Adam Leitman Bailey, P.C. Defeats Tenant’s Rent Illegality Claims
Adam Leitman Bailey, P.C., in a residential non-payment proceeding in New York County Housing Court, won partial summary judgment on its prima facie case and obtained dismissal of the tenant’s defenses and counterclaims of overcharge and rent illegality.
The tenant moved into the apartment in the mid-1980s and signed two successive commercial leases for use of the apartment as a quasi-medical office. Five years later, the tenant commenced a Supreme Court action against the prior landlord. The tenant claimed overcharge, that the apartment was subject to rent stabilization, challenged the legal rent, and demanded a rent stabilized lease in his name. That lawsuit was settled over thirty years ago. The tenant received a rent stabilized lease. The apartment rent was reset.
For the next thirty years, the tenant was offered and signed rent stabilized lease renewals. About ten years ago, the tenant commenced another Supreme Court case against the prior owner claiming personal injuries and property damage in the apartment. Several years later the tenant commenced a lawsuit for similar damages, now against the current owner. Both lawsuits were silent as to any rent issues. Both lawsuits were settled and discontinued with prejudice.
In the meantime, the tenant stopped paying rent. Adam Leitman Bailey, P.C., was retained by the new owner of the apartment and commenced this non payment proceeding. The tenant asserted a host of affirmative defenses, including jurisdictional defenses, laches, breach of warranty of habitability, rent illegality, and overcharge. The tenant also challenged the legal rent amount. The tenant argued that the commercial leases, coupled with inconsistent DHCR registrations amounted to a fraudulent scheme, which should allow the court to examine the entire rent history of the apartment. The tenant also argued that being the first residential tenant after the rent controlled tenant vacated the apartment, he was entitled to a fair market rent appeal and claimed that the prior owner never provided the required notices for the appeal. Tacking on to the legal rent challenges, the tenant argued overcharge.
Tenant had previously moved for summary judgment on these defenses, and other claims, which motion was denied. Landlord previously cross-moved for dismissal of tenant’s remaining defenses and counterclaims, all of which, with the exception of warranty of habitability and laches were dismissed.
Since the operative facts underlying the overcharge and rent illegality claims were not in dispute, and with the COVID19 pandemic in full swing, to advance the case, the parties and the court agreed to resolve the legal issues on papers, reserving the habitability and laches defenses for a hearing.
Adam Leitman Bailey, P.C., moved for summary judgment on its prima facie non-payment case, demonstrating that it is the owner of the apartment, is in a landlord-tenant relationship with tenant, is entitled to receive the rent, that the apartment is located in a multiple dwelling, and that the apartment is properly registered with applicable government agencies.
We also moved for summary judgment dismissing the tenant’s overcharge and rent illegality claims. First, we argued, pursuant to the recent Court of Appeals decision in the Regina case, that the pre Housing Stability and Tenant Protection Act of 2019 law applies to the overcharge inquiry, requiring a limited lookback period instead of an examination of the entire rental history. We also argued that tenant’s settlement of the thirty-year old action should be given res judicata effect, barring the tenant from re-litigating the legal rent issues, which were resolved in that action with the tenant receiving a rent stabilized lease in his name and setting a legal regulated rent. We also argued that, even if the prior owner failed to provide the requisite notice concerning a fair market rent appeal, that the extended deadlines for the tenant to request such an appeal have still long expired. Additionally, while we denied any fraud, we argued that even if a finding of fraud can be made concerning the initial commercial leases and inconsistent DHCR registrations, that it was sanitized through the settlement of the tenant’s prior action. We argued that it would be inequitable for the tenant, who failed to raise a legal rent challenge for the last thirty years, to be able to do so now. Finally, we argued that because the legal rent was proper, and because there can be no overcharge without overpayment (and the tenant was in significant rent arrears), the tenant’s overcharge claims must fail.
The court agreed with our legal arguments and granted partial summary judgment in our client’s favor concerning our client’sprima facie non-payment case, and dismissed the tenant’s defenses and counterclaims of overcharge and rent illegality.