Opinion
SC-270-2008.
Decided March 25, 2009.
Plaintiff brought a Small Claim on December 9, 2008 against Klepper and Golt seeking $2975 on an executed lease for an apartment never occupied by the Plaintiff. Defendant Counterclaimed for $4700 on December 15 for "loss of rent, utilities, advertising costs, storage of personal belongings of Ms. Rock, bank charges + processing fees for returned checks (NSF) time/costs related to re rent apartment." Defendant Klepper filed an Amended Counterclaim on December 17, still for $4700, but adding "mailing, late fees attorney costs." No papers were filed by Defendant Golt.
Plaintiff then filed an Amended Small Claim for $4307.00. Plaintiff's Small Claim seeks return of $2625 paid for rent and security deposit plus $53 interest, as well as $1628.53 travel and lodging expenses for coming to Plattsburgh from Buffalo for court proceedings. P Ex 19.
The Uniform City Court Act § 1804 states that the "Court shall conduct hearings upon small claims in such manner as to do substantial justice between the parties according to the rules of substantive law and shall not be bound by statutory provisions or rules of practice, procedure, pleading or evidence. . . ."
Trial was held on January 16, 2009. Plaintiff appeared and testified, as did Defendant Klepper. They both testified in detail about their contacts before Plaintiff traveled to Plattsburgh to view apartments, the apartments shown to Plaintiff, the circumstances and context of executing the two-year Lease on September 19, 2008 for an apartment then-occupied by another tenant, handwritten additions to the lease made by the Defendant, the trip to the bank and payment of security deposit and three months rent, the storage of Plaintiff's personal property in Defendant's building, and other specifics over the 5-6 hours that the parties spent together on September 19. Defendant Klepper, as well as Plaintiff Rock, amply and at length addressed the procedure followed to execute the Lease.
There was no appearance by Defendant Golt, and no other witnesses were called by either party. With the consent of both parties, the Court received all exhibits offered by both parties. Plaintiff's Exhibit No. 1 detailed the damages she sought, including travel expenses. At the conclusion of the trial, the Court reserved decision. Both Rock and Klepper filed additional papers after the trial, although neither requested permission from the Court to do so.
After reviewing all of the testimony and submissions, the Court finds that there is no dispute about the essential facts; there is dispute about the legal consequences of the factual events. The case boils down to the fact that the Plaintiff entered into a Lease agreement with Defendant Klepper during the day on September 19, 2008, spending most of the day with Klepper viewing apartments, going to the bank to pay the security deposit and one month's rent, paying two more months rent, then reviewing and signing an 11 page lease.
That same evening, the Plaintiff reconsidered her decision to sign the Lease. The next morning, September 20, at 8 AM she mailed a letter to Defendant Klepper "rescinding the contract" and also telephoned her. After notifying Klepper in the phone conversation that she would not be moving in, Rock asked for the return of her personal property that was stored the previous day, and the Defendant told her no.
The Lease signed on September 19, 2008 for apartment # 304 at 43 Hamilton Street states on its face that the "lease period" is 9/22/08-9/30/10. On September 19, Rock paid, and was given receipts for, $1000 security deposit, $300 for September rent, $1625 "partial payment on Sept-December (2008), and $1000 partial payment on balance due on Sept-Dec, totaling $3925. The four receipts are Plaintiff's Exhibit 2, and on each Klepper wrote "not refundable if Virginia Demjanenko (Rock) chooses not to move into apt 304 or honor all lease conditions." Both the Plaintiff and Defendant signed each receipt. The Plaintiff stopped payment on the last $1300.
The Plaintiff testified that she felt she had no choice but to sign the receipts, including the non-refundable provisions, because Defendant Klepper "insisted" that she do so, and Klepper had possession of Plaintiff's personal belongings in a storage room.
In the Nature of Claim attached to her Small Claim, and in the September 20, 2008 letter she sent to Klepper notifying Klepper that she requested cancellation of the lease (Plaintiff's Exhibit # 9), Rock claimed that she paid the first $1000, then another $2625 without seeing any lease. Rock claimed that she signed the receipts, carrying the handwritten non-refundable notations "under protest" because Klepper had her belongings and Rock was concerned that she would not have receipts for the sums of money she paid unless she did sign.
