Opinion
250670/05.
Decided July 9, 2009.
Rappaport, Hertz, Cherson Rosenthal PC by Robert I Miller, Esq., Petitioner.
Fishman Neil, LLP by David Ratner, Esq., Respondent.
Respondent moves for an order: (a) restoring this matter to the Court's calendar, (b) vacating the stipulation dated October 31, 2005, (c) dismissing the licensee holdover proceeding, and (d) granting such other relief as is just and proper. Based on the Notice of Appearance and Motion (1), Affirmation in Opposition (2), and Affirmation in Reply (3), the Court decides as follows.
FACTS
As of February 2005, Respondent occupied a rent-stabilized apartment in a building owned by Petitioner. Respondent had been living in the apartment with the tenant of record, and continued to occupy the apartment after the tenant of record died. In February 2005, Petitioner commenced the instant licensee holdover proceeding against Respondent. The proceeding was settled by a so-ordered, two-attorney stipulation of settlement on October 31, 2005. Pursuant to the stipulation, Respondent agreed to vacate the apartment temporarily, during which time Petitioner would renovate the subject apartment. After Petitioner completed renovations, Respondent would re-occupy the apartment at a non-rent-regulated market lease for one year at a rate of $1000.00 per month, renewable for a second one-year period at $1050.00 per month. Both parties carried out their obligations under the stipulation until August 20, 2007, at which point Respondent attempted to alter the second renewal lease. Petitioner refused to accept Respondent's proposed changes. However, Petitioner collected Respondent's rent payments from the expiration of the first signed renewal lease on August 31, 2007 until April 2, 2008, thereby creating a month-to-month tenancy. In April 2008, Petitioner commenced a second holdover proceeding against Respondent under Index No. L T 251170/08. Respondent moved to dismiss the 2008 holdover arguing, in part, that the 2005 stipulation was void as against public policy. This Court dismissed Respondent's motion without prejudice, anticipating that the parties would reopen the instant case and that Respondent would move to vacate the stipulation on the grounds initially raised in the 2008 proceeding.
STIPULATION IS VOID AS AGAINST PUBLIC POLICY
The Court grants Respondent's motion to vacate the October 31, 2005 stipulation as void as against public policy. The stipulation in effect evades the rent stabilization scheme and subverts the protections afforded by rent stabilization. "RSC § 2520.13 provides that [a]n agreement by the tenant to waive the benefit of any provision of the RSL or this Code is void'" ( Haruvi v Punt, 2008 WL 2481879 [NY Sup] [Trial Order]). Moreover, the First Department has emphasized that "parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity of the Rent Stabilization Law" ( Haruvi, 2008 WL 2481879, citing Drucker v Mauro , 30 AD3d 37, 814 NYS2d 43 [1st Dept 2006]; see also Jazilek v Abart Holdings LLC ,10 NY3d 943, 862 NYS2d [2008]; Ruxton Towers, LP v Floratos, 23 Misc 3d 22, 877 NYS2d 818 [App Term, 1st Dept 2009]; Georgia Props. v Dalsimer ,39 AD3d 332, 853 NYS2d 41 [1st Dept 2007]; Riverside Syndicate v Munroe ,10 NY3d 18, 853 NYS2d 263).
The Court recognizes that the public policy argument raised by Respondent could have been decided in the 2008 holdover proceeding. However, since the stipulation in question settled the 2005 holdover proceeding, voiding the stipulation in the 2008 case would leave Respondent's status in the instant case pending. Judicial economy therefore calls for a ruling on the validity of the 2005 stipulation in the instant proceeding.
In Riverside Syndicate, the Court of Appeals reiterated this principle in the context of a so-ordered, two-attorney stipulation of settlement. The Court stated that "[a]greements like the one at issue here distort the market without benefitting the people that rent stabilization laws were designed to protect" ( Riverside Syndicate at 23). Further, in Georgia Props., the First Department asserted that parties are prohibited" from making private agreements to effectively deregulate applicable housing units'" ( Georgia Props., 39 AD3d at 334, quoting 390 W. End Assoc. v Harel, 298 AD2d 11, 16 [1st Dept 2002]). "Deregulation of apartments is only available through regular, officially authorized means [and] not by private compact'" ( Georgia Props., 39 AD3d at 334, quoting Draper v Georgia Props., 94 NY2d 809, 811, 701 NYS2d 322).
The stipulation at issue in the instant case was the product of negotiations and was so-ordered by this Court. However, in exchange for its benefits, Respondent forfeited any succession rights she may have had. By waiving Respondent's right to succession and calling for Respondent to vacate the apartment temporarily, the stipulation effectively removed the apartment from rent-regulated status. Therefore, the stipulation of settlement is void as against public policy. For purposes of voiding the stipulation, it is immaterial that Respondent was not a tenant of record at the time that the stipulation was created. In Jazilek, the Court of Appeals reasoned that "[a]lthough tenant was not of-record' upon entering the agreement, the so-ordered stipulation violates the Rent Stabilization Code and is void as against public policy" ( Jazilek, 10 NY3d at 944, citing Riverside Syndicate, 10 NY3d 18).
