New York Legal Update

Bianca Jagger Can't Get No Rent Control Satisfaction

Beware you jet setting, international, super celebrities.  Your days in your New York rent controlled or stabilized apartments may be numbered.  This is the implication of the Court of Appeals' decision yesterday in Katz Park Ave. Corp. v Jagger, 2008 NY Slip Op 07987.

The case involved not Mic, but Bianca Jagger.  Ms. Jagger is in the U.S. legally on a B2 tourist visa.  She also has a rent stabilized apartment in Manhattan.  The problem? 

Under the Rent Stabilization Code (RSC), a landlord may recover possession of a rent stabilized apartment from a tenant whose lease has expired if the apartment "is not occupied by the tenant . . . as his or her primary residence" (RSC [9 NYCRR] § 2524.4 [c]). But the holder of a B2 tourist visa is required to have a "principal, actual dwelling place" outside the United States. Federal regulations make B2 visas available to aliens who are "visitors for pleasure" of the kind described in section 1101 (a) (15) (B) of the Immigration and Nationality Act (see8 CFR § 214.1 [a] [1] [i], [2]). That subsection of the statute applies only to "an alien . . . having a residence in a foreign country which he has no intention of abandoning" (8 USC § 1101 [a] [15] [B]), and "residence" is defined as "principal, actual dwelling place in fact, without regard to intent" (8 USC § 1101 [a] [33]).

Based on this, Ms. Jagger's landlord claimed that her rent stabilized apartment was not her "primary residence" and sought to remove her from the stabilized apartment. 

In affirming the landlord's motion for summary judgment, the Court of Appeals concluded that, at least absent some unusual circumstance, a primary residence in New York and a B2 visa are logically incompatible. It noted that Ms. Jagger made no attempt to show how she could simultaneously have a principal, actual dwelling place outside the United States and her primary residence in a New York stabilized apartment. 

So, Ms. Jagger's apartment will now be available.  Which international celebrity will be next?

Parties Cannot Agree To Subject Apartment To Rent Stabilization Law

On Tuesday the First Department held in 546 W. 156th St. HDFC v Smalls, 2007 NY Slip Op 05574 that parties can not voluntarily agree to subject an apartment to Rent Stabilization Laws where the apartment is in a building created as a not-for-profit housing cooperative under the Private Housing Finance Law. Such buildings are statutorily exempt from rent stabilization (Administrative Code of City of New York § 26-504[a]; 9 NYCRR § 2520.11[j], [l]), and thus, the Court held that for parties to voluntarily subject an apartment to rent stabilization would contravene the statutory scheme. However, the Court did state that such a voluntary agreement could be enforceable only to the extent that it set the rental amount and only for the duration of the lease signed by the parties.

Accelerated Rent Clause Is Not Recoverable In Summary Proceeding

The subject matter jurisdiction of the District Courts in summary proceedings to recover possession of real property is limited. It is limited by Uniform District Ct Act § 204, which provides in relevant part:

The court shall have jurisdiction of summary proceedings to recover possession of real property located in whole or in part within . . . to remove tenants therefrom, and to render judgment for rent due without regard to amount" (emphasis added).

What about an accelerated rent clause, which is a clause which requires a tenant to pay the entire amount left due on a lease after a tenant vacates an apartment? Last week the Second Department in Ross Realty v V & A Fabricators, Inc., 2007 NY Slip Op 04278 held that accelerated rent is not "rent due" and thus not enforceable in District Court.

The matter arose as follows. The landlord and tenant had entered into a commercial lease for a term of five years, commencing May 1, 2003. Shortly thereafter, the defendant became dissatisfied with the space, failed to pay the June 2003 rent, and abruptly vacated the premises. The plaintiff thereafter commenced a summary proceeding in the District Court for nonpayment of the June rent and to recover possession of the property. The proceeding was commenced pursuant to article 7 of the New York Real Property and Proceedings Law and § 204 of the Uniform District Court Act. Immediately prior to the commencement of the nonjury trial, the landlord orally moved to amend its petition to also recover accelerated rent, as provided for in the lease. Following trial, the District Court found a surrender of the premises by operation of law and granted the plaintiff a judgment of possession and rent for the month of June 2003. The District Court declined to award the plaintiff accelerated rent.

Thereafter, the landlord commenced a plenary action in Supreme Court which contained causes of action for approximately $20,000 in what the landlord characterized as "rental" payments for the months of July, August, and September 2003, during which the premises remained vacant, and to recover the difference between the rent the tenant was to pay and the rent that a subsequent tenant paid, approximately $53,000 (thus in effect the landlord was seeking the accelerated rent). The tenant moved to dismiss these causes of action on the ground that they were barred by the doctrine of res judicata based upon the prior District Court proceeding. The Supreme Court granted the tenant's motion, but the Second Department reversed.

The Second Department found that once the landlord succeeded in its summary proceeding, the parties' relationship as landlord and tenant terminated, and whatever monetary liability the tenant may have had to the landlord at that point was no longer in the nature of rent, but was in the nature of contract damages. And since the jurisdiction of the District Court was limited to recovery of "rent due" such damages were not within the subject matter of the District Court action. Thus, since the District Court court lacked subject matter jurisdiction over the claims in the plenary Supreme Court action, its determination could not be res judicata. The Second Department thus reinstated the landlord's causes of action in Supreme Court.