Plaintiff also testified, that although the lease provided for one month's rent paid in advance, Klepper told her that it had to be three month's rent because Plaintiff was unemployed. Plaintiff paid the sum. Klepper testified that she did not ask Rock for rent, that it was Rock who wanted to pay the rent for additional months.
According to Plaintiff, on September 19 the Defendant set the commencement of the lease as September 22, eventhough Plaintiff did not request that date, informed the Defendant that she would not be back here from Buffalo to move in by that date, and it would give the current tenant only 48 hours to move out. Klepper testified that she did not "coerce" Rock into a the 9/22 start date, "it made sense, it was a Monday."
The Plaintiff never occupied apartment # 304, nor did she move any of her belongings into it. Plaintiff asserts in her Small Claim and her Exhibit # 9 that she never received a key for apartment # 304. Defendant's Exhibit F, p7 agrees that keys were never provided to Rock, explaining that they "are kept under lock and key at the building and it is customary and reasonable for tenants to get their keys at the scheduled move-in date, which was to be on September 22nd, 2008."
Another person had signed a lease for the same apartment six days earlier on September 13, 2008. Plaintiff's Exhibit 13. Tawnya Silver and Corey Johnson signed a lease for the period 9/13/08 to 9/30/09. Tawyna Silver and Corey Johnson, Mary Johnson and Carol Klepper all executed an Amendment dated September 15, 2008, to the September 13 lease, authorizing Defendant Klepper to show their apartment until September 20 to find replacement tenants for them. At paragraph 4, the Tenants agree to move out by noon on September 20, 2008. D Ex A.
On October 2, 2008, Defendant Klepper, Tawnya Silver and Corey Johnson all signed a "Refund Agreement," which recites a lease period of 9/13/08-9/30/08. It releases these two tenants from their lease on apartment # 304, so long as they agree to use their $1000 security deposit to pay "September rent, utilities + application fee totaling $650.00." Plaintiff's Exhibit 12. Receipt # 635189 dated 10/2/08 carries the notation in Defendant Klepper's handwriting: "original move out scheduled for 9/20/08 delayed move out to 9/30/08 because replacement tenant (Virginia Rock) requested help with September 2008 rent." No testimony by either party at trial supports this assertion. $350 was returned to Tawnya Silver from her $1000 security deposit.
Issue Presented
To decide the question of whether the Plaintiff had the right to rescind the lease, the Court must examine the context of the lease's execution and the language of the lease. The pertinent principles of law applicable to this case include those pertaining to Rescission of Contracts, Landlord-Tenant Rights, Security Deposits, and Unconscionable Leases.
Rescission
The courts in New York have ruled that "there is no hard and fast rule on the subject of rescission under New York law. . . . Rather, the availability of the right of rescission usually depends on the circumstances of the particular case." 16 NY Jur2d Cancellation of Instruments § 13. "Relief in the form of cancellation is a matter within the sound discretion of the court and is granted or withheld by it according to what is reasonable and proper under the circumstances of each particular case." 16 NY Jur2d Cancellation of Instruments § 6. "A lease not executed in accordance with statutory requirements may be repudiated as soon as made by either party." 52 CJS Landlord Tenant § 404.
Unconscionable lease or clause.
NY Real Propery Law § 235-c, subd. 1, states "If the court as a matter of law finds a lease or any clause of the lease to be unconscionable at the time it was made, the court may refuse to enforce the lease, or it may enforce the remainder of the lease without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result."
The NY Court of Appeals has ruled that "as a general proposition, unconscionability, a flexibledoctrine . . . requires some showing of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." Matter of State of New York v Avco Financial Service of New York, 50 NY2d 383, 429 NYS2d 181 (1980).
According to the Federal Court in Williams v Walker-Thomas Furniture Co., 350 F2d 445, 449-450 (1965), "when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract, with little or no knowledge of its terms, it is hardly likely that his consent . . . was ever given to all of the terms. In such a case the usual rule that the terms of the agreement are not to be questioned should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld."
