Opinion
106687/07
Decided April 11, 2008.
Lynn Armentrout, Esq., New York, New York, for Plaintiff.
Borah, Goldstein, Altschuler, Schwartz Nahins, P.C., By: Jeffrey R. Metz, Esq., New York, New York, for Defendant.
Plaintiff Tycho Von Rosenvinge, tenant of record for a rent stabilized apartment, seeks a declaratory judgment that he is entitled to renew his lease at a preferential rent. Defendant Wellington Fee, LLC, the owner and landlord, seeks to begin charging plaintiff the legal regulated rent. Defendant makes this pre-answer motion, pursuant to CPLR 3211 (a) (7) or CPLR 3211 (c), to dismiss the complaint. Alternatively, defendant moves to extend its time to answer the complaint, pursuant to CPLR 3211 (f). Plaintiff cross-moves for summary judgment pursuant to CPLR 3212.Because both parties agree that the questions before the Court involve pure points of law, this Court converted each motion to a motion for summary judgment under CPLR 3211 (c) ( see interim decision of September 17, 2007) and afforded the parties a schedule for the submission of additional papers.
BACKGROUND
Plaintiff's apartment is governed by the Rent Stabilization Law (RSL) of 1969 (Administrative Code of City of NY § 26-501, et seq.) and the Rent Stabilization Code (RSC) ( 9 NYCRR 2520.1, et seq.). Plaintiff renewed his lease three times. The first lease and each of the three renewals offered a preferential rent. A proposed lease, offered by defendant, provided for rent to be set at the legal regulated rent. Plaintiff rejected the proposed fourth renewal lease and commenced this action.
In the complaint, plaintiff seeks a declaratory judgment that the preferential rent established pursuant to the original lease remains in full force and effect and an order directing the landlord to issue a renewal lease based on the preferential rent.
I
The RSC defines a preferential rent as a rent which a landlord agrees to charge which is lower than the legal regulated rent the landlord could otherwise lawfully collect under the RSL ( 9 NYCRR 2521.2 [a]). The rule used to be that, where a landlord was charging a preferential rent, the landlord could not raise the rent to the full legal regulated rent in lease renewals for that tenant, but would have to wait until a vacancy and a new tenant to collect the full legal regulated rent. This rule was somewhat modified in Matter of Missionary Sisters of the Sacred Heart, Ill v New York State Div. of Hous. and Community Renewal ( 283 AD2d 284 [1st Dept 2001]), which held that where a lease specifically provides that the preferential rent may be raised to the full legal regulated rent on renewal, the preferential rent may be raised to the legal regulated rent accordingly.
In 2003, as recognized by several courts, the holding in Missionary Sisters was codified by a RSL amendment, which permitted a landlord to terminate a preferential rent at the time of lease renewal and charge the legal regulated rent ( see Aijaz v Hillside Place, LLC , 8 Misc 3d 73, 75-76 [App Term, 2d Dept 2005], affd in part, revd in part on other grounds 37 AD3d 501 [2d Dept 2007]; Matter of Sugihara v State of New York Div. of Hous. and Community Renewal Off. of Rent Admin., 13 Misc 3d 1239[A]; 2006 NY Slip Op 52186[U], *6 [Sup Ct, NY County 2006]; 448 W. 54th St. Corp. v Doig-Marx , 5 Misc 3d 405, 407 [Civ Ct, NY County 2004], affd 11 Misc 3d 126[A], 2006 NY Slip Op 50199[U] [App Term, 1st Dept 2006]).
The amendment 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 any other increases authorized by law
(Administrative Code § 26-511 [c] [14]).
