How Rent Stabilization Affects Value in New York City and on Long Island

HOW RENT STABILIZATION AFFECTS VALUE IN

NEW YORK CITY AND ON LONG ISLAND

ITKOWITZ PLLC

HOW RENT STABILIZATION AFFECTS VALUE IN NEW YORK CITY AND ON LONG ISLAND

A Program Prepared for the Columbia Society of Real Estate Appraisers, Inc. By Itkowitz PLLC

By Michelle Maratto Itkowitz and Jay B. Itkowitz ITKOWITZ PLLC 26 Broadway 21st Floors New York, New York 10004 (646) 822-1801 www.itkowitz.com [email protected] @jitkowitz [email protected] @m_maratto

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AGENDA

 Rent Stabilization & Value Today: How to identify when there are Rent Stabilized or Rent Controlled units in a multi-family building.  Rent Stabilization & Value Tomorrow: The most common ways to get a Rent Stabilized tenant out and thereby increase a building's value: Non- Primary Residence Cases; Owner Occupancy Cases; Demolition Eviction Cases; Tenant Buy-Outs; Chronic Non-Payment of Rent; also a consideration of Succession Rights and where does J-51 and 421a tax abatements fit in.  Rent Stabilization & Value In Between Today and Tomorrow: Issues with buildings with mixed occupancy - both Rent Stabilized and Free Market apartments in the same building and the effect of this on the building’s value

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Contents

I. WHAT RENT STABILIZATION MEANS 4 II. HOW DO I KNOW IF MY TENANT IS RENT STABILIZED? 5 A. WHY IS IT SO HARD TO TELL IF AN APARTMENT IS RENT STABILIZED? 5 B. WHAT MAKES AN APARTMENT SUBJECT TO RENT STABILIZATION 6 C. WHAT MAKES AN APARTMENT NOT SUBJECT TO RENT STABILIZATION? 6 1. Exceptions to Rent Stabilization Status Where the Building was Built Before 1974 and Contains More Than Six Units. 7 2. Exceptions to Rent Stabilization Status Where the Building is or was Part of a Tax Benefit Program, Such as J-51, 421-A, or the Private Housing Finance Law. 9 3. Rent Stabilization Status Where the Building is or was a Loft. 10 4. Practical Tip! Do Not Ignore Prior Litigation 12 III. RENT CONTROL AND LONG ISLAND RENT STABILZATION 12 A. Rent Control 12 1. How To Identify Rent Control 12 2. What Rent Control Means 13 3. Where To Look When Working On A Rent-Control Case 13 B. LONG ISLAND RENT STABILIZATION 13 IV. TERMINATIONS OF RENT STABILIZED TENANCIES – IN GENERAL 14 A. TERMINATION OF A RENT STABILIZED TENANCY BASED UPON GROUNDS FOR NON-RENEWAL AND THE GOLUB NOTICE 14 B. TERMINATION OF A RENT STABILIZED TENANCY BASED UPON GROUNDS IN STATUTE 15 V. NON-PRIMARY RESIDENCE 16 A. UNDERSTANDING NON-PRIMARY RESIDENCE CASES 16 B. CASES THAT EXPLAIN THE EFFECT OF TENANT'S INTENT IN NON-PRIMARY RESIDENCE CASES 19 C. NON-PRIME NOT CURABLE & THE EFFECT OF TRYING TO REESTABLISH RESIDENCE UPON RECEIVING A NOTICE OF NON-RENEWAL 21 D. WAREHOUSING CASES 22 E. NON-PRIME VS. ILLEGAL SUBLET 22 F. EFFECT OF IMMIGRATION STATUS ON NON-PRIMARY RESIDENCE 23 G. EFFECT OF MENTAL ILLNESS ON NON-PRIMARY RESIDENCE 23 H. NON-PRIMARY RESIDENCE CASES AND SURVEILLANCE CAMERAS 23 I. NON-PRIMARY RESIDENCE CASES AND ELECTRONIC DISCOVERY 24 1. What is Electronic Discovery? 24 2. Electronic Discovery and Residential Landlord-Tenant Cases 26

