Opinion
36963/2017
01-29-2018
622 E. 169 LLC, Petitioner, v. Areletha MCCLAIN, Henry McClain, Respondents–Occupants.
Recitation, as required by CPLR § 2219(a), of the papers considered in the review of this motion.
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Papers
Order to Show Cause, Affirmation and Affidavit Annexed, Exhibits 1
Affirmation and Affidavits in Opposition, Exhibits 2
Reply Affirmation 3
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Upon the foregoing citing papers, the Decision and Order on this Motion are as follows:
After eviction in this residential holdover proceeding, respondent Areletha McClain through her counsel, The Legal Aid Society moves to vacate the stipulation between the parties, restore the respondent to possession of the premises, file an amended answer and dismiss the petition as she was served with a notice of termination as a licensee when she is the tenant of record. In the alternative, respondent seeks an Order permitting the respondent a reasonable amount of time to remove her belongings or any other relief the Court may determine. For the reasons stated below, the stipulation between the parties is vacated, the answer is deemed admitted and served nunc pro tunc, respondent is provisionally restored to possession forthwith and this matter is restored to the Court's calendar for proceedings on March 5, 2018 at 2:15 pm.
The essential question to be resolved in this matter is whether the McClains established a rent stabilized tenancy when they moved into the subject premises despite the privity between Apex Asset Management LLC and CCC LLC (Petitioners predecessor in interest). If the respondent established a rent stabilized tenancy the proceeding will be dismissed as it was brought on the theory that the she was a licensee. If Ms. McClain was a rent stabilized tenant, she was entitled to a predicate notice appropriate to a rent stabilized tenant and this proceeding would be dismissed.
This case involves a "scattered site" placement for the McClains; a homeless mother and her children who were placed in the subject premises in June 2015. Respondent's exit from the homeless shelter was apparently paid for by the City of New York through a LINC III voucher. The parties agree that apartment at 622 East 169 Street, Apt. 4C, Bronx, NY was owned by "CCC LLC" and was rent stabilized. Respondent alleges that "CCC LLC" entered into an agreement with "Apex Asset Management LLC" to rent the subject premises. Areletha McClain alleges she entered into an agreement with Apex Asset Management LLC to rent the subject premises. As a corporate entity, the parties apparently knew that Apex Asset Management LLC would never occupy the apartment but that Apex Asset Management LLC would simply facilitate the McClains moving out of the shelter to the subject premises.
Scattered site placements have been used by various nonprofits and government agencies to provide housing to vulnerable populations for many years. See Coalition for the Homeless Scattered Site Housing Program at http://www.coalitionforthehomeless.org/our-programs/housing/scattered-site-housing-program/
The LINC III voucher appears to be for victims of domestic violence. "LINC III will provide rental assistance for families recently affected by domestic violence to relocate them from the City shelter system—these families will be selected from both HRA domestic violence shelters and families in DHS shelters who HRA has certified as survivors of domestic violence." http://www1.nyc.gov/site/dhs/permanency/linc-one-two-three.page
Respondent's contends that although petitioner contracted with Apex Asset Management LLC for the apartment an actual tenancy was created between petitioner and McClain by an illusory tenancy. An illusory tenancy is defined as when "an illusory prime tenant rents the apartment to others for some financial gain—either short term profit from overcharge of rent ... In some cases, the illusory prime tenant acts as the landlord's alter ego, enabling the landlord to circumvent rent regulation". While there is a right for a corporate entity to contract for a rent stabilized lease there are limitations. When the corporate entity and the landlord name a third party to the lease and that third party occupies the premises as their primary residence, a tenancy vests not in the corporation but in the third party. A scheme such as that alleged between Apex Asset Management LLC and CCC LLC cannot operate to deprive an otherwise eligible tenant from the benefits of rent stabilization.
Andrew Scherer, Residential Landlord and Tenant Law in New York § 8:168 (2014–2015 ed.)
Citadel Estates, LLC. v. Pathways to Hous., Inc. , 44 Misc 3d 1222[A], 1222A, 2014 NY Slip Op 51225[U], *4 [Civ Ct, Kings County 2014].) citing to Koenig v. Jewish Child Care Ass'n , 107 AD2d 542, 487 N.Y.S.2d 759 affd 67 NY2d 955, 494 N.E.2d 86, 502 N.Y.S.2d 981 ( [1986] ).)
See Avon Furniture Leasing, Inc. v. Popolizio , 116 A.D. 280; 500 N.Y.S.2d 1019 (1st Dept. 1986).
It is well settled that the parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void (Rent Stabilization Code [9 NYCRR] § 2520.13 ), and this Court has uniformly thwarted attempts, whether by mutual consent or by contract of adhesion, to circumvent regulated rent maximums (see Draper v. Georgia Props., 94 NY2d 809, 723 NE2d 71, 701 NYS2d 322 [1999] [nonprimary residence]; 390 W. End Assoc. v. Harel , 298 AD2d 11, 744 NYS2d 412 [2002] [consent judgment]; 390 W. End Assoc. v. Baron , 274 AD2d 330, 711 NYS2d 176 [2000] [same]; Abright v. Shapiro , 214 AD2d 496, 626 NYS2d 73 [1995] [residential space leased for professional purposes]; Matter of Yanni v. New York State Div. of Hous. & Community Renewal , 194 AD2d 375, 598 NYS2d 497 [1993], lv denied 82 NY2d 662, 632 NE2d 459, 610 NYS2d 149 [1993] [residential premises leased in corporate name]; Bruenn v. Cole , 165 AD2d 443, 568 NYS2d 351 [1991] [illusory tenancy] ). Drucker v. Mauro, 2006 NY Slip Op 3006, pp 2–3, 30 AD3d 37, 39, 814 N.Y.S.2d 43, 45 (App. Div.)