Applying these principles to landlord-tenant cases, the Court in Seabrook v Commuter Housing Co., 72 Misc 2d 6, 8, 338 NYS2d 67 aff'd 363 NYS2d 566 (1972), concluded that a ". . . lessee that has no choice but to sign an unconscionable lease agreement . . . must be protected against the bad bargain he enters into" because "laissez faire . . . has no place in our enlightened society where the lessor and lessee do not deal on equal terms."
In Knudsen v Lax, 17 Misc 3d 350, 842 NYS2d 341 (Co Ct, Jefferson Co 2007), the Court found that a lease contract with "33 terms pre-printed and submitted to the tenant without discussion and with no opportunity given the tenant to participate in the wording of the contract terms was an adhesion contract." The Court continued, stating that "in an adhesion contract, the terms of such are subject to scrutiny for reasonableness' as to whether there was an absence of meaningful choice on the part of [the tenant] together with contract terms which are unreasonably favorable to the [landlord]", citing New York v Avco.
Thus, there are two major elements in determining unconscionability of a lease or its provisions: (1) absence of meaningful choice in the process of entering into the contract and (2) contract terms which are unreasonably favorable to the landlord.
The Lease in this case is 11 pages, single spaced in what appears to be 9 or 10 point font. According to the Handbook on the New York Attorney General's website, the print must be large enough to easily read. NY Civil Practice Law and Rules § 4544 provides that this must be at least 8 point type.
In addition, General Obligations Law § 5-702, requires that every lease "for personal, family or household purposes . . . must be
1. Written in a clear and coherent manner using words with common and every day meanings;
2. Appropriately divided and captioned by its various sections."
Terms unreasonably favorable to Landlord Klepper in instant lease.
There are numerous clauses in the Klepper lease — at least 42 — which unreasonably favor the landlord. A copy of the lease is attached, with the Court's notations enumerating provisions of this nature. Examples are:
Threatening termination "at any time" for violation of any lease condition (# 2), or if the "tenant should be objectionable in his/her conduct by the landlord" (# 25), or "IMMEDIATE TERMINATION" for "nonpayment of rent, utilities or other monies due to owners" (# 27).
Requiring the tenant to give 90 days notice of decision not to renew the lease, or it "will automatically renew" (# 3).
Threatening "immediate eviction" for "failure to honor their financial obligations or violated their lease agreement" (# 8); "immediate eviction" instead of the court process for eviction (# 26) whenever the tenant leaves the utility bill in the landlord's name for more than 3 days (# 19), does not vacate by the 4th of the month if did not pay the rent on the 1st (# 24), or for failure to immediately pay labor for cleaning and repairs (# 30).
Asserting that the "right of 30 day eviction is insured to the landlords in their sole, absolute, discretion" (# 28).
Claiming that any tenant property remaining 30 days after an "eviction notice" "shall be disposed of at tenants' expense" (# 27).
With respect to the condition of the apartment, requiring that the tenant salt and shovel porches, walkways and stairs, and pay for the shovels and salt (# 13); defrost the freezer weekly (# 40); keep all food in sealed containers (# 40); have no soiled dishes in the sink (# 39); use no abrasive cleaners (# 39); pay for professional carpet cleaning (# 37); pay the landlord all costs "to reinstate the apartment to its original condition at the time of move-in" (# 13).
Numerous penalties are set forth in the Klepper lease: "minimum of 3 months rent . . . if the tenant fails to honor the lease conditions, financial obligations or give 90-day written notice of non-renewal of lease" (# 4); $50 per month "difference in rent" if the tenant does not complete the lease period (# 5); costs plus $45 per hour for landlord time to sublet or re-rent (# 6); forfeiture of all payments if tenant does not move in, or fails to honor the lease (# 9); $25 per month for utilities charged to the landlord (# 16); a fee for "administration of bills" at $35 per hour, with one hour minimum (# 17); $5/day late fee on utility bills (# 18); $5/day late fee on rent (# 7); $45/hour to landlords for cleaning, sorting and removal of garbage, debris, returnables, or recyclables (# 22) and (# 38); $45/hour penalty to landlords "for administration, processing, cleaning, and/or conflict resolution regarding the apartment" (# 29); and charging additional rent for any visitor who remains more than 3 days (# 1).