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J. SUCCESSION 27 VI. OWNER’S USE PROCEEDINGS 29 VII. DEMOLITION EVICTIONS: A REAL POSSIBILITY 30 A. DEMOLITION EVICTION – THE STATUTE AND REGULATIONS 31 B. REQUIREMENTS FOR DEMOLITION EVICTION 31 1. Permission from the DHCR 31 2. Proof You Have the Money for the Project 31 3. Building Plans Approved by the City 32 4. Paying the Tenant 32 5. Relocate Tenant or Pay an Additional Stipend Based on an Established Formula 32 6. Pay an Additional Stipend Based on an Established Formula 36 C. WHO IS THE “OWNER” 36 D. THE DHCR APPLICATION PROCESS; NO RENT INCREASES WHILE APPLICATION PENDING 37 E. WHAT IS “DEMOLITION” 38 F. THE RELATIONSHIP BETWEEN DEMOLITION EVICTION AND BUYOUT 39 G. KEEP THE RENT STABILIZED LEASES IN EFFECT 40 VIII. TERMINATION OF A TENANCY FOR CHRONIC NON-PAYMENT OF RENT 40 A. THEORY BEHIND CHRONIC NONPAYMENT -- SUBSTANTIAL VIOLATION OF LEASE 41 B. NO NOTICE TO CURE REQUIRED FOR CHRONIC NONPAYMENT 42 C. HARDSHIP IS NOT A DEFENSE TO CHRONIC NONPAYMENT 42 D. REPAIRS ARE A DEFENSE TO CHRONIC NONPAYMENT 43 E. PROCEEDINGS MUST BE COMMENCED TO SUPPORT CHRONIC NONPAYMENT 43 F. CHRONIC NONPAYMENT STIPULATIONS UPHELD 44 G. NO POST-JUDGMENT STAY 44 IX. BUYOUTS OF RENT STABILIZED TENANTS 45 A. UNDERSTANDING WHY SOME TENANTS RESPOND FAVORABLY TO A BUYOUT, AND WHY OTHER TENANTS REJECT ANY OFFER 45 B. GROUNDS FOR TERMINATING A RENT STABILIZED TENANCY 46 C. MAKING YOUR BUYOUT OFFER MEANINGFUL 48 1. First Possible Solution – Do Something Different With The Buyout Money 48 2. Second Possible Solution -- Move Tenant #2 To Another Rent Stabilized Apartment That The Landlord Owns 49 3. Third Possible Solution – Find Out What Tenant #2 Really Needs 49 D. WHEN THE TENANT IS CRAZY, NOT AMENABLE TO A WIN-WIN SOLUTION AND UN-SWAYED BY LITIGATION 50 E. THE POWER OF “PLAN B” 51 F. FINDING A WAY TO GET THINGS DONE – FINAL THOUGHTS…OUT ON A LIMB 52

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I. WHAT RENT STABILIZATION MEANS

Rent Stabilization applies to many residential tenancies in New York City. Rent Stabilization limits the rent an owner may charge for an apartment, restricts the right of an owner to evict tenants, and imposes other requirements on landlords and tenants. Rent Stabilization is overseen by the New York State Division of Homes and Community Renewal (“DHCR”).1

Rent Stabilized tenants are entitled to leases and automatic lease renewals.2 Under Rent Stabilization, leases must be entered into and renewed for one-or two-year terms, at the tenant's choice.

Family members residing in the premises often have succession rights to the leases.3

Rent increases for Rent Stabilized tenants are artificially controlled by the New York City Rent Guidelines Boards, which maximum rates for rent increases once a year which are effective for leases beginning on or after October 1st of each year. For example, on June 23, 2014, the New York City Rent Guidelines Board voted in favor of allowing the following increases on rent-stabilized apartments and lofts commencing between October 1st, 2014 and September 30th, 2015:

For a one-year lease: 1% For a two-year lease: 2.75%

Owners are required to register all Rent Stabilized apartments initially and then annually with the DHCR and to provide tenants with a copy of the annual registration.

