Opinion
SP 186/05.
Decided on November 17, 2005.
This Court is confronted with one motion for summary judgment made by four separate respondents and one cross-motion for summary judgment, pursuant to CPLR 3212. Each of these cases involves a summary non-payment proceeding. Respondents' motion for summary judgment raises the issue of whether "the 2003 amendment to the Emergency Tenant Protection Act (ETPA) allows a landlord, who offers a 'preferential rent' to a rent-stabilized tenant due to existing market conditions, to raise the rent to a higher 'legal rent' at the end of the lease term, where such 'legal rent' continues to be significantly higher than 'market rent'." Implicated in this question is the amendment of the ETPA § 10. New York Unconsolidated Laws Chapter 249-B § 10a and a-2, known as ETPA § 10, states, in pertinent part, as follows:
a.For cities having a population of less than one million and towns and villages, the state division of housing and community renewal shall be empowered to implement this act by appropriate regulations . . .
a-2.[Expires and repealed June 15, 2011] Provides that where the amount of rent charged to and paid by the tenant is less than the legal regulated rent for the housing accommodation, the amount of rent for such housing accommodation which may be charged upon renewal or upon vacancy thereof may, at the option of the owner, be based upon such previously established legal regulated rent, as adjusted by the most recent applicable guidelines increases and other increases authorized by law. Where, subsequent to vacancy, such legal regulated rent, as adjusted by the most recent applicable guidelines increases and any other increases authorized by law is two thousand dollars or more per month, such housing accommodation shall be excluded from the provisions of this act pursuant to paragraph thirteen of subdivision a of section five of this act.
Respondents contend that market rent is to play the determining factor in what rent petitioner may charge upon renewal of the respondents' leases by petitioners. This Court specifically rejects all of respondents arguments concerning market rent. The above quoted statute is crystal clear that the petitioner landlord has the right to increase the rent to the legal regulated rent in accordance with the requirements of the statute; market rent does not provide an obstacle. Thus, upon renewal of a lease the statute gives the landlord the option to raise the rent to the legal regulated rent or to offer a preferential rent at a lower amount.
This Court has reviewed the Senate Debate Transcripts for 2003 Chapter 82 to amend EPTA Section 10. It is clear from reviewing this document that the Legislature intended that New York State would "continue to give the State sole jurisdiction over housing and rent in the State of New York, including New York City." This is referred to as the continuation of Urstadt Law. (See Transcript, page 5239). Furthermore, the intent of the 2003 amendment to the said ETPA Section 10 is expressed by Senator Bonacic who states on page 5240:
And last but not least, the other amendment, again, they all it the legal rate. But if the landlord wants to lower it again, called the preferential rate lower than the legal rate, when they again want to renew, they can kick it up to the legal rate without going through the Rent Stabilization Board, apply for higher rents.
On page 5256, Senator Bonacic states:
And I will answer you that it's our intent that the language that I'm going to read to you is the ceiling of which the landlord is bound by and can never go higher than the legal rate. Okay?
I'm going to read the part. And it will be up to lawyers to say — you want it more clear, you want another provision that says in no event can the landlord to above the legal rate. But we think we've covered it here. And I'm going to read it to you.
"Upon renewal" — again, I'm on page 37 "upon renewal or upon vacancy may, at the option of the owner, be based upon such previously established legal regulated rent." Period. He can't go higher, because it says that's the highest he can go. All right? That's how we read it. That's how it was prepared. That's the intent.
Again, on page 5261-5252, Senator Bonacic comments:
I can see obviously you're troubled by the word "option."
And I'm suggesting to you — and I'm not only suggesting to you, I pointed to the language — the word "option" only refers to lowering the rate below the legal rent rate at owner's option. He can charge the 600, the 625, the 650, or, upon renewal, he can go back the 700. He can never go above the 700, the legal rate.
That's the way it's applied now under the code, and we're just putting it in statute. You're struggling — you know, we've been on the floor almost 15 hours, and we're struggling with language. But what I'm suggesting to you, the way we drafted the language, it's our intent that the landlord never has the right to go above the legal rate. That's what the language says. That's what we intended it to say.
