognized an exception to the Grimmet rule. The exception is limited to when an offering plan — under which buildings are converted to cooperatives — expressly states that, upon sale of the building, all non-purchasing tenants other than those subject to rent control may return to their rent-stabilized status and be offered rent-stabilized leases. ( See NYLJ, Apr. 3, 1995, at 28, col 3.) In 40 Downing, the offering plan explicitly provided that tenants could retain their stabilized status. No side offered any provision of an offering plan that allowed tenant to retain stabilization. The case does not, therefore, fit within the Downing exception.
Respondent also relies on Jewish Theological Seminary of Am. v. Roy ( 188 Misc 2d 723 [App Term, 1st Dept 2001, per curiam].) In JTS, the building was rent stabilized and owned by a for-profit corporation when the tenant commenced occupancy. The building was then transferred to the petitioner, which changed the building into a not-for-profit stock corporation. The petitioner then attempted to evict several long-term stabilized tenants. The court noted that "the Rent Stabilization Law excuses a landlord from offering a renewal lease 'where the housing accommodation is owned by * * * [an] institution operated exclusively * * * on a non-profit basis and * * * the tenant's initial tenancy commenced after the owner acquired the property.'" ( JTS, 188 Misc 2d at 724 [emphasis in original], quoting Rent Stabilization Code § 26-511 [c] [9] [c] [I].) The JTS court held that the apartments could not be destabilized, because the tenants occupied stabilized apartments before the petitioner acquired the property from a for-profit corporation. Here, the building was conveyed from the City of New York to petitioner, and not from a for-profit corporation.
In both Downing and JTS, the respondents resided in rent-stabilized apartments before the building converted to a nonprofit corporation or cooperative. Respondent here, unlike the respondents in 40 Downing or JTS, cannot demonstrate that she ever resided in a stabilized apartment.
According to RSC § 2520.11 (b), buildings owned by the City of New York are exempt from stabilization laws. Respondent does not dispute that the City of New York owned the building when she became a tenant in 1988. Petitioner attaches respondent's affidavit from a 1996 nonpayment proceeding in which she swears that when she moved into apartment 22 in September 1988, her lease was with the City of New York. (Petitioner's Cross-Motion to Dismiss Counterclaim at Exhibit F, ¶ 3.) Respondent also avers that before moving into apartment 22, she lived with her parents in another apartment in the building when it was owned by the City of New York's Department of Housing Preservation and Development. ( Id. at ¶ 4.) Respondent cannot circumvent this exemption and claim protection under the rent-stabilization laws.
The statutory exemption from rent stabilization for buildings converted to cooperatives sponsored by HPD in the TIL program is not subject to waiver or estoppel. ( See Grimmet, 181 AD2d at 488-489.) Respondent nonetheless argues that she is entitled to stabilized protection because of a so-ordered stipulation dated December 13, 1996, settling an earlier nonpayment proceeding between the parties. In the stipulation, "[p]etitioner agree[d] to give respondent a preferential rent of $425 for the subject apartment, and to grant her tenancy pursuant to the Rent Stabilization Code of NYC, both to commence with a two-year rent stabilized lease effective 11/1/96." When the two-year lease mentioned in that stipulation expired, the parties entered into a two-year renewal lease at $442.00 per month in 1998. Petitioner registered these rents with the DHCR. (Respondent's Motion at Exhibit B.) Respondent alleges that petitioner began charging her $486 per month in August 1999, before the renewal lease expired, and $550 per month in February 2002. Given everything, respondent argues that the so-ordered stipulation created a rent-stabilized tenancy and that petitioner overcharged her in violation of the rent-stabilization laws.
A stipulation cannot create a stabilized tenancy or give a tenant renewal rights under the Rent Stabilization Code. ( Mayflower Assoc. v. Gray, NYLJ, Mar. 1, 1994, at 21, col 1 [App Term 1st Dept, per curiam].) The Mayflower court held that a tenant "may [not] claim renewal rights [pursuant to the Rent Stabilization Code] as a matter of contract law." ( See NYLJ, Mar. 1, 1994, at 21, col 1; accord 7 Dunham Place Realty, Inc. v. Arndt, 189 Misc 2d 710, 716 [Civ Ct, Kings County 2001].) Although respondent argues that the lease offered in 1998 proves that respondent's tenancy is stabilized, the Mayflower court held that "[t]he use of rent-stabilization forms or riders does not foreclose a claim, at the expiration of any given lease term, that the premises are exempt from or not subject to rent-stabilization. Nor would the use of such instruments impose a contractual obligation to perpetuate a tenancy * * * *" ( Id.; accord Park West Village Assocs. v. Leonard, NYLJ, Aug. 16, 1994, at 32, col 1 [App Term 1st Dept, per curiam]; Libani v. Concorde Cie., LP, NYLJ, Oct. 28, 1998, at 28, col 6 [Sup Ct, NY County]; Ruiz v. Chwatt Assocs., NYLJ, Aug. 20, 1997, at 21, col 4 [Sup Ct, NY County].)