In New York City, the New York City Rent Stabilization Law governs Rent Stabilized tenancies, and is codified in the New York City Administrative Code (“NYC Admin. Code”) § 26-501 et seq. The DHCR has promulgated a set of regulations that also govern Rent Stabilized tenants in New York City known as the Rent Stabilization Code (“RSC”), codified at 9 NYCRR §§ 2520.1 et seq. These statutes appear in the Unconsolidated Laws of the State of New York. Finally, there are some additional subsets of Rent Stabilized tenancies that have rules all their own to watch out for, such as SROs (Single Room Occupancies).

You can also obtain guidance when working on rent regulated matters by calling the DHCR hotline (a.k.a. the Rent Infoline) at (718) 739-6400. You have to be cautious because some DHCR employees are more knowledgeable than others. The DHCR website also provides lots of information, from the current lawful rent increases, to the

1 Omnibus Housing Act § 3 (L. 1983, c. 403).

2 9 NYCRR § 2523.5(a).

3 9 NYCRR § 2523.5 (b)(1); 9 NYCRR § 2520.6 (o).

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requirements for providing heat, hot water and other necessary services.4 The DHCR promulgates Operational Bulletins and Policy Statements on various topics that are often instructive and sometimes persuasive, which are available on the website or by calling the DHCR Rent Infoline.

II. HOW DO I KNOW IF MY TENANT IS RENT STABILIZED?

In 2011 (the most recent and most supported statistic I could find) there were 986,840 Rent Stabilized apartments in New York City, according to New York University’s Furman Center for Real estate and Urban Policy.5 But which apartments are they?

First, we seek to clearly and briefly answer three questions:

 Why is it so hard to tell if an apartment is Rent Stabilized?  What makes an apartment subject to Rent Stabilization?  What makes an apartment not subject to Rent Stabilization?

A. WHY IS IT SO HARD TO TELL IF AN APARTMENT IS RENT STABILIZED?

There is no official list somewhere that definitively tells the world which apartments are subject to Rent Stabilization and which are not.

The New York State Division of Housing and Community Renewal (“DHCR”) has jurisdiction over matters relating to Rent Stabilization6 and the DHCR maintains some records. But the records the DHCR maintains contain information that is largely self- reported by landlords and that is not controlling with regard to an apartment’s Rent Stabilization status. Therefore, year after year a landlord can report to the DHCR that an apartment is “permanently exempt”, but that does not make it so.

Moreover, a current or former tenant may have signed a document acknowledging that an apartment is not subject to Rent Stabilization. But this, also, does not make it so. Parties may not contract in or out of Rent Stabilization coverage.7

4 See http://www.nyshcr.org/

5 http://furmancenter.org/files/publications/HVS_Rent_Stabilization_fact_sheet_FINAL_4.pdf. Interestingly, a 2014 New York City Rent Guidelines Board 2014 Housing Supply Report lists the exact same number. http://www.nycrgb.org/downloads/research/pdf_reports/14HSR.pdf.

6 Omnibus Housing Act § 3 (L. 1983, c. 403).

7 Thornton v. Baron, 5 N.Y.3d 175 (2005).

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I would like one thin dime for every time a landlord-client showed me that an apartment was long ago registered with the DHCR as permanently exempt or that the tenant himself signed a lease rider acknowledging that the apartment is not Rent Stabilized, and suggested to me that these facts mean that the apartment is not Rent Stabilized. These facts are meaningless and these pieces of paper are worthless.

How do you ever get a definitive answer on an apartment’s Rent Stabilization status? With some exceptions, the last word on whether or not an apartment is Rent Stabilized is in the hands of the courts. Until a judge is satisfied that an apartment is not Rent Stabilized, the matter is always, in some measure, unsettled. As you will see from the balance of this section, for some apartments the matter is way more unsettled than for others. This section is designed to come in handy for those apartments where circumstances make the matter unclear.