In Les Filles Quartre LLC v. McNeur, 9 Misc 3d 179, 798 NYS2d 899 (Civ Ct 2005), the court made clear that the 2003 amendment was to allow landlords to increase the rent to the legal regulated rent upon renewal subject to contractual agreement of the parties which provides for a lower preferential rent to be charged upon renewal or during the term of the lease:
In 2003 the Rent Stabilization Law was amended to provide that an owner could raise the preferential rent to the" previously established legal regulated rent" on lease renewal with the same tenant. The amendment, Rent Stabilization Law (RSL), N.Y.C. Administrative Code § 26-511(c)(14) provides in pertinent part "where the amount of rent charged to and paid by the tenant is less than the legal regulated rent for the housing accommodation, the amount of rent for such housing accommodation which may be charged upon renewal or upon vacancy thereof may, at the option of the owner, be based upon such previously established legal regulated rent, adjusted by the most recent applicable guidelines increases and other increases authorized by law."
The courts have made an exception to new provision RSL § 26-511(c)(14) authorizing the landlord to raise the preferential rent to the full legal regulated rent on lease renewal. Accordingly, the courts have held that where the original or a prior lease contains a provision wherein the parties agree that the tenant is entitled to renewal leases at the preferential rent for the full length of the tenancy, RSL § 26-511(c)(14) does not negate such a lease provision. Thus in Aijaz v. Hillside Place, LLC, 8 Misc 3d 73, 798 NYS2d 840 (App Term, 2nd Dept 2005), aff'g, 3 Misc 3d 754, 774 NYS2d 662 (Civ Ct, Queens Co, Butler, J. 2004) the Court held that the 2003 amendment permits owners to discontinue a preferential rate upon a renewal lease, but that the amendment does not preclude the renewal periods, or for the life of the tenancy. Similarly in 448 West 54th Street Corp. v. Doig-Marx, 5 Misc 3d 405, 784 NYS2d 292 (Civ Ct, NY Co, Fiorella, J, 2004), the Court held that the 2003 amendment does not prevent the parties from contractually agreeing that the preferential rent will continue during the term of the tenancy, and that such a contractual provision will be given effect. These cases cited Century Operating Corp. v. Popolizio, 60 NY2d 483, 470 NYS2d 346, 458 N.E.2d 805 (1983) and Missionary Sisters of the Sacred Heart v. DHCR, 283 AD2d 284, 724 (1st Dept, 2001) wherein the courts held that specific lease provisions limiting rent concessions or preferential rents to the term of the lease took precedence over the rent stabilization provisions then in effect requiring that renewal leases be based on the preferential rent reserved in the prior lease. Thus, both before and after the 2003 amendment, the courts held that specific lease terms take precedence over the more general "default" rent stabilization provisions governing renewal lease terms and preferential rents.
In Aijaz v. Hillside Place, 8 Misc 3d 73, 798 NYS2d 840 (App Term, 2nd Dept 2005), the court also made clear that the landlord could not be held liable based upon a statutory overcharge in raising the rent upon renewal to the legal regulated rent up from the preferential rent. The court explicitly held that the landlord could be held liable based upon contract if the parties intended for the lower preferential rent to continue upon renewal or for the entire life of the occupancy:
As the court below implicitly ruled, the 2003 amendment was not intended to preclude the parties to a lease or stipulation from agreeing to a rent preference that would endure beyond the term of the lease into renewal periods ( see 448 W. 54th St. Corp. v. Doig-Marx, 5 Misc 3d 405 [2004]; see also Matter of Century Operating Corp. v. Popolizio, 60 NY2d 483 [1983], supra; Matter of Missionary Sisters of Sacred Heart, Ill. v. New York State Div. of Hous. Community Renewal, 283 AD2d 284 [2001], supra). Since plaintiff and defendant's predecessor here agreed upon a preferential rent that would last for the life of the tenancy, plaintiff was entitled to have this term of his lease carried over into all the renewal leases (Rent Stabilization Code [ 9 NYCRR] § 2522.5 [g]; see Matter of Century Operating Corp. v. Popolizio, 60 NY2d at 488). Contrary to defendant's contention, the fact that the renewal leases did not include the preferential rent cannot be deemed a waiver of plaintiff's right thereto ( Matter of Century Operating Corp. v. Popolizio, 90 AD2d 731, 732 [1982], rev'd on other grounds 60 NY2d 483 [1983]). Plaintiff therefore has a cause of action sounding in contract for the refund of the rents that he paid in excess of the agreed-upon preferential rate.