Additionally, there is evidence to suggest that the building at issue received J-51 tax abatements at the time that the parties entered into the stipulation. "[A]ll apartments in buildings receiving J-51 tax benefits are subject to the RSL during the entire period in which the owner receives such benefits" ( Roberts v Tishman Speyer Props., LP , 62 AD3d 71 , 81, 874 NYS2d 97 [1st Dept 2009]; see also 518 E. 13th Owner, LLC v Ellis , 22 Misc 3d 446, 449, 867 NYS2d 657 [Civ Ct, NY County 2008]). Petitioner could not have deregulated any apartment in the subject building while receiving J-51 tax benefits ( see generally Roberts, 62 AD3d 71; 518 E. 13th Owner, 22 Misc 3d 446; Denza v Independence Plaza Assocs., LLC, 2009 WL 979643 [NY Sup] [Trial Order]), thereby providing another reason to void the stipulation.
Since the apartment at issue was subject to rent stabilization prior to the stipulation and the stipulation is void as against public policy, the apartment continues to be covered by the rent stabilization law ( see Haruvi, 2008 WL 2481879; Riverside Syndicate, 10 NY3d at 24).
RESPONDENT'S TENANCY STATUS
Since the Court holds that the 2005 stipulation is void as against public policy, Respondent's concession contained in the stipulation that she was a licensee is also void ( see Yucekus v 42-25 43rd Owners Corp., 2008 WL 4752829 [NY Sup, Queens County] [holding that subleases, and waivers of rent regulatory rights contained in the subleases, were void as against public policy]). Respondent argues that since the Court is voiding the stipulation, she should automatically become a rent-stabilized tenant and the instant licensee holdover proceeding should be dismissed. The Court rejects Respondent's argument that Petitioner has in effect made Respondent a tenant by offering her a lease, because by contravening the rent stabilization law, the lease is also void as contrary to public policy ( see Drucker, 30 AD3d at 45 ["any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void" (internal citation omitted)]).
However, Petitioner created a landlord-tenant relationship with Respondent by accepting Respondent's rent payments from the expiration of the signed renewal lease on August 31, 2007 until April 2, 2008. "When a landlord accepts rent after the expiration of a lease a month-to-month tenancy is created (RPL 232-c)" ( Baginski v Lysiak, 154 Misc 2d 275, 276, 594 NYS2d 99 [App Term, 2d 11th Jud Dists 1992]; see also Jessamy v Waltonsteed, 13 Misc 3d 128 (A), 824 NYS2d 754 [App Term, 9th 10th Jud Dists 2006]). As in Martine Assocs., LLC v Donahoe, Petitioner "did not commence this proceeding immediately upon the expiration of the lease but instead continued the tenancy for several months following the lease's expiration" ( 11 Misc 3d 129 (A), 816 NYS2d 697 [Table] [App Term, 9th 10th Jud Dists 2006]). Petitioner's acceptance of monthly rent payments effectively "vested tenant with new tenancy rights" ( Id.). Petitioner also acknowledged respondent's tenancy status in the April 2, 2008 Notice of Termination (Notice of Appearance and Notice of Motion, Exhibit H ["you have failed to execute a valid lease renewal; thereby creating the month to month tenancy which is terminated as herein]). Therefore, Respondent is recognized as a tenant of the rent-stabilized Apartment at the regulated rent required by law.
The Court does not require a succession hearing to determine Respondent's tenancy status. Had the relationship between the partiesbeen based solely onthe voided stipulation and voided lease, then the Court would have ordered a succession hearing. However, since Petitioner admittedly made respondent a month-to-month tenant by accepting rent payments in Respondent's name, Petitioner vested Respondent with tenancy rights and a created a new landlord-tenant relationship. Since the apartment is rent stabilized, Respondent will be covered by rent stabilization. This case is distinguishable from Haruvi in which the Supreme Court left the issue of succession for future determination. Unlike in the instant case, Respondents claiming succession in Haruvi had not established tenancy rights in their own names independent of the voided stipulation.
The Court need not and does not determine, at this time, what the legal rent for the apartment should be.
CONCLUSION
Based on the above, the Court grants Respondent's motion to vacate the October 31, 2005 stipulation as void as against public policy. Respondent is now recognized as a rent-stabilized tenant of the subject apartment at the regulated rent required by law. Therefore, the instant licensee holdover proceeding is dismissed. Since a new, rent-stabilized tenancy was created, and there is no current lease between the parties providing for attorneys' fees, Respondent's request for attorneys' fees is denied. This constitutes the Order of the Court.