Although the 2003 amendment permits owners to discontinue a preferential rent and assume charging the legal regulated rent upon a renewal lease, it does not preclude a landlord and tenant from agreeing to a preferential rent for a designated time period ( see Colonnade Mgt., LLC v Warner , 11 Misc 3d 52, 53 [App Term, 1st Dept 2006]). Where the original lease or a renewal lease contains a provision that the tenant is entitled to further leases at the preferential rent for the full length of the tenancy, the 2003 amendment does not negate such a provision ( id.; Matter of Romero v New York State Div. of Hous. and Community Renewal , 16 Misc 3d 484 , 488-489 [Sup Ct, NY County 2007]; Sugihara, 2006 NY Slip Op 52186[U], *6; Les Filles Quartre, LLC v McNeur , 9 Misc 3d 179, 183 [Civ Ct, NY County 2005]; Aijaz, 8 Misc 3d at 76). "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" ( 764 Madison Ave. LLC v Risse , 17 Misc 3d 330, 334 [Civ Ct, NY County 2007]).
Therefore, the determinative question here is whether the lease provides that the preferential rent must be continued throughout plaintiff's tenancy. The initial lease, starting a rental term on May 1, 2002, includes a "Preferential Rent Rider," that provides the following.
The monthly regulated rent for this apartment is $4,440.74. Renter acknowledges that this agreement shall in no way affect the monthly legal regulated rent for the subject apartment. Owner reserves the right to calculate the rental amount for future vacancy lease for this apartment based upon this monthly legal regulated rent.
Instead of the legal regulated rent set forth above, Owner agrees to charge and Renter agrees to pay a monthly preferential rent of $3,975.00 . . . If Renter chooses to renew the terms of this lease, this preferential rent amount, plus all other lawful increases, shall be used to calculate all applicable increases to establish the renewal rent. Thereafter, each successive renewal rent shall be calculated based upon increases to the most recently established renewal rent for as long as the Renter remains in occupancy
(Notice of motion, Ex. 2).
The initial lease expressly provides that the tenant will be charged the preferential rent for as long as he remains in occupancy. Similar language is found in leases in other cases where the court determined that the landlord agreed to charge a preferential rent for the duration of the tenancy ( see Rosenshein v Heyman, ___ Misc 2d ___, 2007 NY Slip Op 27536, *2 [App Term, 2d Dept, 2d and 11th Jud Dists 2007] ["during the term of the tenant's occupancy"]; Romero, 16 Misc 3d at 485 ["during the term of the tenant's occupancy"]; Sugihara, 2006 NY Slip Op 52186[U], *1 ["all lease extensions after the first year"]); 45-55 Realty LLC v Covin ,13 Misc 3d 1208[A], 2006 NY Slip Op 51728[U], *1 [Civ Ct, Kings County 2006] [all tenant's increases will be taken off preferential rent amount]).
The first renewal lease was for the one year term May 1, 2003 through April 30, 2004. Nothing more is said about that lease, and no copy is provided. The second renewal lease was for the two year term May 1, 2004 through April 30, 2006. It provided that the maximum legal rent was $4,529.55, and the following.
Tenant acknowledges and agrees that the current preferential rent of $3,649.40 may be increased by orders of the Rent Guidelines Board upon the renewal of this lease, if any, and at any time pursuant to order to the State Division of Housing and Community Renewal or by mutual written agreement between Tenant and Owner. In addition, Tenant acknowledges and agrees that Owner is entitled to collect increases on the current preferential rent pursuant to Section 421-a of the Real Property Tax Law . . .
It is further understood and agreed that in all subsequent agreements by Tenant's successors in tenancy, Owner shall be entitled to all lawful rent increases base [sic] on the current maximum legal regulated of [ sic] $4529.55 (1 year increase), increased by . . . written agreement between the Tenant and Owner, during this preferential tenancy
(Notice of motion, Ex. 3).
The second renewal lease provides that the tenant's successors, but not the tenant, will be charged rent increases based on the legal regulated rent.
The third renewal lease was for the one year term May 1, 2006 through April 30, 2007. It provides the following.
Tenant acknowledges and agrees that the current maximum legal regulated rent ("Legal Rent") for the apartment is $4733.38.