Why is this so complicated? Because it is. There are many statutes and mountains of case law that, when woven together, make up the rent regulatory scheme in New York City. There are rules, and exceptions to the rules, and exceptions to the exceptions to the rules.

B. WHAT MAKES AN APARTMENT SUBJECT TO RENT STABILIZATION

There are three sets of circumstances that will alert me, as a veteran landlord and tenant practitioner, to the possibility that an apartment is subject to Rent Stabilization. They are:

 The building was built before 1974 and contains six or more units.8

 The building is or was part of a tax benefit program, such as J-51, 421-a, or the Private Housing Finance Law.9

 The building is (or was) a Loft.

If any of these circumstances are present, my job as a landlord’s (or a tenant’s) lawyer is to look more closely. If we are going to court and any of these circumstances exist, then I MUST look more closely and have the answer, because the court will demand it.

C. WHAT MAKES AN APARTMENT NOT SUBJECT TO RENT STABILIZATION?

If a building has less than six units and was constructed after 1974, but without being part of a tax abatement program like those mentioned above, and it is not a Loft, then

8 NYC Admin. Code 26-505(b).

9 NYC Admin. Code 26-504(c).

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we have all we need to confidently assert that the apartments in the building are not Rent Stabilized.

But if the circumstances above, are present, then we need to start looking for exceptions. And here we go!

1. Exceptions to Rent Stabilization Status Where the Building was Built Before 1974 and Contains More Than Six Units.

If the building was built before 1974 and has more than six units, the most common reasons that a unit in the building would NOT be subject to Rent Stabilization are:

a. The Building was Converted to a Co-Op and the Tenant is NOT the First Tenant in the Unit After Conversion.

If a building was converted to a co-op and the tenant in the unit is NOT the first tenant in the unit after the time of conversion, i.e. a “non-purchasing tenant”, then the apartment is probably exempt from Rent Stabilization.10

b. The Unit was Luxury Deregulated and such Deregulation was Properly Documented with the DHCR.

If the rent legally hit $2,500.00 -- and some other criteria were met -- then the unit may have been luxury deregulated.

This exception is sometimes problematic. You need to examine the rent history on file with the DHCR and compare it with the Rent Guidelines Board allowable increases and assess whether or not the rent has “legally” made it to $2,500.00. Moreover, luxury deregulation of an occupied apartment is only obtained by way of an application to the DHCR.

The problem I’ve had is when landlords come to me and tell me their apartment is deregulated because the rent is over $2,500.00. This is circular reasoning and leads nowhere. The information I really need is -- why did the rent get to be over $2,500.00?!

Finally, note that there is no luxury deregulation option for Lofts or for buildings subject to Rent Stabilization via a tax abatement program.

c. The Building was Substantially Rehabilitated.

If the building was substantially rehabilitated when it was vacant and the owner did not submit the building to a tax abatement plan that made the building temporarily Rent Stabilized, then none of the units in the building are Rent Stabilized.

10 NY Gen. Bus. Law § 352-eee.

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In general, the DHCR will find that a building has been substantially rehabilitated and is, therefore, exempt from coverage under the Rent Stabilization Law, where the owner demonstrates to the DHCR that the following criteria have been met:

 At least 75% of the building-wide and apartment systems were each completely replaced with new systems. Additionally, all ceilings, flooring and plasterboard or wall surfaces in common areas were replaced; and ceiling, wall, and floor surfaces in apartments, if not replaced, were made “as new”. 11

 The rehabilitation commenced in a building that was in a substandard or seriously deteriorated condition. The extent to which the building was vacant of residential tenants when the rehabilitation commenced constitutes evidence of whether the building was in fact in such condition. If rehabilitation commenced in a building that was at least 80% vacant of residential tenants, there is a presumption that the building was substandard or seriously deteriorated at that time.

