Opinion
Decided May 5, 2004.
Belkin Burden Wenig Goldman, LLP, Attorney for petitioner, New York, New York.
Thea Halo, Respondent, pro se.
Petitioner, Breson Corporation and C. Brian Breyre, as Tenants in Common, commenced this proceeding against respondent, Thea Halo ("Respondent"), seeking possession of the 4th floor loft apartment at 186 Franklin Street, New York, New York 10013 ("Premises"). Petitioner terminated Respondent's tenancy on December 31, 2002 upon the allegation Respondent violated sections 2525.6(b) and/or 2525.7(b) of the Rent Stabilization Code ("RSC") and profiteered from the Premises. Respondent interposed an answer containing ten affirmative defenses, six counterclaims and a jury demand.
The matter first appeared in the resolution part on January 14, 2003 and was adjourned to February 14, 2003. On the adjourn date Respondent made a motion seeking to dismiss the proceeding on numerous grounds. The matter was adjourned to April 9, 2003 for a cross motion by Petitioner, opposition to Respondent's motion and argument. On March 7, 2003, Petitioner moved for summary judgment. In a decision dated April 30, 2003, the court denied both motions and made the matter returnable May 28, 2003.
The matter was then adjourned to July 16, 2003.Respondent then made two motions, one seeking recusal of the court and another for a stay of the proceedings pending a decision on recusal. Petitioner also made a motion seeking to strike the jury demand and severing/striking counterclaims. The court did recuse itself and the motions were reassigned to another part. By decisions dated July 25, 2003, the jury demand, the counterclaims for personal injury and property damage were stricken. Respondent then made a second recusal motion which was denied and that decision was the subject of a renew/reargue motion which was also denied. Respondent then brought a motion returnable August 8, 2003 seeking discovery of the Petitioner which was denied.
The proceeding was referred to this part for trial on August 14, 2003 at which point Respondent made an application to adjourn the matter for her to make motions. When that application was denied, she make an application to adjourn because she was ill. The trial commenced and four minutes into the testimony of Respondent, she claimed she was going to get sick and went to the bathroom and never returned. The court officer informed the Court that she was taken to the hospital at her request, at which point the matter was adjourned to August 18, 2003. On that date Respondent did not appear and the matter was again adjourned at the request of Respondent's friend due to Respondent's claim of illness. On September 4, 2003, Respondent now represented by counsel asked this Court to decide the summary judgment motion Respondent had made in the interim. That motion was denied by decision dated September 4, 2003. Respondent also made another motion seeking to renew/reargue the court's decision dated July 25, 2003. This motion was also denied on September 4, 2003.
On September 18, 2003, Respondent changed counsel and later became pro-se again. Respondent's motion seeking to adjourn the scheduled trial date of October 2, 2003 was denied on September 23, 2003. Respondent's motion seeking to subpoena certain persons employed by various courts was also denied.
At the conclusion of Petitioner's prima facie case, Respondent made a motion to dismiss the proceeding (See: Letter D.G. Melis, Esq. dated October 2, 2003). The decision on that motion was reserved and is decided herein.
The trial was conducted on August 14, 2003 (Tape # 65984; Counter # 5280 to 5982), August 18, 2003 (Tape # 65824; Counter # 0 to 382), September 4, 2003 (Tape # 65985; Counter # 3512 to 7332), October 2, 2003 (Tape # 66318; Counter # 1552 to End) and concluded on October 24, 2003 (Tape # 66512; Counter # 5434 to End; Tape # 66513; Counter # 0 to End; Tape # 66514; Counter # 0 to 975). October 27, 2003 (Tape # 66514; Counter # 3040 to 4957). On November 19, 2003 the parties submitted post trial briefs.
After considering the credibility of the witnesses and the documents placed in evidence, the Court makes the following findings:
Respondent's niece, Dominica Lesiuk, whose mother is Respondent's sister, testified pursuant to subpoena issued by Petitioner. She testified that she spoke to Respondent in April 1999 concerning renting a portion of Respondent's loft with a friend. Shortly thereafter she looked at the smaller unit within the Premises. This portion is separate from the main area of the loft and contains its own bathroom, bedroom and kitchen consisting of a sink, a refrigerator, a hot plate, a microwave, and a toaster oven. The space was mostly furnished.
