The court file establishes that the demand for rent, notice of petition and petition were all served on Alese Starks, who had predeceased the commencement of the summary proceeding by several months. (She died on May 9, 1999 and the three-day demand was served on June 18, 1999 and the notice of petition and petition served on July 16, 1999). The tenant defaulted and judgment was entered against her on September 13, 1999. Toni Starks, the tenant's daughter brought three pro-se orders to show cause and on her third application the court so- ordered a stipulation dated February 22, 2000 which stayed the warrant of eviction for the payment of $8,873 and "amended (the petition) to name Toni Starks as respondent-occupant nunc pro tunc."

The stipulation was clear that the named tenant was deceased, however it was not evident that she had died five weeks prior to "service" of the rent demand and four months prior to judgment being entered on her default. The court held: "The law is clear that when a tenant dies prior to the expiration of the lease and rent is due, a summary proceeding cannot be commenced if no representative or person 'has taken possession of the premises and no administrator or executor has been appointed, the proceeding may be commenced after three months from the date of death of the tenant by joining the surviving spouse or if there is none, then one of the surviving issue or if there is none, then one of the distributees.'" (citing RPAPL  711(2).)

It has been held that the dead cannot be sued without a representative being served. Therefore, the landlord and its counsel may be held liable for sanctions when they seek a default judgment against a tenant that, "they know or should know is deceased." In this case, the tenant alleges that she submitted her mother's death certificate and requested consideration to succeed to the apartment two weeks after her mother's death. The landlord argues that RPAPL 711(2) does not apply to this case because there was no lease in effect. The court found this argument without merit and notes that the landlord alleged in its petition that there was a lease in effect.

The court noted that the landlord's responding papers did not contain an affirmative denial that the petitioner was not aware of the tenant's death or that upon a reasonable inquiry might not have obtained this information prior to proceeding to obtain a default judgment against the respondent-tenant. The landlord further argues that tenant's death and any other defenses of the movant-daughter have been waived by Toni Starks signing the so-ordered stipulation. The court concluded that Toni Starks could not, "step into the shoes of her mother" for purposes of signing a settlement agreement. Due to her mother's death, she could not be bound to the terms of a stipulation seeking to confer jurisdiction over her. The court held that the proceeding was void ab initio, that the judgment should never have been entered and the warrant never issued.

Tenant filed a rent overcharge complaint with the DHCR on February 26, 1991. In its decision dated July 17, 1996 the DHCR found that "piggybacking" had occurred and found that landlord had overcharged petitioner-tenant since she moved in on March 15, 1987 - July 14, 1996. On August 12, 1996 the tenant filed a PAR, and on September 9, 1997 while the PAR was pending the Rent Regulation Reform Act of 1997 (RRRA) became effective. On October 20, 1999 the Administrator of DHCR determined that the RRRA was applicable, granted the PAR and dissolved the finding of an overcharge against landlord.

Tenant commenced this Article 78 proceeding and this court remitted that case to DHCR for reconsideration. By order dated April 19, 2000 the DHCR upheld its revocation of the rent overcharge order stating that while they found that landlord had overcharged tenant, they were barred from recognizing the overcharge pursuant to the Rent Regulation Reform Act of 1997. The RRRA of 1997 amended the statute of limitation provisions of the Administrative Code of the City of New York to, "preclude examination of the rental history of the housing accommodation prior to the four year period proceeding the filing of a complaint pursuant to this subdivision."

The court held that it could not examine the rental history of the apartment prior to February 26, 1987, since this action was commenced on February 26, 1991. Resolution of the case relies on the interpretation of the term "rental history." In the DHCR proceeding the DHCR interpreted the preclusion of the "rental period" to prevent consideration of any "rental event" that took place prior to the four year period. Thus, the DHCR Deputy Commissioner excluded evidence of the first rent increase, because it occurred prior to the four year period, and found that there was no evidence of an overcharge. The court held that the DHCR Deputy Commissioner gave the term "rental history" an "unreasonably narrow construction."