Moreover, to document a claim of substantial rehabilitation, the landlord needs records demonstrating the scope of the work actually performed in the building. These may include an itemized description of replacements and installations, copies of approved building plans, architect's or general contractor's statements, contracts for work performed, appropriate government approvals, photographs of conditions before, during, and after the work was performed, and proof of payment by the owner for the rehabilitation work.12

It is up to a court (or the DHCR, which has concurrent jurisdiction with the court) to decide whether or not substantial rehabilitation has occurred. An owner may apply to

11 Building-wide and Apartment Systems include: 1. Plumbing 2. Heating 3. Gas supply 4. Electrical wiring 5. Intercoms 6. Windows 7. Roof 8. Elevators 9. Incinerators or waste compactors 10. Fire escapes 11. Interior stairways 12. Kitchens 13. Bathrooms 14. Floors 15. Ceilings and wall surfaces 16. Pointing or exterior surface repair as needed 17. All doors and frames including the replacement of non-fire-rated items with fire-rated ones

12 DHCR Bulletin 95-2.

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the DHCR for an advisory prior opinion that the building will qualify for exemption from rent regulation on the basis of substantial rehabilitation, based upon the owner's rehabilitation plan.13

I once had a case where substantial rehabilitation had certainly occurred but the landlord did not bother to get the DHCR’s opinion on the project. Therefore, we found ourselves in Supreme Court arguing with a serially deadbeat tenant about his Rent Stabilization status, trying to reconstruct the details of a construction project that was over a decade old.

One final thing to add to this section -- the Rent Stabilization Law specifically states that it does NOT apply to a building for which the certificate of occupancy was obtained after March 10, 1969. Sometimes you do not even need to start thinking about the scope of rehabilitation; you can just check when the certificate of occupancy was first obtained.14

2. Exceptions to Rent Stabilization Status Where the Building is or was Part of a Tax Benefit Program, Such as J-51, 421-A, or the Private Housing Finance Law.

a. History and Overview

New York Real Property Tax Law § 421-a, designed to encourage new construction of New York City residential housing, provides for a partial real-estate tax exemption over a period of at least 10 years.

J-51 is a property tax benefit program (“J-51”) for property owners who renovate and/or rehabilitate their residential and/or mixed use apartment buildings.15 The Program also grants tax benefits to owners of non-residential buildings who convert their buildings to residential use.16 The benefit varies depending on the building’s location as well as the type and extent of improvements -- although it generally comes in the form of tax abatement and/or a tax exemption.

The Program is known as "J-51" because of the name of the relevant statute before the New York City Administrative Code (“NYC Admin. Code”) was renumbered in 198917; Today, it is authorized by § 489 of the New York State Real Property Tax Law (“RPTL”) and § 11-243 of the NYC Admin Code and is administered by the Tax Incentive Programs Unit of the New York City Department of Housing Preservation and Development (“HPD”). HPD determines eligibility for the program and the Finance

13 DHCR Fact Sheet #38 Use for RS-3 1010 http://www.nyshcr.org/Forms/Rent/rs3.pdf.

14 9 NYCRR § 26-505(d).

15 See J-51 Guidebook, A publication of the City of New York Division of Tax Programs and Policy Tax Incentive Programs Unit (“J-51 Guidebook”), p.1. 16 Id. 17 Id.

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Department administers the benefit. HPD has published rules governing the Program, codified in Chapter 5 of Title 28 of the Rules of the City of New York (“RCNY”).18

The Program expired on December 31, 2011. Since its expiration, New York City has not been able to grant any new J-51 subsidies. However, existing J-51 benefits are not affected, and owners with benefits in place will continue to pay fewer taxes until their benefits expire.

b. Condition Imposed In Exchange for Benefits

In return for tax programs like these, landlords must submit the building to rent regulation for the duration of the tax-benefit period, even when a building is constructed after 1974, and would otherwise be exempt from rent regulation.

Rent Stabilization goes away when the tax abatement burns off, but only under the following circumstances:

 Housing accommodations subject to the law remain regulated until a vacancy occurs, at which time free-market rents may be charged.