Tenant further acknowledges and agrees that:
1) Tenant's current rent of $3649.40 reflects a temporary rent concession to the Tenant ("Preferential Rent") which may be increased pursuant to or by mutual written agreement between the Parties.
2) In all subsequent lease renewal agreements, Owner shall be entitled to all lawful rent increases based on the Legal Rent.
(Notice of motion, Ex. 4).
Before the third renewal lease expired, defendant sent plaintiff the fourth renewal lease for a term starting on July 1, 2007. The fourth renewal lease charged the maximum legal regulated rent of $4,863.55, plus increases pursuant to one or two year renewals and other charges. For a one-year renewal the rent was $5,640.05 and for a two-year renewal the rent was $5,785.06.
Unlike the previous leases, the third renewal lease provides that the legal rent will be charged in subsequent renewals. Although he signed the third renewal lease, the tenant argues that the provision about charging the legal regulated rent is not effective, and that the landlord must base the rent on the previously charged preferential rent. The landlord argues that the 2003 amendment allows it to cease charging the preferential rent and start charging the legal regulated rent.
In general, leases, like other contracts, must be interpreted in accordance with the intent of the parties ( Matter of Century Operating Corp. v Popolizio, 60 NY2d 483, 489; United W. LLC v Margulies, 12 Misc 3d 1159 [A], 2006 NY Slip Op 50971[U], *2 [Civ Ct, NY County 2006], affd 16 Misc 3d 132[A], 2007 NY Slip Op 51432[U] [App Term, 1st Dept 2007]). However, a rent stabilized lease is not read exactly in the same manner as an unregulated leasing agreement ( First Lenox Terrace Assoc. v Hill , 13 Misc 3d 488, 490 [Civ Ct, NY County 2006]), but must be read in accordance with the law regulating the tenancy.
RSL and RSC impose very specific requirements regarding the leasing of rent stabilized apartments ( 390 W. End Assoc. v Harel, 298 AD2d 11, 14 [1st Dept 2002]). The purpose of these laws is to protect the tenant and tenancies in general ( First Lenox, 13 Misc 3d at 490). A landlord and a tenant may not make an agreement that goes against the scheme of rent regulation, even if favorable to the tenant ( id.), although, provided that the laws are adhered to, a tenant may be granted greater rights ( Minick v Park, 217 AD2d 489, 490 [1st Dept 1995]). In addition, the tenant cannot waive a benefit of the rent stabilization law ( 9 NYCRR 2520.13). An agreement by the tenant to waive the benefit of any provision of RSL or RSC is void ( see Georgia Properties, Inc. v Dalsimer , 39 AD3d 332, 334 [1st Dept 2007]; Riverside Syndicate, Inc. v Munroe , 39 AD3d 256, 257 [1st Dept 2007], affd 10 NY3d 18 ; United, 2006 NY Slip Op 50971[U], *3).
RSC at 9 NYCRR 2522.5 (g) (1) requires a renewal lease to be offered on thesame terms and conditions as the expiring lease, except where the landlord can demonstrate that the change is necessary in order to comply with a specific requirement of law or regulation applicable to the building or the lease or with the approval of the Division of Housing and Community Renewal (DHCR) ( see First Lenox, 13 Misc 3d at 489-490; Sugihara, 2006 NY Slip Op 52186[U], *5; United, 2006 NY Slip Op 50971[U], *3). The lease may not seek "to create a new tenancy obligation not expressed in the earlier lease" ( East Eleventh St. Assocs. v Breslow, 174 Misc 2d 994, 995 [App Term, 1st Dept 1997], affd 256 AD2d 110 [1st Dept 1998]). The tenant cannot be forced to accept any new term or condition ( id.).
On the one hand, as stated above, landlords and tenants can agree that the 2003 amendment will not apply to their lease. On the other hand, there is a limit to the extent that the lease can go against the RSL. Consequently, in the case of rent stabilized leases, the general rule of lease construction does not always apply, as the parties' intentions may not control.
