Adam Leitman Bailey, P.C. Secures Tenant Victory Against Landlord at Trial in New York Civil Court, Commercial Part Involving Residential Use of Commercial Property
Adam Leitman Bailey, P.C. delivered a resounding blow for its clients against their landlord in the New York Civil Court, Commercial Part. The petitioner-landlord, owning a Manhattan building with a commercial certificate of occupancy (“CO”) with limited commercial marketability, decided to renovate the space and lease it as a “live/work” space. Respondent-tenants – two university students – signed a commercial lease for the property and engaged in a months-long process of custom-tailored renovations handled by, or with the acquiescence of, the landlord. Prior to moving in, the landlord worked with tenants and their parents to build out the premises to include a full kitchen, bathroom, laundry, and two bedrooms. The tenants lived in the space for two years without issue until, at the end of the lease, the landlord sought an exorbitant rent increase and specific lease language expressly prohibiting any residential occupancy, even though the landlord knew all along that was the entire basis of the tenants’ use. When renewal discussions inevitably failed, the landlord sued in the Commercial Part for eviction and possession because of the tenants’ residential use of the space. By that time, approximately $500,000 in post-lease rent had accrued.
Under the New York Civil Court Act, the civil Housing Part – and not the Commercial Part – maintains exclusive jurisdiction over all proceedings to recover possession of residential premises to remove tenants, and to render judgment for rent due. Moreover, despite the commercial nature of a lease, if a landlord knows of or acquiesces to a tenant’s use of the premises for residential purposes prior to commencing eviction proceedings, the action must be brought in the Housing Part. Pursuing possession of premises used for residential purposes constitutes a subject matter jurisdictional defect that is not waivable.
The landlord implausibly claimed that he had only recently learned of the tenants’ residential use, and that he always intended the space for strictly commercial use, but post-COVID-19, he planned to accommodate tenants who might wish to occasionally stay overnight, as their supposed business needs required. Despite pretrial filings making clear that the action should be barred from the Commercial Part, the matter proceeded to trial to determine, among other things, exactly what and when the landlord knew about the tenants’ occupancy. Over multiple trial days with five witnesses, Adam Leitman Bailey, P.C. adduced ample evidence demonstrating that the landlord was well aware that the tenants were residing in the premises. On direct examination, the landlord testified he had only learned of the tenants’ residential use recently, and that he made this supposed discovery by seeing tenants and their guests coming in and out of the space at all hours on his CCTV system. In a critical exchange on cross examination, the landlord admitted that he had consistently seen the tenants’ residential use of the space on CCTV, and was further forced to admit that he had installed the system over two years prior. That was the nail in the landlord’s coffin, leading the Court to find that he had “testified on rebuttal that he was aware, through the security cameras he had installed, that [the tenants] had been living in the premises for at least the past two years. Thus, this proceeding must be commenced in Housing Court.”
Accordingly, the Court fully dismissed the matter from the Commercial Part. Ultimately, this likely sounds the death knell for the landlord’s ability to recoup the ~$500,000 rent claimed to be owed, which was a main goal of the tenants. The Court’s decision definitively settled the question of the landlord’s awareness of the tenants’ residential use, and judgment for rent due in the Housing Part is unavailable to the landlord under these circumstances – where a commercial property is being used residentially, without a valid CO for its actual use.
Dov Treiman and Ben Rose represented the clients and secured dismissal after trial.