 Alternatively, decontrol may occur upon the expiration of a tenant’s lease after the tax benefits expire provided the tenant’s initial lease and each renewal thereof contain a notice, in at least 12-point type, informing the tenant that the unit’s protected status would eventually lapse.19

3. Rent Stabilization Status Where the Building is or was a Loft.

A Loft (or “Interim Multiple Dwelling”) is an old commercial building that is now used for residential purposes, which is in the process of obtaining a proper certificate of occupancy.20 Lofts are administered by the Loft Board. You can know whether or not a building is a loft by looking at the Loft Board website21. The Rent Guidelines Board regulates the rents of Lofts.22 The owner is also entitled to milestone increases when certain Loft Law compliance deadlines are reached. The milestones are:

18 See http://rules.cityofnewyork.us/codified-rules?agency=HPD 19 In 254 Pas Prop. LLC. v. Gamboa, 16 Misc.3d 131(A) (App. Term 1st Dept. 2007), the lease rider in question failed to set forth the requisite notice of the “approximate date on which such benefit period is scheduled to expire,” inasmuch as it specified an expiration date of June 30, 1991, when, in fact, the actual expiration date of the abatement was June 30, 1997. The court rejected landlord's claim that this six-year discrepancy was de minimus, especially given the landlord's improper tender of a fair market lease in 1995. Although in Mayflower v. Deri, 36 Misc.3d 128(A) (App. Term 1st Dept. 2012), the court says that, “[t]he notice provision contained in the parties' July 2, 2009 lease rider was not rendered invalid by any minor misstatement as to the approximate date on which such (tax) benefit period is scheduled to expire,” the problem is that this case does not indicate how far off the date was.

20 MDL § 281.

21 http://www.nyc.gov/html/loft/html/home/home.shtml.

22 http://www.nycrgb.org/html/guidelines/orders/order46.html.

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1. When the owner files an alteration application with the Department of Buildings for the legalization work; 2. When the owner obtains a building permit; and 3. When the owner achieves Article 7-B compliance (compliance with the fire safety requirements of the Multiple Dwelling Law). This compliance will be documented either by the owner’s architect filing a certificate with the Loft Board verifying that the 7-B work is completed, or by obtaining a temporary or final certificate of occupancy.

The amount of the increase depends upon two things: (1) the milestone achieved; and (2) the date it was achieved.23

Alteration application: Reached before June 1, 2012 — 6% Reached after June 1, 2012 — 3%

Permit: Reached before June 1, 2012 — 8 % Reached after June 1, 2012 — 3%

7-B Compliance: Reached before June 1, 2012 —6% Reached after June 1, 2012 — 4%

Loft apartments are subject to the Rent Stabilization rent increases, unless the converter either sold or abandoned the fixtures in the apartment to the building owner. In either case, the Landlord must file a report with the Loft Board.24

a. Sale of Tenant Improvements

An owner who purchases improvements from an outgoing Loft tenant may remove the unit from IMD rent regulation so long as the building has fewer than six residential units subject to rent regulation solely by reason of Article 7-C of the Multiple Dwelling Law (“MDL”).25 Upon doing this, landlord must file a report with the Loft Board.26

23 http://www.nyc.gov/html/loft/html/faq/faq.shtml. 24 Multiple Dwelling Law § 286(12). 25 MDL § 286(6); Acevedo v. Piano Bldg. LLC., 70 A.D.3d 124 (1st Dept., 2009).

26 MDL § 286(12).

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b. Upon Getting the Permanent Certificate of Occupancy, Even if the Building has Less than Six Units, the Units Become Rent Stabilized

Upon getting the permanent C of O, even if the building has less than six units, the unit is Rent Stabilized.27 This provides an interesting example of where you COULD find Rent Stabilization in a building with less than six units.

4. Practical Tip! Do Not Ignore Prior Litigation

Take heed of what I have said so far. The court is the last word. When doing your due diligence about the status of an apartment be sure to check with the various courts’ files in the county in which the real property is located to see if the matter has been previously litigated and decided. I once had a young lawyer come to me and tell me about all the research he had done on whether or not a Loft apartment was Rent Stabilized. In passing, he mentioned that the client told him there was a court case regarding the apartment many years ago. I told him he needed to get that file. He told me that the Civil Court archives going that far back were hard to navigate and incomplete. I said: look anyway! He looked and he found a decision deregulating the apartment. All the research he did was an unnecessary reinvention of the wheel. The answer was in the court files!