However, plaintiff does not have a cause of action for breach of the rent overcharge statutes. Since the Legislature rejected the Collingwood rule and made preferential rents revocable, the preferential rent does not become the legal regulated or authorized rent, and a collection rent in excess of the preferential rent constitutes only a breach of the agreement of the parties and not an offense against the rent overcharge statutes. Because the statutory amendment is applicable to pending proceedings (DHCR Fact Sheet No. 40), it cannot be found that defendant violated the statutory overcharge prescriptions. Accordingly, we reinstate the first affirmative defense insofar as it alleges a defense to the statutory cause of action.
In 190 Washington Ave. Assoc., Inc. v. Velasquez, Nassau Dist Ct, April 23, 2005, Pardes J., Index No. SP 5422/04, the court rejected the claim that fair market rent played a factor in how much rent the landlord could charge a tenant upon renewal:
The respondents now move to dismiss the non payment petition based on their contention that the "legal regulated rent" as provided in the leases agreements since 1999 have exceeded the Department of Housing and Urban Renewal's (Hud) calculations of "Fair Market Rent" for Nassau and Suffolk County and are therefore "excessive". The respondents urge the court to dismiss the Petition and require "the Petitioner to offer the Respondents a new lease at a monthly rent not to exceed the fair market value . . ."
The petitioner's attorney accurately points out that the respondents have not offered any statutory or case law authority in support of this motion. Rather, counsel for the respondents urges the court to grant the respondents' application based on "fairness". The court must agree with the petitioner that this court does not have the authority to grant such a request. The court finds that had the legislature or the NYS Division of Housing and Community Renewal intended to link "legal regulated rents" to HUD's "Fair Market Rent" calculations, it would have done so.
This court has previously approved a "Rent Payment Option Rider" substantially the same as the rider in the instant proceeding. ( Clinton Realty, LLC v. Beazer, 195 Mis 2d 786 [Nassau Dist Ct. 2003]). The respondents apparently enjoyed the benefit of this reduced rent from 1999 through 2003. Moreover, the respondents apparently chose to enter into a new lease in October, 2004 fully aware that they would no longer have the rent credit option. The respondents are bound by the terms of their agreement.
Accordingly, the respondents' motion to dismiss the petition is denied. The respondents are directed to serve and file an answer to the petition within five days after the service of this order with notice of entry pursuant to
In regard to petitioner's cross-motion for summary judgment, the petitioner has not demonstrated its entitlement to summary judgment on a non-payment proceeding through its submissions ( see, RPAPL § 711). The Court is not able to ascertain the rental amounts owed without the applicable lease and renewal lease in each case. The various Annual Apartment Registration for the Department of Housing and Community Renewal submitted by the petitioner does not provide such proof. Therefore, petitioner's cross-motion is denied. There are issues of fact that require a plenary trial.
Noteworthy is the fact that the respondents' attorney raises new arguments for the first time in its reply affirmation which is improper ( see, Matter of Zimmerman v. Planning Bd. of Town of Schodack, 294 AD2d 776, 742 NYS2d 431, lv denied 98 NY2d 612, 749 NYS2d 4 [3rd Dept 2002]). This Court will disregard respondents' reply affirmation in this regard.
CONCLUSION
Based upon the above, the motion and cross motion are decided as follows:
The motion to dismiss the petitions are denied. Petitioner is entitled to recover the legal regulated rent upon renewal for each tenant provided the amount being sought is the legal regulated rent in accordance with applicable law. The respondents' claims that fair market rent should be considered by the Court is rejected and will not be the subject of any affirmative defense or defense at the time of trial.
Thus, these matters are set down for trial for January 4, 2006 in Civil 2, Room 280 of the First District Court, 99 Main Street, Hempstead, New York, at 9:30 a.m. Respondents are entitled to raise as an affirmative defense the claim that contractually the parties agreed to have a preferential rent apply upon renewal; again the fair market rent argument will not be considered as part of this defense. See Les Filles, supra, and Aijaz, supra.
So Ordered.