The tenant's right of privacy is limited by lease requirements: requiring weekly inspection on Tuesday at 10 PM for "open food, garbage, debris, returnables or recyclables in/or outside the apartment" (# 14 and 35); providing that the landlord can "enter at any time to insure safety of all occupants" (# 20), and enter with "no prior notice . . . if tenants fail to remove daily garbage . . . (# 21) or if the landlord has "reason to believe" that the tenant "may be using the apartment for an unauthorized purpose (# 33) or if the tenant is away for more than 3 days (# 34); prohibiting "large amounts of any type of alcohol" (# 31); prohibiting more than one dinner guest at a time (# 32).
Several waivers of the tenant's rights are contained in the lease: that the landlord not keep the security deposit in an interest-bearing account (# 10); that the tenants are responsible for "any damages to premises property, appliances furnishings provided by the landlords" (# 29), and the lease further states that the "tenants agree not to hold landlord liable for any property owned by tenant if damaged, lost or stolen during their tenancy." (# 36) and that the tenants "understand that the landlords/owners are not liable and do not have any obligation to reimburse me for any loss to any of personal property due to damage, neglect, or if any item is considered missing or stolen." (# 41); and the lease concludes "I agree not to hold landlords/owners responsible for any personal injury I OR ANYONE may have during my tenancy. . . . Furthermore, we agree to waive all rights to any and all personal injury claims against landlords and owners. . . ." (# 42).
The Law
Security Deposits
Security deposits may be used only for three purposes: (1) reimbursement for the reasonable cost of repairs beyond normal wear and tear, (2) damage to the apartment caused by the tenant, and (3) reimbursement for unpaid rent. The lease in this case states at page 2 in the paragraphwhich begins "Security/Cleaning/Damage Deposit is NOT for last month's rent,""Tenants will NOT be entitled to any refund of their security/cleaning and damage deposit, if they fail to honor all lease conditions and financial obligations for their entire lease term and all renewals. In addition, tenants agree to pay landlords any and all related costs incurred by them to reinstate apt. # 304 to its original condition at time of move-in and the cost to re-rent apt # 304 to a qualified suitable tenant for the remaining lease period at the current market rate." This goes beyond what the law permits.
The four receipts provided to Rock for payments made on September 19, each carry a handwritten notation by Klepper that the monies, including the security deposit, are non-refundable if she does not take the apartment.
By law, the tenant is not responsible for "normal wear and tear," and the landlord cannot retain the security deposit for cleaning or repainting that are due to "normal wear and tear." The Klepper lease ignores this principle and requires that the tenant "reinstate" the apartment "to its original condition at the time of move-in." Late fees.
Several courts have addressed specific late fees, at times finding them to be excessive, unconscionable and unenforceable. In Spring Valley Garden Associates v Earle, 112 Misc 2d 786, 447 NYS2d 629 (Co Ct, Rockland Co 1982), a late fee of $50 if rent of $405 per month was over ten days late was found to be "liquidated damages and a penalty which cannot stand." That Court also ruled that the same late fee "is unconscionable and is void." A 5% per month late rent "surcharge," amounting to 60% per year was "unreasonable and confiscatory in nature and therefore unenforceable." 943 Lexington Avenue, Inc. v Niarchos 83 Misc 2d 803, 373 NYS2d 787 (App Term, 1st Dept 1975). A late charge equal to 4% per month, amounting to 49% per year "is clearly a penalty disproportionate to any probable loss. Accordingly, the court finds this provision of the lease unenforceable." Raanana Realty Corp. v Louis J. Rotondi Restaurant Corp., 1/9/91 NY Law Journal 23, col 3 (1st Judicial Dept, NY Co). Late fees of $32.50 per month on rent of $650 per month (5%) were struck down as unreasonable, excessive and unenforceable in Parkchester Apartments Co v Lewis, 4/22/98 NY Law Journal (1st Judicial Dept, Bronx Co).
In this case, $875/month rent was due on the 1st of each month. The Lease provides for a late fee at $5 per day beginning on the 2nd. In a 30 day month, the late fee could be $150 per month, or 17% of the rent.
Apartment not available on start date of lease.
