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Illusory (sham) Tenancies - subtenant's rights to apartment

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Illusory (sham) Tenancies - subtenant's rights to apartment

Postby TenantNet » Thu Jun 11, 2009 7:28 am

An illusory tenancy situation could result in a subtenant being entitled to the rent stabilized tenancy rights of the rent stabilized apartment.

Here's one case where the court explained an illusory tenancy as follows:

An illusory tenancy exists where the prime tenancy is a sham in that the prime tenant does not occupy the apartment but instead sublets the apartment to a subtenant for profit. To establish this claim the subtenant must show that the landlord had at least constructive notice of the subletting. Primrose Management v. Donahoe, 253 A.D.2d 404 (1st Dep't. 1998). The doctrine of illusory tenancy provides that when a rent regulated apartment is sublet with an intent to deprive the subtenant of the rent regulation protections, the subtenant can be recognized as the legal rent regulated tenant.


See http://tenant.net/Court/Hcourt/index.html?x=1504


Housing Court Decision Summaries

255 West 88th Co. LLC v. Gelband
Jan. 5, 2005

Appellate Court:

Trial Court:
Civil Housing Court, New York County

Trial Judge:
Hon. Michelle Schreiber

Type of Action or Proceeding:
Holdover Proceeding - Illusory Prime Tenancy

Issues/Legal Principles:
Undertenant granted leave to depose landlord's building employees so as to establish the landlord's constructive notice of his occupancy in support of his illusory prime tenancy claim.

Source:
NYLJ, 20:1, Jan. 5, 2005

Referred Statutes:
CPLR 408

Summary:
Landlord commenced illegal sublet holdover proceeding against rent stabilized tenant. Undertenant appeared and asserted that he was the illusory prime tenant at the subject premises, and therefore, that he was entitled to a rent stabilized tenancy in his name to the extent he had resided at the premises exclusively for 14 years and had been paying more than the legally registered rent.

Undertenant moved the Court for leave to conduct discovery of the landlord and/or the management company in the form of a deposition of the building porter, superintendent and doorman so as to substantiate his claim that petitioner had constructive notice of his tenancy at the subject premises. Landlord opposed, stating that even if the employees of the building have knowledge of undertenant's presence in the building, they would not know the nature of his occupancy.

The Court held that undertenant set forth a meritorious illusory prime tenancy defense. Accordingly, the Court granted undertenant's motion for leave to conduct depositions of the building employees so as to substantiate this defense. The Court further held that the landlord failed to establish any means by which it would be prejudiced by submitting to the undertenant's request for discovery.

Notes:

Decision:

Cite as: 255 W. 88th Co. LLC v Gelband, NYLJ, Jan. 5, 2005, at 20, col 1 (Civ Ct, NY County, Schreiber, J.).


Civil Court of the City of New York
New York County

255 WEST 88th CO. LLC, Petitioner,
against
STEPHEN GELBAND, Respondent-Tenant, and STEVEN SHIP, Respondent-Undertenant.

Index No. L&T 080582/04

Michelle D. Schreiber, J.H.C.

Petitioner commenced the instant holdover proceeding against respondent/prime tenant, Stephen Gelband ("Mr. Gelband"), based on allegations of an illegal sublet and/or assignment. Specifically, petitioner claims that Mr. Gelband sublet or assigned the rent stabilized subject premises to respondent undertenant, Steven Ship ("Mr. Ship"). To date Mr. Gelband has not appeared, however, Mr. Ship filed a written answer with defenses including illusory tenancy.

In his affidavit in support of the motion Mr. Ship states that he moved into the subject premises in 1990 as the roommate of respondent's prior subtenant; in 1992 he became the sole subtenant and he has occupied the apartment ever since. Mr. Ship states that he has never met or dealt with Mr. Gelband directly, but rather has dealt with Mr. Gelband's friend Michael Kaufman. Mr. Ship alleges that throughout his fourteen year residency of the subject premises Mr. Gelband has not occupied the apartment. The current legal rent for the premises is $2,026.88, however, Mr. Ship has been paying $2,600 per month to Michael Kaufman. Mr. Ship states that the landlord's employees have notice of his occupancy at the subject premises, and he seeks to depose the building porter, superintendent, and doorman.

In opposition to the motion petitioner submits an affidavit from Abraham Reiss, a principal of the petitioner. Mr. Reiss states that petitioner was unaware of the presence of Mr. Ship until it received a letter in March 2004. He states further that renewal leases have been executed by Mr. Gelband and that the rent has always been paid by him. Mr. Reiss does not dispute that building staff has knowledge of Mr. Ship's presence in the building, but asserts that the staff has no information regarding the nature of his occupancy.

Discovery in a special proceeding is not granted as of right but is only permitted by leave of court pursuant to CPLR 408. Leave to conduct discovery may be granted where the movant demonstrates a meritorious claim, ample need, that the discovery sought is tailored to the facts of the case, and no prejudice to petitioner. New York University v. Farkas, 121 Misc.2d 643 (Civ. Ct. NY Cty 1983).

An illusory tenancy exists where the prime tenancy is a sham in that the prime tenant does not occupy the apartment but instead sublets the apartment to a subtenant for profit. To establish this claim the subtenant must show that the landlord had at least constructive notice of the subletting. Primrose Management v. Donahoe, 253 A.D.2d 404 (1st Dep't. 1998). The doctrine of illusory tenancy provides that when a rent regulated apartment is sublet with an intent to deprive the subtenant of the rent regulation protections, the subtenant can be recognized as the legal rent regulated tenant. Avon Furniture Leasing, Inc. v. Popolizio, 116 A.D.2d 280 (1st Dep't 1986) app den. 68 N.Y.2d 610 (1986).

In the instant proceeding Mr. Ship has set forth a meritorious claim of illusory tenancy. Mr. Ship alleges that Mr. Gelband, has not resided at the subject premises since 1992, that he has charged rent in excess of the legally registered rent, and that the landlord had knowledge of his occupancy. In order to establish this defense Mr. Ship needs to show the details of the landlord's actual or constructive notice of his sublet arrangement; information in the possession of the particular employees. There is no showing of prejudice to the petitioner by allowing the deposition of these individuals. The petitioner may seek payment of use and occupancy during the discovery phase of the case. See e.g., 545 Eighth Ave. Assocs., L.P. v. Shanaman, 2/4/04, NYLJ 21:3 (Civ. Ct. NY Cty); Goldman v. Richards, 1/7/04, NYLJ 18:3 (Civ. Ct. NY Cty); Rubino v. Eberle, 1/18/90 NYLJ 24:1 (Civ. Ct. NY Cty).

Accordingly, Mr. Ship's motion to conduct discovery regarding his illusory tenancy defense is granted to the extent of allowing respondent to depose the superintendent, doorman and porter as set forth in the notice annexed to the moving papers. The discovery is to be completed within ninety days of the date of this decision. The case may be restored by motion or stipulation at the conclusion of discovery.

This constitutes the decision and order of the court, copies of which are being mailed by the Court to the attorneys below.
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