The court stated, "the rental history, as it existed on February 26, 1991, includes not only the rent on that date, but all of the information contained in the lease. To hold otherwise would allow the lease to be used for one purpose, to determine the rent on the base date, but not for another, to determine whether the rent guidelines increase was taken. Because the lease, by its own terms, was in effect on the base date, it was within the four year history period which may be considered." The court concluded that the DHCR's finding was in error of law and remanded the case to DHCR for further consideration.

The tenants (parents and daughter) cross-move for dismissal of the declaratory judgment action on grounds that judicial review cannot be sought under Article 78 while a proceeding is pending with the DHCR, that the owner has to wait for the outcome of the DHCR decision. The court noted that the DHCR has exclusive jurisdiction to determined luxury deregulation cases, and a court of law must wait the outcome of the agency's decision before the court may review that decision. The owner, however, claims that the DHCR's Operational Bulletin would require the exclusion of the parent's income from the total household income for purposes of the year 2000 filing period and therefore seeking administrative remedies would be futile.

The court observed that while concurrent jurisdiction does exist between the court and the DHCR, where there is an administrative agency with the expertise to dispose of the issue, a court of law should exercise its discretion and defer to the agency. Exhaustion of remedies is not necessary, however, if the administrative remedies are futile; the standard for futility is high or "narrow" to use the court's term. The court held that in this case the owner was simply seeking to circumvent the DHCR. The owner is merely predicting what DHCR will do by the owner's interpretation of the DHCR operational bulletin. The operational bulletin provides that the operative date for determining who is a tenant, co-tenant or occupant whose income will be included in the total annual income will be the date that the income verification document is served at the apartment. In this case, the parents were apparently not living in the apartment on the date of service. The court held that the DHCR should be allowed to make a ruling on this issue in this case rather than the landlord presuming that the DHCR will automatically exclude the parents since there is no history of the DHCR's interpretation of this provision in the operational bulletin.

The landlord sought attorney's fees as the prevailing party in the litigation in reliance upon a lease provision for the payment of fees in situations where the owner defends a lawsuit brought against owner because of the tenant's action. The lower court (Hon. Michael Stallman) concluded that this provision applies only to actions brought by third parties against the landlord as a result of the tenant's actions. The Appellate Term found that this was too narrow an interpretation of the lease provision. The Court concluded that there is no valid reason to decline to enforce the attorneys fees clause in circumstances where a tenant's own actions in prosecuting a claim caused the landlord to incur legal expenses.

Notwithstanding that analysis, the Appellate Court affirmed the lower court's denial of legal fees on grounds that the RRRA, enacted while the case was pending, was made applicable to actions or proceedings pending in any court. The statute "completely altered the landscape of the law of rent overcharge" in New York, and that "assumptions of the parties when the litigation began were revocably altered by a change in the law." In these circumstances, the Appellate Term ruled that where tenant's action "was properly commenced under existing law, but was dismissed because of a change in the law affecting pending rent overcharge cases, we deem it appropriate that each side bear its own legal costs." The Court acknowledged the dissent's position that fees are a contractual right, the majority stated that "a court's authority to withhold fees in a particular case is not so closely confined and may turn upon equitable factors or other considerations fact-specific to the litigation."