Respondent further argues that collateral estoppel bars petitioner from arguing that respondent is not a rent-stabilized tenant because the matter was litigated and decided when the parties entered into the so-ordered stipulation on December 13, 1996. Respondent relies on 1009 Second Ave. Assocs. v. Mint Restaurant Corp. (NYLJ, Feb. 24, 1989, p. 21, col 2 [App Term 1st Dept, per curiam]), which held that the parties cannot not re-litigate a judge's factual finding made in a prior nonpayment proceeding between the parties that the commercial space the tenant occupied was part of a single building for rent-escalation and insurance purposes. ( Id.) There is no evidence, however, that the court made any similar factual finding when it so-ordered the parties' stipulation in 1996. 1009 Second Avenue does not stand for the proposition that a so-ordered stipulation conferring rent-stabilization rights on a tenant continues in perpetuity and is entitled to collateral-estoppel effect.
Respondent also argues that she is now entitled to an indefinite rent-stabilized tenancy because a stipulation in writing entered into in open court binds the parties. ( See e.g. Speada v. Bakirtjy, NYLJ, Apr. 19, 2000, at 27, col 6 [Hous Part, Civ Ct, NY County].) Spaeda denied the respondent's cross-motion to dismiss and stated the general rule that "[w]hile the settlement of an issue may not be the determination of an issue for purposes of res judicata or collateral estoppel, any stipulation in writing or in open court is nonetheless binding on the parties." ( Id.) Although a stipulation is binding, that merely means that petitioner did not have the right to collect more than the agreed upon rent through the expiration of the last lease signed by the parties.
Respondent alleges that the last lease she signed was for a two-year term that commenced in 1998. (Affirmation of Louise Smalls dated July 23, 2003, at ¶ 5.) Respondent alleges that by increasing her rent in August 1999, petitioner charged her an amount greater than the agreed-upon rent for the 1998-2000 lease term. ( Id.) Respondent also alleges that she was overcharged through 2003, although there was no lease in effect beyond the 1998-2000 term. ( Id.) The court cannot know without a lease the amount of rent due to petitioner or the amount respondent allegedly overpaid. Respondent's motion for leave to amend the pleadings to add a counterclaim for overcharge is granted but limited to whether petitioner charged respondent an amount greater than the contract rent from July 1999 through the present.
Respondent's motion for leave to amend her answer to include a warranty-of-habitability counterclaim is granted. Leave to amend a pleading shall be freely granted absent prejudice or surprise resulting from the delay. ( Board of Managers of Alexandria Condominium v. Broadway/72nd Assocs., 285 AD2d 422, 423-424 [1st Dept 2001], citing Crimmens Contr. Co. v. City of N.Y., 74 NY2d 166, 170.) In RRL, LLC v. Narasin (NYLJ, Aug. 14, 2000, at 28, col 2 [App Term 1st Dept, per curiam]), the defendant had filed a pro se answer and, upon retaining counsel four months later, moved for leave to amend the answer to include breach of warranty-of-habitability counterclaims. The Appellate Term held that the Civil Court abused its discretion in denying defendant's motion to amend his answer because the petitioner was not surprised or prejudiced by the delay of the proposed amended answer.
Although respondent claims that she was unaware of her right to file counterclaims against the petitioner about the overcharge or warranty-of-habitability, she filed a pro se answer including these complaints. Petitioner will be neither surprised nor prejudiced by the court's allowing respondent to file counterclaims; it was already put on notice of the warranty-of-habitability counterclaim when respondent filed her pro se answer.
For the reasons stated above, respondent's motion to dismiss the petition for improperly alleging the regulatory status of the premises is denied. Respondent's motion for leave to amend her answer to include counterclaims for breach of the warranty-of-habitability is granted. Respondent's motion for leave to amend her answer to include a counterclaim for overcharge is granted to the extent that it is limited from July 1999 through the present. Petitioner's cross-motion to dismiss is denied.
This proceeding is restored to Part C's trial calendar at 9:30 a.m. on November 6, 2003.
This opinion is the court's decision and order.