After viewing the space, Respondent told her niece that the rent would be $1,200.00 per month which was agreed upon. This was the extent of the agreement. There was no agreement for utilities these were included in the rental amount. Pursuant to this oral agreement Respondent's niece Dominica Lesiuk and her friend Jennifer Seyler moved into that portion of Respondent's loft the "Rented Space" in May 1999. No duration was set for their occupancy it being agreed it would be on a trial basis. They obtained in their name, telephone and cable TV service. Respondent paid for the electricity to the Rented Space.
Ms. Lesiuk and Ms. Seyler paid $2.00 per month for cable service they provided in Respondent's portion of the loft. Each paid $600.00 in rent to Respondent for a total of $1,200.00 per month.
They entered the Rented Space though a door different from the one Respondent used to enter her portion of the loft. The doors had different locks. As they did not have a copy of the key to Respondent's door, they could not use the elevator which serviced the loft as it opened onto the front portion of the loft occupied by Respondent which was always locked. When visitors came to the Rented Space they were required to call from the street so that someone could go downstairs to open the entrance door to the building. They used the washer and dryer located in Respondent's portion of the loft, but could use it only with permission and when Respondent was home. When they did their laundry they were expected to place a couple of dollars in a jar placed there. Ms. Lesiuk testified that at first she paid her rent of $600.00 by check, but that later Respondent asked that it be paid in cash. She stated that she would get $500.00 in cash from an ATM machine and her employer, HBO, would cash her check for $100.00 (Petitioner Exhibit 3). This sum would be paid to Respondent each month. Ms. Lesiuk paid her portion of the rent of $600.00 through December 2001. Ms. Lesiuk's testimony was candid, forthright, detailed and credible.
Ms. Lesiuk testified that when they finally moved back to the Premises after the "9/11" disaster there was an "awful odor" in the Rented Space, so they began plugging in air fresheners. Respondent did not like this and commenced a Supreme Court action to compel them not to use these air fresheners. That action was settled by the parties in court.
In January 2002, Respondent served a thirty day notice of termination to terminate the tenancy of Ms. Lesiuk and Ms. Seyler. On January 18, 2002 an altercation occurred where Respondent grabbed Ms. Lesiuk's arm and pretended that Ms. Lesiuk had bitten her arm. Respondent called the police and alleged that Ms. Lesiuk had assaulted her. The police removed Ms. Lesiuk from the Rented Space. She did not return to possession of the Rented Space except to remove her possessions. Ms. Seyler moved out the next day. They had lived in the Rented Space together for the entire time.
Ms. Seyler testified that she is a employee of the New York Times working in financial planning and budgeting. Initially she paid to Respondent $600.00 per month by check. After a few months Respondent told her to pay by money order or cash, because she didn't want Petitioner to know. She paid cash for awhile, but later went back to paying by check. She paid $600.00 per month for the period May 1999 through December 2001 (Petitioner Exhibit 4, 13, 14A, 14B, 15 16B-left side only). She moved out because of the impending lawsuit by Respondent and because her friend and roommate had been arrested.
Respondent testified on behalf of herself in this proceeding. She is a highly intelligent woman possessing knowledge of court process and law that would challenge a proficient attorney. This coupled with her amazing ability to recall facts, events and the particulars of the numerous proceedings she and Petitioner have been involved in made her a force to be reckoned with and not taken lightly. However what was striking to the Court was how Respondent would "forget" or not be able to recall facts or events during her testimony in response to questions by Petitioner. Her responses to questions were guarded, lacking in candor and calculated. The long and short of it being if she believed the fact being elicited would help her she would recall it, if she thought it detrimental to her position, the fact was forgotten. The record is replete with examples of this. An example of Respondent's selective recall is when she testified she did not recognize her own signature when confronted with records of an account held at Greenwood Trust. Most telling was when Respondent testified that she had no records whatsoever to show payments by Ms. Lesiuk and Ms. Seyler, nor could she not recall any such payment.
