182 Fifth Avenue, LLC v. Design Development Concepts, Inc.

New York Law JournalDecember 12, 2001

SUPREME COURT

Ia Part 25

Justice DeGrasse

In this landlord-tenant dispute plaintiff 182 Fifth Avenue Corp. ("182 Corp.") moves to dismiss defendants' ten affirmative defenses and two counterclaims, and for an order directing defendants to pay use and occupancy pendente lite.

Facts:

The unit which is the subject of this action is the second floor of the building located at 182 Fifth Avenue in Manhattan. Pursuant to a written lease agreement, dated February 28, 1995 ("the lease") plaintiff's predecessor in interest, Evergood Industries Corp. ("Evergood") leased the unit to the corporate defendant Design Development Concepts, Inc. ("DDC") for a term commencing March 1, 1995 and ending on April 15, 2001. While the lease is a commercial one, defendant Robert Crivello, the principal of DDC, states that he has from the first used the unit as his residence as well as his place of business. Crivello claims that the lease was drafted to be a commercial lease at Evergood's insistence.

According to Crivello he renovated the unit with Evergood's approval to add a kitchen, a bathroom and other amenities.

In October 1998 182 Corp. purchased the building from Evergood and assumed all of Evergood's rights and responsibilities with respect to the lease for the unit.

182 Corp. served defendants with a Notice of Lease Defaults and Conditional Limitation dated July 6, 2000. The notice states that DDC has defaulted in the payment of rent for a fifteen-day period, and that, pursuant to paragraphs 48 and 49 of the lease, the landlord has the right to terminate the tenancy as a result. The notice further sets forth defaults as bases for terminating the lease based on defendants' construction of a kitchen on the premises: 1) without obtaining the landlord's written consent, 2) without using contractors approved by the landlord, and 3) without obtaining requisite building permits. The notice also alleges a violation of paragraph 2 of the lease arising from defendants' use of the premises as a residence.

182 Corp. claims that the notice required defendants to cure the breaches of the lease by July 26, 2000, that defendants failed to do so, and that as a result the possession of the unit reverted to plaintiff.

Plaintiff commenced this action by summons and complaint dated August 10, 2000. Defendants served an answer containing ten affirmative defenses and two counterclaims.

Discussion:

Plaintiff moves to dismiss defendants' ten affirmative defenses and two counterclaims. On a motion to dismiss, the court must accept the facts alleged as true and determine simply whether the facts alleged fit within any cognizable legal theory. (Morone v. Morone, 50 NY2d 481, 484.) The court may consider facts alleged in an affidavit as a supplement to the answer. (See Ackerman v. 305 East 40th Owners Corp., 189 AD2d 665.)

A. Defendants' First Affirmative Defense

Defendants' first affirmative defense alleges that the Notice of Lease Defaults is defective insofar as it relies on the conditional limitation contained in paragraph 48 of the lease. Defendants assert that both Evergood and 182 Corp. have known about, and acquiesced in, their residential tenancy despite the fact that his lease is a commercial one. Because Crivello and his family use the loft as their residence, defendants argue, they are entitled to the "cure" period prescribed by RPAPL 753(4). Plaintiff disputes that the tenancy is properly characterized as residential.

For purposes of this motion to dismiss, the court accepts defendants' assertion that plaintiff acquiesced in the residential use of the unit.

While paragraph 48 is somewhat ambiguous, it can be interpreted, in harmony with RPAPL 753(4), to provide for a ten day cure period. In any event,, plaintiff in its reply papers concedes that the ten day cure period provided in RPAPL 753(4) applies. Accordingly, this affirmative defense is dismissed.

B. Defendants' Counterclaims and Second and Third Affirmative Defenses

In their second and third affirmative defenses, and in their two counterclaims, defendants argue that the unit is subject to rent stabilization pursuant to The Emergency Tenant Protection Act of 1974 ("ETPA") and the Loft Law, respectively.

Defendants allege in their papers that the building had at one time six residential units, and that the building was built prior to 1974, thereby qualifying it for rent stabilization under the ETPA. (See McKinney's Uncons Laws of NY 8625[a][4], [5] Emergency Tenant Protection Act of 1974].)

Plaintiff argues that the unit was once subject to rent stabilization under the Loft Law, but that a prior tenant's sale of rights in the unit to Evergood, plaintiff's predecessor in interest, removed the unit from the aegis of rent stabilization once and for all. (See MDL 285[12].) In so arguing, plaintiff cites the Loft Board's rules, which provide that upon such a sale is no longer subject to rent regulation where coverage under Article 7-C [the Loft Law] was the sole basis for such rent regulation . . . .

(29 RCNY 2-10[c][2].)

The court disagrees that this sale of rights ended the unit's eligibility for rent stabilization. The Loft Law is not the "sole basis" that this unit was subject to rent stabilization. (29 RCNY 2-10[c][2].) As noted above, the facts pleaded in' defendants' answer and affidavits would place the unit within the criteria for rent stabilization created by the ETPA.