Petitioner objects to the allegations as being brought forth by respondent's counsel as little more than bare allegations. Those allegations include that collusion between Apex Asset Management LLC and CCC LLC occurred to obtain a higher ($1,926.00) than the legal (an unspecified amount) monthly rent. Respondent indicates that Apex Asset Management LLC assured her that she was to be the tenant of record and not the licensee. Respondent further alleges that Apex Asset Management LLC's status as a fictitious nonprofit entity or agent of the government did not put them within the exemptions that would permit the rental of a rent stabilized apartment without rent stabilization attaching to the resident (a matter not asserted by the petitioner).
See Respondent's affidavit in support at paragraph 4.
The ETPA of 1974 has specifically articulated exemptions from its jurisdiction. See RSC § 2524.1 (a) (b) (c).
While petitioner's point is well taken that the allegations are without proof sufficient as a matter of law, the allegations are not farfetched and deserve further consideration. While these allegations are speculative the Court notes the motion is made after eviction, by newly retained counsel representing a mother with her children who are in danger of homelessness and may not be in the best position to pursue an effective investigation. Furthermore, while the Court is concerned about the impact of disturbing the "scattered site" placement model of vulnerable individuals, there is also concern if Apex Management LLC or others are placing homeless families for a fee (or absconding with rent) and then abandoning them to eviction. If the stipulation and judgment are vacated and the tenant is restored to possession these matters would be considered on a full record with the assistance of counsel. To support motion practice and/or prepare for trial, limited disclosure and possible joinder of parties may be required.
As to the stipulation, that this is a case where the respondent's contention that she did not understand the options to retain her apartment when she agreed to the stipulation is entirely believable. Given that the Court has met and spoken with the respondent on several occasions, it is difficult to believe that she knowingly waived the defense of an illusory tenancy. The Court finds that if a reasonable formerly homeless tenant knew she had the ability to retain her home at an affordable rate with all the rights associated with rent stabilization she would not have chosen to leave. To hold this unrepresented tenant to this bargain would be harsh and unjust despite her agreement on these terms. The stipulation of July 14, 2017 is therefore vacated.
See Leathers v. Dunston , 6/3/87 N.Y.L.J. 13, Col. 3 (Civ. Ct. Kings Co.); see also, 1504 Mgmt v. Liddie , 4/28/86 N.Y.L.J. 7, col. 2 (App. Term 1st Dep't).
As to the amended answer, review of the answer in context with these facts indicate that admission and service of the proposed answer nunc pro tunc is warranted. The proposed answer articulates the basis of this motion, that an illusory tenancy was created and consequently the proceeding should be dismissed. This line of defense would not have been apparent to a pro se litigant and the delay should not prevent this defense from being asserted. See Guzetti v. City of New York , 32 AD3d 234, 238 (NY 2006.
As to the eviction, the Court has authority by case law to restore an evicted tenant to possession of the subject premises. Most case law addresses the ability to restore the tenant to possession upon payment of rental arrears in a long-term tenancy rather than after eviction in a holdover. However, whether the issue is holdover or nonpayment of rent the operative issue is whether the restoration is equitable. On these facts, the Court finds that restoration is equitable and Orders that respondent be restored forthwith.
"[T]he Civil Court may, in appropriate circumstances, vacate the warrant of eviction and restore the tenant to possession even after the warrant has been executed" (Brusco, 84 NY2d at 682 ; see also Harvey 1390 LLC v. Bodenheim, 96 AD3d 664, 664, 948 NYS2d 32 [1st Dept 2012] ). ( Matter of Lafayette Boynton Hsg. Corp. v. Pickett, 135 AD3d 518 , 519 [1st Dept 2016].)
The Housing Court maintains the ability to restore tenants to possession of the leasehold.
[t]he Court of Appeals has affirmatively stated that courts may grant such relief, even after a warrant of eviction has been executed. In Matter of Brusco v. Braun (84 NY2d 674, 645 NE2d 724, 621 NYS2d 291 [1994] ), it said, "the Civil Court may, in appropriate circumstances, vacate the warrant of eviction and restore the tenant to possession even after the warrant has been executed" (id. at 682 ). So, while the statute (RPAPL 749 (3) ) may not give the Civil Court the authority to vacate an already-executed warrant of eviction, case law provides that authority.
Matter of Lafayette Boynton Hsg. Corp. v. Pickett , 135 AD3d 518, 522 [1st Dept 2016].
As to accelerated judgment based on the illusory tenancy and the predicate notices, respondent's allegations are insufficient. Obviously, the respondent will have to gather more information before advancing to trial or dispositive motion. The matter is therefore restored to the calendar for conference or appropriate motion practice on March 5, 2018 at 2:15 pm.
This is the decision of the Court and copies will be mailed to the attorneys for the parties, and made available in the Courtroom.