Respondent's fear of the consequences of her acts made her extremely defensive. She lashed out at anyone she came in contact with. Respondent showed absolute disdain for the Court, the rulings and decisions of the court, her attorneys, all court personnel, Petitioner and Petitioner's counsel. This attitude is not appropriate in any court of law.
The crux of Respondent's version of the events, that she was merely helping her niece and that any payment made to her was not required and that any such payment made was merely gratuitous on the part of Ms. Lesiuk or Ms. Seyler, strains credibility and is wholly unworthy of belief.
The issue for the Court to determine is, whether upon the facts presented Respondent violated RSC § 2525.7(b) and/or RSC § 2525.6(b) and profiteered from the Premises.
It is found by the Court that at all times relevant to this proceeding, the proper rent for the Premises has been $1,085.41 (Petitioner Exhibit 10, Respondent Exhibit Y). Although Respondent never paid this sum it is the maximum collectible rent. She paid $1,008.84 per month for the relevant period without explanation. The Rented Space constituted approximately 1/3 of the loft. Respondent continued to occupy the other 2/3 of the Premises.
Although Respondent uses the theory of subtenant and roommate interchangeably in her argument, the "co-occupants" were not provided access to or use of Respondent's 2/3 portion of the housing accommodation. Ms. Lesuk and Ms. Skler had very little interaction with Respondent. Other than their use of the washer and dryer for which they were expected to contribute toward, there was no shared areas, and they lived separate and apart from Respondent. Their use of Respondent's portion of the Premises could best be analogized to that of a two family house where the owner allows the tenant to use the washer and dryer in the basement.
However, whether this proceeding is approached from the view that it was a sublet or it was a roommate situation, the end result is the same as it is clear that under either theory profiteering has occurred.
Viewing the case from the prospective of a sublet, the applicable provision governing same is RSC § 2525.6(b) which provides that the rent charged to the subtenant shall not exceed the legal regulated rent plus no more than a 10-percent surcharge if the housing accommodation is sublet fully furnished. Leaving aside whether the Rented Space as rented would be considered fully furnished, for the purposes of this opinion the Court will assume it is.
It is Respondent's position that once the electrical charges are deducted from the rent, and the 10% surcharge is added for the furnishings, the allegations show payments of less than the legal regulated rent for the Premises and therefore no profiteering has occurred.
In fixing what may be charged a subtenant, the statute contemplates the sublet of the entire housing accommodation, not simply a portion of it. When it speaks of the legal regulated rent, it means to the entire housing accommodation. Here the monthly legal regulated rent for the loft was $1,085.41. If Respondent had effected a sublet of the entire loft with the permission of Petitioner the amount she could legally charge if it were fully furnished would be $1,193.95 per month. If Respondent could only legally charge $1,193.95 per month to sublet the entire loft, how can it be said that where Respondent only sublet 1/3 of the housing accommodation and charged $1,200.00 per month, no overcharge has occurred. Respondent's argument that as long as the rent charged for the sublet portion of one's housing accommodation does not exceed the regulated rent (plus 10% for furnishings) for the entire housing accommodation does it hold up under scrutiny and is akin to a flawed syllogism. Such an interpretation would allow a tenant to subdivide a housing accommodation into separate spaces and be able to charge the legal rent for the entire accommodation (plus 10% if furnished) and not be profiteering or running afoul of the strictures of RSC § 2525.6(b).
Respondent cannot sublet 1/3 of her housing accommodation, and charge as if she had sublet it in its entirety. The amount of the legal regulated rent attributable to the area that was sublet is $361.80 (1/3 the regulated rent of $1,085.00). Adding 10% or $36.18 for furnishings would bring the amount to $397.98. Hence Respondent profited each month in the amount of $802.02 ($1,200-$397.98 = $802.02).
If the co-occupany of the Premises is viewed from the perspective that Ms. Lesisuk and Ms. Skeler were Respondent's roommates, which the Court does not believe the facts bore out, the relevant rent stabilization code section is RSC § 2525.7(b) which provides in pertinent part:
The rental amount that a tenant may charge a person in occupancy pursuant to section 235-f of the Real Property Law shall not exceed such occupant's proportionate share of the legal regulated rent charged to and paid by the tenant for the subject housing accommodation. For the purposes of this subdivision, an occupant's proportionate share shall be determined by dividing the legal regulated rent by the total number of tenants named on the lease and the total number of occupants residing in the subject housing accommodation.