The court concludes that the ETPA applies to eligible lofts for the following reasons. The ETPA contains a number of specific exceptions to its coverage. Lofts, a relatively common form of residential unit in New York City, is not among these exceptions. Moreover, at the time the Loft Law was passed in 1982, case law provided that lofts were covered by the ETPA. (See Mandel v. Pitkowsky, 102 Misc2d 478, aff'd 76 AD2d 807.) The legislature did not alter the holding in Mandel via the Loft Law or by amending the ETPA. Accordingly, several courts have held that the Loft Law does not preclude rent regulation under other statutes. (See Tan Holding Corp. v. Wallace, 187 Misc2d 687; Tracto Equipment Corp. v. White, NYLJ, March 21, 1997, at 36, col. 4; Miller v. Margab Realty, NYLJ, April 11, 2001, at 19, col. 2; Scherer, Residential Landlord-Tenant Law in New York, 6-107.)[1]

Plaintiff argues that even if the sale of rights by a previous tenant did not preclude the application of the ETPA, the initial rent paid by defendants was over $2000, and therefore over the decontrol threshold set by the rent stabilization law. New York City Admin Code 26-504.2 provides that stabilized units shall not include:

housing accommodations . . . [with a] legal regulated rent of two thousand dollars or more per month . . . which is or becomes vacant at any time after the effective date of this section.

Defendants correctly point out that this language provides that a rent of $2,000 precludes rent stabilization only if it is a "legal regulated rent." It is unclear from the facts before the court whether the rent charged defendants was a "legal regulated rent" as that term is variously defined in 9 NYCRR 22521.1.

For the foregoing reasons, defendants' second affirmative defense and first counterclaim, which are based on the premise that the unit is covered by the ETPA, survive plaintiff's motion to dismiss.

In their third affirmative defense and second counterclaim, defendants also argue that the unit remains subject to the Loft Law's imposition of rent stabilization. Defendants argue that the 1986 sale of rights was ineffective, since it appears that defendants failed to file a record of sale with the Loft Board as required by 29 RCNY 2-10[d][2]. However, the penalty prescribed by the applicable regulations for a failure to timely record a sale is not nullification of the sale, but rather a "civil penalty up to $1,000, as determined by the (Loft] Board." (29 RCNY 2-10[d][3].)

Nonetheless, the record before the court is unclear as to whether the unit was used for non-residential purposes after the sale of rights. If so, then plaintiff had to comply with the requirements of 29 RCNY 2-10[c], which include, inter alia, the removal of residential fixtures and an inspection by the Loft Board.

Plaintiff cites Thorgeirsdottir v. New York City Loft Board (161 AD2d 337) for the proposition that the Loft Board cannot place conditions by regulations on a sale of rights that conflict with the Multiple Dwelling Law. However, Thorgeirsdottir concerns a different section of the Multiple Dwelling Law (MDL 286[6]), which concerns the sale of "improvements" in a loft. The section applicable herein (MDL 286[12]) concerns a tenant's sale of rights to a loft unit. Under the plain terms of the section applicable in Thorgeirsdottir, dere- gulation of a residential unit occurs upon "purchase" of the improvements. The Thorgeirsdottir court held that this language precluded the Loft Board from imposing any additional regulatory requirements before a unit could be deregulated.

MDL 286(12), the section applicable here, does not similarly provide that deregulation shall occur upon a landlord's purchase of rights. While treating the two sections symmetrically might have surface appeal, the legislature drafted the two sections differently, and it is not the court's role to rewrite the statute. (See Security Pacific Nat'l Trust Co. v. Cuevas, 176 Misc2d 846, 849.)

For the forgoing reasons, plaintiff's motion to dismiss defendants' third affirmative defense and second counterclaim is denied.

C. Use and Occupancy

Defendants' eighth and ninth affirmative defenses allege that the building is a multiple dwelling without a valid certificate of occupancy, and that plaintiff is barred from collecting rent as a result. However, defendants do not dispute that they continue to use the premises for commercial use. Accordingly, the equities demand that defendants continue to pay rent for their use of the premises. (See Zane v. Kellner, 240 AD2d 208; Lipkus v. Pikus, 99 Misc2d 518, aff'd 72 AD2d 697, appeal dismissed 51 NY2d 874.) Defendants shall deposit their monthly rent of $2,850, together with all rent arrears, with the clerk of the court pending a determination on the plaintiff's claims and the defendants' counterclaims and affirmative defenses. (Sima Realty LLC v. Philips, 282 AD2d 394.)

D. Defendants' Remaining Affirmative Defenses

Defendants allege no facts in support of their fourth, fifth, sixth, seventh and tenth affirmative defenses. Accordingly, plaintiff's motion to dismiss is granted with respect to these counterclaims.

Conclusion:

Plaintiff's motion to dismiss defendants' counterclaims and affirmative defenses, and for an order directing defendants to pay use and occupancy, is granted to the following extent. Defendants' first, fourth, fifth, sixth, seventh and tenth affirmative defenses are dismissed. Defendants shall deposit their monthly rent of $2,850, together with all rent arrears, with the clerk of the court pending a determination on the plaintiff's claims and the defendants' counterclaims and affirmative defenses. In all other respects, plaintiff's motion is denied. Settle Order.

FootNotes:

[1]

The parties do not discuss the import vel non of MDL 286[13], which arguably conditions the applicability of the ETPA to residential lofts upon "a declaration of emergency by the local legislative body." Accordingly, the court does not reach this question.

Date Received: December 11, 2001