Opinion
August 8, 1985
Cadwalader, Wickersham Taft ( Edward E. Klein of counsel), for plaintiff.
Jacobs, Sieratzki Zinns ( Jay Zinns of counsel), for defendants.
The question presented by the motion and cross motion herein is whether an estate has the right to buy cooperative shares allocated to the apartment of a tenant who died prior to acceptance for filing by the New York State Attorney-General of the cooperative offering plan.
Plaintiff, executor of the estate of Dr. Gunther Lomnitz, moves for a preliminary injunction: (1) enjoining defendants (the owner of the building, the selling agent and the cooperative corporation) (a) from selling the stock certificates evidencing ownership of shares in the cooperative corporation allocated to apartment No. 1, 61 East 86th Street, New York, New York, and (b) from dispossessing plaintiff from the apartment pending final determination of this action; (2) tolling the running of time during which plaintiff is required to vacate the apartment pursuant to a notice to quit. Defendants cross-move for an order awarding summary judgment in their favor dismissing the complaint.
Dr. Gunther Lomnitz occupied the apartment at issue for approximately 40 years until his death on October 14, 1983. On December 8, 1983, a noneviction offering plan for the sale of shares in the cooperative corporation was accepted for filing by the Attorney-General of the State of New York and defendants offered all tenants in the building the right to purchase their allocated shares at the insider price. In July 1984, plaintiff submitted two copies of a duly executed subscription agreement and a down payment for purchase of the shares allocated to apartment No. 1. On September 14, 1984, defendants rejected plaintiff's subscription agreement and deposit on the ground that the estate was not a tenant in occupancy entitled to purchase the shares.
In the underlying action, plaintiff seeks the right to purchase the subject apartment and requests a permanent injunction, declaratory relief and specific performance of its subscription agreement. Defendants interpose affirmative defenses and assert a counterclaim for possession of the apartment and a second counterclaim seeking a declaration of their right to reject plaintiff as a purchaser.
It is not disputed that if the deceased tenant had occupied the apartment pursuant to a professional lease, existing or expired, neither he nor his estate would have the right to purchase under the terms of the offering plan. Nor does plaintiff dispute that if the decedent had been a residential tenant living on a month-to-month basis, the tenancy would have expired at his death. ( Yates v Kaplan, 75 Misc.2d 259.) The parties agree also that if decedent had occupied the apartment for combined residential and professional purposes, the apartment could have been subject to the Rent Stabilization Law. ( Matter of Zeitlin v New York City Conciliation Appeals Bd., 46 N.Y.2d 992; Park Towers S. Co. v A-Lalan Imports, 103 Misc.2d 565.) The critical disagreement of fact is over whether, at the time of his death, Dr. Lomnitz was a rent-stabilized tenant living under an existing lease.
Plaintiff argues that the tenant occupied the apartment as a residence at the time of his death, that the apartment was regulated by the Code of the Rent Stabilization Association of New York City, Inc. (Rent Stabilization Code), and that the estate of a rent-stabilized tenant inherits all the rights of the decedent including the right to purchase the apartment at the insider price.
It is defendants' position that the apartment was leased to Dr. Lomnitz as a doctor's office, that the last lease expired in June 1966, and that the apartment never became subject to the rent stabilization laws. They argue further that even had Dr. Lomnitz been a rent-stabilized tenant, his estate cannot buy the apartment since the rights of an estate can be no greater than those of a deceased tenant and Dr. Lomnitz died before his right to purchase could vest on the date the offering plan was filed.
The parties have submitted voluminous papers in an effort to establish the status of the apartment at the date of decedent's death. They agree that Dr. Lomnitz initially entered into possession of the subject premises under Federal rent regulations pursuant to a written lease dated September 25, 1941 covering both apartment No. 1 and apartment No. 4C on the same floor. The 1941 lease indicated that the space was to be occupied as a private dwelling and doctor's office. In 1948 the two units were separated, apartment No. 4C became subject to residential rent regulation and apartment No. 1, identified as a doctor's office, came under commercial rent control.
L 1945, ch 314, as amended.