Justice McCooe offered a long and vigorous dissent, starting by his distinguishing of the Appellate Division case upon which the majority relied. In Wells v. East 10th Street Associates, the law had changed after a trial and judgment, in other words, before the party had an opportunity to change their position. In this case, the law had changed far earlier in the course of litigation at the trial stage. Moreover landlord's attorney wrote tenant's attorney a letter suggesting that tenant discontinue her case based on a change in the law unfavorable, indeed fatal, to her case. Justice McCooe argued that the contract between the parties should dictate who is awarded legal fees as opposed to the Appellate Division's position which holds: "a court should invoke its discretion to deny fees . . . where bad faith is established on the part of the successful party or where unfairness is manifest." Justice McCooe's disagreement with the Appellate Division's reasoning is that "bad faith" or "manifest unfairness" are concepts not grounded in any principle of contract law (which is the basis of awarding fees to begin with). Justice McCooe argued that "reliance on traditional contract defenses promotes uniformity of result. It eliminates judicial determinations on an ad hoc basis depending upon each judge's discretionary view of the correctness of the result in the underlying case."

Tenant also requested to do discovery on the landlord (ask the landlord questions under oath) because tenant claims that the landlord is warehousing apartments. Landlord argues that this claim is entirely unrelated to the nonprimary residence issue and tenants are not allowed unrelated discovery. The tenant's position is that the landlord should not proceed forward on any eviction proceeding due to "unclean hands," but the court noted that there is no legal authority for this position. Thus, the court denied tenant's motion.

The Appellate Term distinguished Capital Holding Co. because that proceeding was premised upon a breach of the parties' own lease, not the statutory provisions of section 235-f. In fact, the court there held that its ruling " . . . will not restrict landlords from setting reasonable occupancy limitations in leases, or prevent them from enforcing such lease provisions, so long as they do not violate the minimum protections afforded tenants and occupants under section 235-f." In this case, the court held that contracting parties are not precluded from referencing section 235-f in their lease or setting "reasonable" limitations. The Appellate Term reinstated the petition and remanded it back to Housing Court.

Justice Parness dissented on grounds that Section 235-f does not create "an affirmative right of action for landlords to enforce occupancy limitations," citing Capital Holding v. Stavrolakes. Thus, merely stating in the lease that the unit may be occupied only in accordance with RPL 235-f, and then accusing the tenant of violating the lease provision, adds nothing since the statute is permissive, according to Stavrolakes, not restrictive. In other words, the majority's interpretation of the this case contradicts the Appellate Division's holding in Stavrolakes. Justice Parness declared that there is nothing unreasonable for a tenant of a four- bedroom apartment to have three roommates.

On February 14, 1996 landlord's predecessor in interest, Sibelius Realty Co., obtained a final Certificate of Occupancy for the premises. Thereafter, on November 14, 1997 Sibelius filed a notice of Rent Guidelines Board Increase with the Loft Board and the tenants of the loft spaces. The tenants replied to the notices by confirming the rent levels for their respective loft spaces and by electing to have rent increases governed by Rent Guidelines Board increases applicable to two-year leases.

Pursuant to Loft Board Rule, 29 RCNY 2-01(m) the Board set the initial rent stabilized rent for tenants' loft spaces, and also set the term for their leases - a two-year period commencing December 1, 1997 ending November 30, 1999. In June, 1998 landlord purchased the building from Sibelius. Two months later landlord forwarded the tenants rent stabilized leases in compliance with the Loft Board's order. Tenants signed the leases and returned them to landlord with checks for the appropriate rent increases. In July, 1999 landlord served tenants with notices of intent not to renew the respective leases on owner occupancy grounds and when tenants failed to vacate, landlord commenced the within proceedings.

Tenants argue that the petitions must be dismissed because landlord's collection of Rent Guidelines Board increases bars him from commencing an owner use proceeding pursuant to 29 RCNY 2-01(m)(ii) which provides, "If the owner has received any Rent Guidelines Board increase under §2-01(i)(1), then the initial term of such lease shall end upon the expiration of the last Rent Guidelines Board increase period as defined in §2-01(i)(1) prior to the setting of the initial legal regulated rent; provided, however, that no notice or proceeding by the owner to recover the unit pursuant to §2524.4 of the Rent Stabilization Code may be commenced during the pendency of this initial abbreviated lease term." The Court found the argument without merit. There was no initial abbreviated lease term prior to the setting of the legal regulated rent. Each of the tenants received a full two-year term pursuant to the Loft Board's direction, and the Rent Guidelines Board increases were collected during the term of the first rent stabilized lease, not prior thereto, as required by the statute.