In this case, the parties' intentions control in regard to the original lease that provided that the tenant would pay a preferential rent for as long as he remained a tenant. The parties' intentions do not control in regard to the renewal lease that removes the preferential rent. This renewal lease takes away a benefit from the tenant. Benefits given to a rent stabilized tenant cannot be withdrawn by a subsequent lease except under certain circumstances that do not apply here. Once the landlord has agreed that a tenant will pay preferential rent as long as he is a tenant, the landlord may not afterwards start charging the legal regulated rent ( Sugihara, 2006 NY Slip Op 52186[U], *5; United, 2006 NY Slip Op 50971[U], *3). This is the case even where the tenant signs a renewal lease that provides for the legal regulated rent and pays such rent.
In Aijaz v Hillside Place, LLC (3 Misc 3d 754, 755 [Civ Ct, Queens County 2004]; affd as mod Aijaz, 8 Misc 3d 73), the original 1997 lease provided that the preferential rent would last for the term of the tenant's occupancy. Although the tenant twice entered into renewal leases offering the legal regulated rent, the court ruled that, because of the original lease, the landlord had to charge the preferential rent ( Aijaz, 8 Misc 3d at 76). In addition, the court found that the tenant had a contract cause of action for the refund of the rents paid in excess of the agreed-upon preferential rent ( id.). In New Haven Place v Beaufort (9 Misc 3d 1130[A], 2005 NY Slip Op 51858[U], *3 [Nassau County Dist Ct 2005]), the fact that the renewal lease did not include the preferential rent was not "deemed a waiver of plaintiff's right thereto" and the plaintiff had a cause of action sounding in contract for the refund of the rents that he paid in excess of the agreed-upon preferential rate.
In United (2006 NY Slip Op 50971[U], *3), the initial lease provided that the preferential rent would last for the duration of the tenancy. Although the tenant signed a renewal lease charging the legal regulated rent, the court concluded that the landlord had to continue to offer the preferential rent. One reason for the court's decision was that the tenant rejected the renewal lease before the renewal term began. Nonetheless, it is certain that even if the tenant had not rejected the lease until after the renewal term began, the decision would have been the same. The court cited the rules that the renewal lease had to be on the same terms as the original lease and that the tenant could not waive the benefit of the rent stabilization law. In Rosenshein (2007 NY Slip Op 27536, *2-3) neither the original lease, nor the first renewal, attached a preferential rent rider. The second renewal included a preferential rent rider providing that preferential rent would be charged for the length of the tenant's occupancy. Nine years later, the landlord advised the tenant that it was discontinuing the preferential rent, claiming that this was its right under the 2003 amendment, and offered to renew tenant's lease at the claimed legal regulated rent. The court found for the tenant on the basis that, where parties had agreed that a preferential rent would last for the life of the tenancy, the 2003 amendment was not intended to and does not abrogate the agreement of the parties.
In East Side Mgrs. Assoc. Inc. v Goodwin (18 Misc 3d 1102[A], 2007 NY Slip Op 52374[U], *1 [Civ Ct, NY County 2007]), the parties contracted for a rent preference for an unspecified term. The court determined that the lease was ambiguous regarding the duration of the preferential rent and resolved the ambiguity against the drafter, the landlord. The court interpreted the lease to provide that the landlord was obligated to continue charging the preferential rent.
In Friendship Realty LLC v Guo Nong Li, NYLJ 4/8/08 p. 26, col. 1 (Civ Ct. Housing Pt NY Cty. D. Cohen, J. 3/14/08), a stipulation of settlement between the landlord and the prior tenant, the father of the current tenant, gave tenancy rights to the current tenant and obligated the landlord to a one year rent stabilized lease at a preferential rent. A rider to the lease provided
If Renter chooses to renew the terms of this lease, this preferential rent amount, plus all other lawful increases, shall be used to calculate all applicable increases to establish the renewal rent. Thereafter, each successive renewal rent shall be calculated based upon increases to the most recently established renewal rent for as long as the Renter remains in occupancy.