Defendants have submitted Dr. Lomnitz's next lease which was for apartment No. 1 only. It covered the period May 1, 1949 through September 30, 1951 and specified that the apartment was to be occupied solely as a doctor's office. Defendants assert that after the expiration of commercial rent control Dr. Lomnitz continued to occupy apartment No. 1 as a professional tenant, using it as a doctor's office under a lease running from July 1963 through June 1966. Defendants maintain that Dr. Lomnitz was a month-to-month tenant from the time the 1963-1966 lease expired until his death. In support of this assertion, defendants submit, inter alia, a copy of a letter to Dr. Lomnitz dated October 22, 1982 in which defendant Time Equities, Inc. informed him that it had purchased the property, and confirming that Dr. Lomnitz was a month-to-month tenant in apartment No. 1. Defendants also submit a copy of a letter to Dr. Lomnitz dated August 31, 1983 in which Time Equities, Inc. stated they were discontinuing his month-to-month tenancy and were offering him a one-year lease at a fourfold increase in rent.
Plaintiff responds that the October 1982 and August 1983 letters are self-serving and that Dr. Lomnitz may have had a lease for the apartment in effect at the time of his death. Plaintiff submits a copy of the 1984 registration for the apartment in which defendants list the apartment as "stabilized — pending determination of case currently before D[ivision of] H[ousing and] C[ommunity] R[enewal]."
The landlord of a rent-stabilized property is obligated to maintain rental histories (Rent Stabilization Code § 42 [A]; Matter of 303 E. 27th St. Corp. v New York City Conciliation Appeals Bd., Sup Ct, N Y County, June 18, 1984, index No. 01433/84, affd 107 A.D.2d 1096, lv denied 64 N.Y.2d 609) and has the burden of establishing that an apartment is not covered by statute. ( Towers Hotel Investors Corp. v Davis, 85 Misc.2d 451, 454, affd 54 A.D.2d 730, affd 42 N.Y.2d 923.) Neither party has submitted complete records showing the apartment's status. There has been no opportunity for discovery. Upon the conflicting claims of the parties and the fragmented documentation submitted, it cannot be said that no issues of fact exist as to the rental status of the apartment and the existence of a lease at the time of Dr. Lomnitz's death.
Plaintiff contends that if no written lease existed when Dr. Lomnitz died, nonetheless he occupied the apartment pursuant to a lease implied by law because he had been entitled to a lease. This argument is without merit under the facts at bar. A lease gives a tenant a possessory right — the right to live in the premises upon agreed to terms. There is no authority for holding that a tenant's estate may retroactively assert the right to a lease after the tenant's death.
Code of the Rent Stabilization Association of New York City, Inc. § 60 requires the landlord of a rent-stabilized apartment to offer renewal of an existing lease and, absent grounds for nonrenewal, gives the tenant a vested right to renew. ( Matter of Fanelli v New York City Conciliation Appeals Bd., 90 A.D.2d 756, affd 58 N.Y.2d 952; Short v Graves, 109 Misc.2d 672, 674.)
Plaintiff could not prevail even if it were to be demonstrated that a lease existed at the time of the tenant's death. No statute or case law or policy consideration supports a right to purchase shares of a cooperative apartment at the insider price by the estate of a dead tenant when the right arose after the tenant's death.
It is well established that a lease is not terminated by the death of a lessee but passes as personal property to the estate. (EPTL 13-1.1; 2 Rasch, N Y Landlord Tenant, Summary Proceedings, § 1016 [2d ed]; Schnee v Jonas Equities, 109 Misc.2d 221, 222; Putch v Jacard Realty Co., 44 Misc.2d 177.) The estate's legal representative has the obligation to settle the estate and distribute the assets of the decedent. (41 N.Y. Jur 2d, Decedents' Estates, § 1550; EPTL 11-1.1 [b] [5] [A]; Young v Carruth, 113 Misc.2d 586, affd 89 A.D.2d 466.)