When the landlord fails to deliver possession of the leased premises at the beginning of the term, the tenant has the right to rescind the lease and to recover the consideration paid, including any rent paid in advance. Real Prop Law § 223-a, 74 NY Jur2d Landlord and Tenant § 224.
The Plaintiff asserts that she can rescind the contract because the previous tenant had not moved out by September 22. (1) The Plaintiff paid rent and security deposit and signed a Lease for # 304 effective 9/22/08 and then changed her mind. (2) The Plaintiff notified the landlord on September 20 that she would not being moving in, and she took no action to move in. (3) Klepper never provided keys to Rock. (4) Tawnya Silver continued to be the tenant of # 304 until the last day of September, and paid rent for that time period.
Waivers
(1) McKinney's General Obligations Law § 5-321unequivocally prohibits any lease provision from exempting a landlord from liability for injuries caused by the negligence of the landlord.
Every covenant, agreement or understanding in or in connection with or collateral to any lease of real property exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his agents, servants or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed to be void as against public policy and wholly unenforceable.
(2) "A tenant cannot waive the requirement that a landlord deposit the tenant's rent security in a bank interest bearing account for the tenant's benefit and any agreement between the tenant and the landlord for that purpose is entirely void." 1971, Op.Atty.Gen. Dec. 21. If the building has six or more apartments, the security deposit must be placed in an interest-bearing account.
Right of Privacy
The Landlord Tenant Handbook on the website of the New York State Attorney General recognizes both a tenant's right to privacy and a landlord's right to enter at a reasonable time with reasonable prior noticeforthree purposes: (1) necessary or agreed upon repairs or services, (2) in accordance with the lease and (3) to show the apartment. It comments "a landlord may not abuse this limited right of entry or use it to harass a tenant."
Damages
Compensatory damages are those which are "just indemnity for the wrong which has been done the party and no more, whether the action is based on a breach of contract or upon a tort." 36 NY Jur2d Damages § 2. Recoverable damages include "[r]easonable expenses incurred as a natural consequence of a tortious act or breach of contract. . . ." 36 NY Jur2d Damages § 88.
Conclusions of Law
The Court finds the following as matters of law:
The Lease violates the requirements of General Obligations Law (GOL) 5-702 regarding division of subject matter and captions.
The $5 per day late charge is unreasonable, excessive and unconscionable as a matter of law.
3.The security deposit interest waiver is illegal and unenforceable.
4.There is insufficient evidence that the Plaintiff is entitled to interest on her security deposit, as no proof was presented at trial regarding the number of apartments in the building.
5.The waivers of landlord liability are illegal and unenforceable.
6.The "right of entry" paragraphs of the Klepper lease exceed the landlord's legal rights.
7.The tenant, Rock, had no meaningful choice in the lease terms.
8.The Lease overwhelmingly and unreasonably favors the landlord.
9.The Lease in its entirety is procedurally and substantively unconscionable.
10.The Plaintiff is entitled to rescission of the lease and return of the monies she paid.
11.Plaintiff is entitled to her reasonable expenses in retrieving her personal property from Defendant Klepper.
12.Time spent attending Court does not qualify as "damages" within the meaning of the Small Claims law.
13.Andrew Golt defaulted by failing to appear or answer, and the January 16, 2009 trial served as an inquest into the amount of his damages.
14.Defendant Klepper's Counterclaims are denied in their entirety.
Now, therefore, it is hereby
ORDERED that Judgment is awarded to the Plaintiff against Defendants Carol Klepper and Andrew Golt as follows:
1.Penalty of $50 for violation of GOL 5-702.
2.Return of security deposit and rent in the amount of $2625.00, with interest of 9% from September 20, 2008 to the date of this Decision and Order, in the amount of $120.39.
3.Filing fee of $20.00 and transcript of judgment fee of $6.00.
4.Travel expenses for one round-trip mileage ($478.53) and tolls ($24.75) from Amherst, NY to Plattsburgh, with one night lodging in Albany ($118.96) to recover
her personal property held by the Defendant in January, 2009, in the amount of $622.24. The remaining reimbursement requests have been considered and are denied.The total Judgment awarded to the Plaintiff against the Defendants Klepper and Golt is $3443.63.