Applying this code section to the case before the Court, the two co-occupants should have been paying no more than 66.6% percent of the $1,085.41 rent per month, or $722.89 per month. Respondent's two "co-occupants" paid her a total of $1,200.00 per month for an overcharge of $477.11 per month over their proportional share of the legal regulated rent.
To the extent that Respondent argues that electricity and the use of her furnishings was included in their rent as a surcharge above the "co-occupants" proportional share of the legal regulated rent of $722.89, the electrical usage or the proportional share of the electric used was not shown to justify a surcharge of $411.11. The Court finds that electric charges were included with the rent. Furthermore, on its face the sum of $477.11 is beyond and exceeds any reasonable apportionment for electrical usage and use of furnishings and cannot justify the disproportional amount of the rent being charged to the "co-occupants".
Irrespective of Respondent's attempted justification for the additional amounts charged and paid by the two "co-occupant's" in excess of their proportional share of the rent, this Court has previously determined that such an analysis is not required in determining a violation of RSC § 2525.7(b). Roxborough Apts Corp v. Becker, 2004 NY Slip Op 50142[U]. As was noted therein, there is nothing in RSC § 2525.7(b) suggesting that the Court consider anything other than the legal regulated rent in determining whether a tenant has violated the section.
Accordingly, whether viewed from the perspective that Ms. Lesiuk and Ms. Seyler were subtenants or roommates, it is clear Respondent utilized the Premises for commercial exploitation. While Petitioner was constrained to charge only what the law allowed, Respondent freely charged what she wished to the point where Respondent was living rent free collecting in excess of 100% of the stabilized rent for the entire housing accommodation while still enjoying exclusive use of two thirds of the Premises. This is not the purpose of rent stabilization. As was stated in the case of Continental Towers Ltd Partership v. Freuman, 128 Misc 2d 680 (App Term 1st Dept, 1985), "[t]he integrity of the rent stabilization scheme is obviously undermined if tenants, who themselves are beneficiaries of regulated rent, are free to sublease their apartments at market levels and thereby collect the profits which are denied the main landlord".
As Respondent had been charging and collecting rent in contravention of RSC § 2525.7(b) and RSC § 2525.6(b), constituting rent profiteering which is an incurable ground for eviction, Petitioner has sustained its burden of proof in its cause of action. BLF Realty Holding Corp v. Kasher, 299 AD2d 87 (1st Dept, 2002).
A final judgment of possession is awarded to Petitioner. Use and occupancy is fixed in the sum of $4,717.00 per month commencing January 1, 2003. Petitioner introduced an executed lease for a space at the building comparable to Respondent's which is rented for that amount (Petitioner Exhibit 26). Respondent introduced nothing into evidence to dispute this showing of market value for the Premises, nor did she offer any evidence concerning the value of the Premises.
Issuance of the warrant of eviction shall be forthwith and execution stayed until July 31, 2004 conditioned on Respondent paying the sum of $104,113.02 by May 25, 2004. This sum consists of unpaid rent in the sum of $1,085.41 per month for the period March 1, 2001 to December 31, 2002 (date of termination of tenancy) [22 months × $1,085.41= $23,879.02]; use and occupancy commencing January 1, 2003 to May 30, 2004 [17 months × $4,717.00 = $80,189.00]; and $45.00 in costs. Execution of the warrant shall be further stayed conditioned upon Respondent tendering future monthly use and occupancy at the rate of $4,717.00 as it accrues by the 10th of each month during the stay period. Respondent is assessed costs in the sum of $45.00. A final money judgment is entered in Petitioner's favor in the sum of $104,113.02.
Petitioner's application for reasonable legal fees may be sought by motion.
Post trial motion to dismiss is denied for the reasons stated herein. The Court finds the balance of Respondent's claims raised in the answer to be without merit.
This constitutes the decision and order of ths Court.