It is not fruitful to attempt to characterize the nature of an estate's possession of a decedent's leased premises as "representative" or as something more. In Rosefan Constr. Corp. v Salazar ( 114 Misc.2d 956, 960) the court stated: "The executors of an estate may occupy a premises in possession of an estate, but only in their representative capacities, not as tenants under the lease." ( Accord, Joint Props. Owners v Deri, 127 Misc.2d 26; Remford Corp. v Rosenfeld, 274 App. Div. 769.) But in Young v Carruth ( 113 Misc.2d 586, 587, affd 89 A.D.2d 466, supra) an estate was denominated "the real party in interest", and in Bunim v 30 Cent. Park W. Apts. Corp. (NYLJ, June 30, 1982, p 6, col 3 [Sup Ct, N Y County]), an estate was said to have "succeeded to all the rights which decedent had to the apartment" ( supra, cols 3-4). With the housing shortage and the profits to be realized from the sale of cooperative apartments has come assertion by estates of ever broader rights — the right to assign ( see, e.g., Joint Props. Owners v Deri, supra); the right to evict ( see, e.g., Young v Carruth, supra), and, as here, the right to purchase shares in a cooperative corporation at the insider's price. The difficult task is to determine the limits, if any, on an estate's rights in its role as tenant.
Rent Stabilization Code § 61 (4) (b) sets forth as follows who is eligible to purchase the shares allocated to an apartment in a rent-stabilized building converting to cooperative ownership: "A tenant in occupancy at the time of the offering shall have the exclusive right to purchase his apartment or the shares allocated thereto". The regulations promulgated by the Attorney-General under General Business Law § 352-e (2-b), (6) govern the conversion of residential property to cooperative ownership and also give the right of purchase to bona fide tenants in occupancy on the date the plan is accepted for filing. Under 13 NYCRR 18.3 (m) (1) (iii) (a) (4), a bona fide tenant of record with an unexpired lease on the date of filing is presumed to be a "tenant in occupancy". The offering plan herein also limits the right of purchase to "each tenant in occupancy on the date of the presentation of the Plan." The phrase "tenant in occupancy" is not defined in the General Business Law, the Rent Stabilization Law (Administrative Code of City of New York, ch 50, tit YY) or the Rent Stabilization Code, but purchase rights are not limited to individuals. ( See, Consolidated Edison Co. v 10 W. 66th St. Corp., 61 N.Y.2d 341.)
Assuming, arguendo, the existence of an unexpired lease on December 8, 1983 when the plan was accepted for filing, the estate herein would have had the right to occupy the apartment at the critical date. Does it follow that the estate would be a "tenant in occupancy" with the right to purchase?
Several nisi prius courts recently have confronted the issue of whether the unexercised right of a deceased lessee in a rent-stabilized apartment to purchase the shares allocable to his apartment will pass to his estate. In Bunim v 300 Cent. Park W. Apts. Corp. (NYLJ, June 30, 1982, p 6, col 3 [Sup Ct, NY County], supra), the court reasoned (cols 3-4) that the estate "succeeded to all the rights which decedent had to the apartment in question [and] [i]ncluded among those rights was * * * [the right] to purchase the shares allocated to the apartment." ( Accord, De Christoforo v Shore Ridge Assoc., 126 Misc.2d 339; De Kovessey v Coronet Props. Co., NYLJ, July 23, 1985, p 11, col 3 [Sup Ct, N Y County]; Freudenstein v 645 Co., 128 Misc.2d 635 [Sup Ct, N Y County]; Blumenfeld v 10 E. End Ave. Owners, Sup Ct, N Y County, Feb. 7, 1984, index No. 20074/84.)
Plaintiff would have this court extend the holding in Bunim, De Christoforo et al. ( supra) to the facts at bar where the tenant died before he acquired the right to purchase his apartment. Plaintiff argues that an estate must be given the same rights as any other tenant in occupancy under a rent-stabilized lease. In plaintiff's view, the right to purchase the apartment emanates not from inheritance but by operation of law, since the estate becomes substituted as a full-fledged tenant on the lease.
To state such a proposition is immediately to see its defects. If the estate were a tenant for all purposes, it could renew its lease and control the apartment until some future undefined date, perhaps beyond the life of the estate.
It appears that no court has expressly determined whether an estate is entitled to possession of a decedent's apartment after the lease expires, or whether an estate can demand renewal under Rent Stabilization Code §§ 50, 60. However, the implicit assumption in a number of cases is that an estate's interest in a decedent's apartment is coterminus with the lease.
But see, Berkeley Assoc. Co. v Kaye, Sup Ct, N Y County, index No. 1311/84, decided simultaneously herewith, which addresses this issue.