Tenants also allege that the simple act of collecting the Rent Guidelines Board increases at anytime is sufficient to bar the commencement of these proceedings. The Court stated that the tenants' focus is misplaced. "The purpose of the statute is the preclusion of eviction proceedings based on owner use or nonprimary residence before the tenant has had the benefit of a full rent stabilized term. The appropriate focus of inquiry is the length of the term." In this case the tenants received the benefit of a one or two-year lease term as required by the Rent Stabilization Code. Therefore, the owner use proceedings are not barred.

The tenants also moved for leave to serve amended answers with two additional defenses. First, the proceedings are attempting to recover possession for the benefit of two owners rather than one owner. Landlord states the defense is without merit because landlord's sister for whom possession is sought is not an owner. She is however the custodian for her minor son is an additional owner. The Court stated that with the minor child's ownership interests in question, there exists at least some merit to tenants' defense, permitting an amendment to the pleadings.

Tenants also wish to amend their answer to include a defense that landlords are warehousing an illegal apartment, and attempting to increase income by leasing an illegal and unregistered apartment. Tenants showed some evidence of warehousing/leasing an illegal space and therefore provides an indication of a lack of good faith on the part of owners with regard to their owner use proceeding. Accordingly the Court granted the tenants leave to serve and file amended answers.

Tenant alleges in 1961 as a child she moved with her family into the apartment below the subject apartment. In 1964 her grandparents moved into the subject apartment and in 1968 she moved in with her grandparents. She has continuously resided in this apartment ever since and paid rent to her grandparents while they were alive. In 1973, her grandfather died and her great aunt moved in with them. In 1974 her grandmother died and tenant continued sharing the apartment with the great aunt with whom she shared expenses (including the rent) which the aunt paid to the landlord. The great aunt died in 1990 and tenant has paid the rent directly to the landlord since then.

The first question is whether the apartment is subject to or exempt from rent control. it is conceded that the subject premises is a two-family house over a store. The earliest date of residence by tenant's family is 1964 when her grandparents moved in. Landlord asserts that the rent control law provides that rent control does not apply to any buildings with one or two residential units that became vacant after April 1, 1953 regardless of whether the building is also occupied by a commercial space. Tenant asserts that the April 1, 1953 vacancy date doesn't apply for decontrol of the subject apartment because the present interpretation of the term "one or two-family house" does not include a building which contains two residential units over a store. Rather the June 30, 1971 vacancy date applies and since tenant's family has continuously occupied the apartment since 1964 it is not decontrolled. The Court held that respondent's interpretation of the law seems correct. The term "one or two family houses" has been consistently interpreted to exclude buildings containing a commercial unit(s) and one or two residential units. The Housing Court addressed the law and circumstances involved here in Luis Eugenio Inc. v. Jennings, NYLJ, May 3, 1995, p.31 col.1 when it granted tenant's motion for summary judgment upon a finding that the two family subject building that also contained a commercial unit did not fall within the statutory exemption from rent control for two family houses. The Court in that case cited the consistent interpretations to this effect including the 1952 decisions of the Appellate Division (Matter of Present v. McGoldrick, 279 App.Did. 1010, (2nd Dept. 1952) and Matter of Wisotsky v. McGoldrick, 279 App.Did. 1011 (2nd Dept. 1952). Therefore, the apartment is subject to rent control.

The second question to address is whether tenant has succession rights. Tenant admits that she cannot present any documentary evidence to substantiate the facts she alleges. She does, however, submit eleven notarized letters of friends, neighbors and family supporting her claims. Because there is a legitimate dispute as to whether or not tenant has succession rights, the affirmative defense of succession rights is to be proven by her at trial.