Landlord v. Tenant: September 2023

RENT

Court Questions Whether Guaranty in Initial Lease Extended Upon Lease Renewal

Landlord sued to evict tenant in housing court for nonpayment of rent. In that prior proceeding, landlord obtained a judgment for rent owed in the amount of $45,100, and tenant moved out of the unit. Landlord then sued tenant and her lease guarantor in State Supreme Court, and sought enforcement of the money judgment against the guarantor.

While acknowledging that a guaranty lasts the full term of a lease, the court pointed out that the issue here was whether the guaranty survived lease amendments, extensions, renewals, or subsequent leases. Tenant claimed that the later leases had no signed guaranty provision. Landlord argued that the guaranty in the initial lease stated that it “will not be affected by any change in the Lease, whatsoever. This includes, but is not limited to, any extension of time or renewals. The Guaranty will bind [the defendant] even if [defendant] is not a party to these changes.” Landlord asked the court to rule in its favor without a trial.

The court ruled against landlord, finding that a trial was required to determine whether the subsequent leases constituted renewals or extensions of the original lease for which the guarantor had signed the guaranty. When tenant’s initial lease term expired, the tenant failed to vacate. Nine months later, landlord and tenant entered into an additional lease for the apartment, which was later renewed by another lease agreement. Neither of the two additional leases referred to the initial lease and neither of them were signed by the tenant’s guarantor. 

• 511 E. 80th St. LLC v. Margalit: Index No. 150100/2023 (Sup. Ct. NY; 11/2/22)

RENT INCREASE ORDERED

DHCR Increases Rent-Controlled Tenant’s Rent Based on Unique and Peculiar Circumstances

Landlord asked the DHCR for a ruling on an apartment’s rent regulatory status and, if needed, the legal rent. The DRA found that the apartment was subject to the rent control law with a maximum base rent (MBR) of $140.75 and a maximum collectible rent (MCR) of $77.40. 

The landlord appealed, and won in part. Section 2202.7 of the NYC Rent and Eviction Regulations permits the DHCR to grant an appropriate rent increase based on “unique and peculiar circumstances.” The MBR and MCR reported by the DRA in this case were set by the Office of Rent Control in 1972. In response to landlord’s prior inquiry, that office mistakenly advised the landlord in 1998 that tenant’s apartment was exempt from rent control. In light of landlord’s good faith effort to determine the apartment’s rent and since the parties operated outside of the regulatory system for decades, the DHCR is authorized to establish the MCR and MBR using an appropriate method based on the equities involved.

So the DHCR deemed an MBR rent increase as if landlord had applied for one in 2017. The DHCR set the apartment’s MBR and MCR at $1,136.56 effective Jan. 31, 2018. These rent amounts would remain at that level until landlord successfully entered the MBR system. Any future rent adjustments shall be set forth in agency orders.

• Gordon: DHCR Adm. Rev. Docket No. GN420019RO (4/7/23)

RENT OVERCHARGE

Landlord Proved Lawful IAIs Cost Almost $65,000

Rent-stabilized tenant complained to the DHCR of rent overcharge in 2018. The DRA ruled against tenant, finding that landlord had proved it spent $64,984 on individual apartment improvements (IAIs) before tenant moved into the unit, resulting in a lawful additional rent increase of $1,085 per month. The DRA found no overcharge.

Tenant appealed and lost. Tenant disputed landlord’s IAI documentation. The DHCR noted that, at the time of the claimed overcharge, landlord was entitled to collect 1/60th of the cost of the IAIs as a rent increase. In accordance with DHCR Operational Bulletin 2016-1, landlord submitted sufficient proof of the IAIs. This included an itemized cost estimate from a contractor, copies of five cancelled checks, and an invoice for plumbing and kitchen items. The DHCR also found no merit in tenant’s claim that there was an identity of interest between the building owner and the super or that landlord colluded to exaggerate the scope and cost of the IAIs. Landlord also properly included the cost of drywall and painting, given the scope of the apartment renovation project. 

• Majsterek: DHCR Adm. Rev. Docket No. LO410006RT (6/29/23)