It is noteworthy that the Real Property Law gives a tenant broader rights to sublet than it affords an estate. Real Property Law § 226-b (2) (a) permits tenants to sublet subject only to the reasonable refusal of consent by the landlord. Real Property Law § 236, governing estates, denies an estate the right to sublet a possessory interest in the apartment without the consent of the landlord and the landlord's consent may be unreasonably withheld.
In Joint Props. Owners v Deri ( 127 Misc.2d 26, supra) an executor was permitted to retain a leasehold when the landlord unreasonably withheld consent to the executor's proposed assignment. Significantly, the court dismissed the landlord's holdover petition as premature and thus presumably it could be brought again after the lease expired. In Young v Carruth ( 113 Misc.2d 586, affd 89 A.D.2d 466, supra) an estate was held to be entitled to evict a licensee of the decedent-prime tenant. On appeal, the First Department pointed out (p 469) that the lease was due to expire and "[t]here would seem to be a serious question whether petitioner, the administratrix of the estate, would be entitled to possession after [the expiration date of the lease], or could sublease the apartment to someone else * * * It is not clear to us that the estate could demand from the landlord under the rent stabilization laws a renewal of the lease, as the estate is not a person using the apartment as its dwelling." ( See also, Young v Carruth, 113 Misc.2d 586, 590 [dissent]; Remford Corp. v Rosenfeld, 274 App. Div. 769.)
The policies underlying the cooperative conversion laws of improving neighborhoods and protecting tenants is not furthered by the extension of rights to an estate demanded by plaintiff. The executor or administrator of an estate is a fiduciary for the decedent's heirs or distributees and there is no reason to grant this group of people favored status, either to move into the apartment as tenants or to buy at the insider's price and resell the apartment at a profit.
See, L 1982, ch 555, § 1, legislative finding underlying the addition of General Business Law § 352-eeee.
The Court of Appeals has recently spoken to the question of when a tenant under lease has the right to pass on an apartment to an immediate family member. In Tagert v 211 E. 70th St. Co. ( 63 N.Y.2d 818, 821) the court stated: "only the tenant may renew a lease; family members have no such right after the tenant has vacated * * * the lease provision does not permit family members to succeed to possession by moving into an apartment upon the tenant's departure, and it does not require a landlord to renew a lease as an apartment is successively passed to members of the tenant's family." ( Accord, Melohn v Heins, NYLJ, Apr. 9, 1981, p 10, col 5 [App Term, 1st Dept] ["(A) rent stabilized apartment may not be passed along like a baton in a relay race"]; see also, 829 Seventh Ave. Co. v Reider, 111 A.D.2d 670.)
Construing Tagert to apply only when the tenant and family member were not living together before the tenant vacated does not change its application to the facts herein.
The New York State Division of Housing and Community Renewal recently issued rules governing when a vacating rent-controlled or rent-stabilized tenant can pass on an apartment to a family member. Division of Housing and Community Renewal Regulations (9 NYCRR) § 2500.2 (m) lists categories of protected relatives, and the agency measures good faith by using as a guideline a minimum period of six months during which the family member must have lived with the tenant in order to take over the apartment when the tenant leaves. ( See, M L Jacobs v Del Grosso, 128 Misc.2d 725 [Housing Ct, Queens County].)
If the court were to expand the estate's rights as plaintiff suggests, it would be granting broader control of an apartment to a tenant who leaves it by dying than the law gives to a tenant who vacates by moving across town. Such an illogical result is to be avoided.
An estate cannot assume a life of its own, exercising rights the decedent never had. It may not, on behalf of the heirs or distributees it represents, inherit an apartment and become a full-fledged tenant. The right of an executor or administrator to manage its decedent's leasehold interest in an apartment should be limited to the life of the lease and to those functions necessary to the winding up of the estate. An estate does not stand in the shoes of a deceased tenant for purposes of exercising a right to purchase his apartment which the decedent did not have when he died.
Accordingly, plaintiff's motion is denied in all respects. The branch of defendants' cross motion seeking summary judgment dismissing the complaint is granted. Defendants' second counterclaim for judgment declaring the rights of the parties is granted. Defendants' first counterclaim for possession of the apartment is severed and continued. Defendants' request for attorneys' fees is denied.