In another clause of the lease, the parties incorporated the stipulation of settlement by reference and provided that it would control in the event of any inconsistency. Three subsequent renewal leases, signed by the parties, calculated a new legal regulated rent but made no reference to the preferential rent; anomalously, tenant usually paid and landlord accepted lower amounts than even the preferential rent. The Court dismissed the non-payment proceeding on the ground that the rent demanded was erroneous, because it was based on the higher, legal regulated rent. The court found that there was no conflict between the stipulation and the first lease; it held that the provision in the first lease, that provided for the preferential rent for the duration of the tenancy, continued to control.
In contrast, where the lease expressly limits the duration of the preferential rent, the landlord may charge the legal regulated rent after the period expires. In Les Filles ( 9 Misc 3d at 185), the initial lease provided that the preferential rent rate was for one renewal lease term, not for the entire term of the tenancy. In 764 Madison ( 17 Misc 3d at 331), the landlord was allowed to start charging the legal regulated rent after charging the preferential rent for more than 10 years, as the leases contained no provision that the preferential rent would last the entire tenancy ( see also Riverside Syndicate, Inc. v Munroe, 10 NY3d 18; Missionary Sisters, 283 AD2d at 289; Cromwell Assoc. v Ortega, 12 Misc 3d 141[A] [App Term, 1st Dept 2006]; Savoy Park Owner, LLC v West, 2008 NY Slip Op 50590[U], * 4 [Civ Ct, NY County 2008]).
The Court concludes that the third renewal lease does not constitute a legally permissible agreement that the landlord may charge the legal regulated rent. Such a provision goes against the statutory scheme of rent stabilization.
II
The landlord argues that DHCR has primary jurisdiction to determine this matter. The doctrine of primary jurisdiction is intended to co-ordinate the relationship between courts and administrative agencies, and to enable the court to defer to an agency that has specialized knowledge in that field ( 150 Greenway Terrace, LLC v Gole , 37 AD3d 792, 792-793 [2d Dept 2007]). The agency has the initial opportunity to address an issue which is within the area of its expertise, and the court may thus have the benefit of the agency's wisdom before it addresses the issue ( id.). A court will await an agency's determination, when the issue requires specialized knowledge to resolve not only factual and technical issues, but also the scope and meaning of the applicable statutes ( Missionary Sisters of Sacred Heart v Meer, 131 AD2d 393, 395 [1st Dept 1987]).
Here, the doctrine does not apply. Plaintiff was not required to go first to DHCR to resolve this matter. The issues here do not entail factual or legal determinations in areas solely within the expertise of DHCR. Rather they concern "pure statutory interpretation dependent only on accurate apprehension of legislative intent" ( Sugihara, 2006 NY Slip Op 52186(U), *5 [determining not to rely on DHCR ruling on preferential rent question]). The application of DHCR statutory or regulatory standards and the determination of whether they have been followed are tasks regularly within the court's province ( Missionary Sisters, 131 AD2d at 395-396).
CONCLUSION
Based on the foregoing, defendant's motion to dismiss is denied, and plaintiff's cross motion is granted.
It is hereby
ORDERED that defendant's motion to dismiss is denied and plaintiff's motion for summary judgment is granted, and the Clerk shall enter judgment accordingly; and it is further
ADJUDGED AND DECLARED that plaintiff is entitled to a declaratory judgment in this action pursuant to CPLR 3001, declaring the rights and other legal relationships of the parties hereto, and it is further
ADJUDGED AND DECLARED that this Court does hereby declare that the rights of the plaintiff and the defendant, with respect to the subject matter of the above entitled action are as follows:
1. The initial lease granting plaintiff a preferential rent for the duration of his tenancy, remains binding.
2. Defendant shall issue to plaintiff a renewal lease offering the preferential rent; and it is further
ADJUDGED AND DECREED that plaintiff recover of the defendant costs and disbursements, as calculated by the Clerk of the Court.