III. RENT CONTROL AND LONG ISLAND RENT STABILZATION

A. Rent Control

A quick word about Rent Control. Rent Control is a separate and far less common form of rent regulation, than Rent Stabilization. There are only 38,375 Rent Controlled apartment in New York City, representing less than 1% of the overall housing stock.28 To deal with Ren Control, and all its peculiarities, is, therefore, beyond the scope of this course. But I will say a few things:

1. How To Identify Rent Control

A tenant is probably Rent Controlled if he or his family has resided in the apartment since prior to 1971, regardless of the size of the building.29

27 91 Fifth Ave. Corp. v. New York City Loft Bd., 249 A.D.2d 248 (1st Dept. 1998).

28 http://www.nycrgb.org/downloads/research/pdf_reports/14HSR.pdf.

29 Emergency Housing Rent Control Law, Unconsol .L. § 8582.2; NYC Rent Rehab Law, NYC Admin. Code § 26- 403(e) (Rent & Eviction Regulations.); 9 NYCRR §§ 2100.2 (b), (e).

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2. What Rent Control Means

In New York City, Rent Control operates under the Maximum Base Rent ("MBR") system. An MBR is established for each apartment and is adjusted every two years to reflect changes in operating costs. Owners who certify that they are providing essential services and have removed violations may raise rents by up to 7.5% each year until the MBR limit is reached.

3. Where To Look When Working On A Rent-Control Case

In New York City, the New York City Rent and Rehabilitation Law30 governs rent controlled tenancies within New York City and is codified in the NYC Admin. Code § 26- 401 et seq. The DHCR has promulgated a set of regulations that also govern rent controlled tenants in New York City known as The New York City Rent and Eviction Regulations, codified at 9 NYCRR §§ 2200.1 et seq.

B. LONG ISLAND RENT STABILIZATION

There are even fewer Rent Stabilized apartments on Long Island than there are Rent Controlled apartments in New York City. There are 10,786 Rent Stabilized Apartments on Long Island, which is about 1% of the overall housing stock. Most apartments on Long Island have market rate rents.

2013 Chart from the Regional Plan Association31

30 Local L. 1962, No. 20, as amended.

31 http://www.rpa.org/article/long-islands-rental-housing-crisis

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IV. TERMINATIONS OF RENT STABILIZED TENANCIES – IN GENERAL

There are two ways to terminate a Rent Stabilized tenancy. A landlord may attempt: (a) to refuse to renew the lease (which can only be done for very specific, delineated reasons as discussed below); or (b) to terminate the tenancy pursuant to the provisions of the applicable statutes.

A. TERMINATION OF A RENT STABILIZED TENANCY BASED UPON GROUNDS FOR NON-RENEWAL AND THE GOLUB NOTICE

The three most noteworthy basis upon which landlord may refuse to renew a Rent Stabilized lease are:

 that the tenant does not occupy the premises as his primary residence32 (See the lengthy section on this below in these materials);

 that the landlord wishes to recover possession of the premises for his or his immediate family’s personal use as a primary residence33; or

 that Landlord seeks to demolish the building34. Landlord needs to seek the prior approval of the DHCR in order to proceed on this ground and must demonstrate that it has the financial ability to do demolish and rebuild and that the plans are approved by all relevant agencies. Landlord must also relocate the tenants to comparable housing. Demolition Eviction is a very complicated procedure, but under the proper circumstances this provision transforms a Rent Stabilized building into a development project. This method is growing in popularity in the current market wherein much of New York City is being rebuilt (See the lengthy section on this below in these materials).

All three of these grounds are addressed in detail below.

The landlord’s intention not to renew a Rent Stabilized lease must be communicated to the tenant during what has come to be known as the “Golub” period, at least ninety (90) and no more than one hundred and fifty (150) days prior to the expiration of the lease.35 This is a tight window and if missed, the landlord is out of luck until the next renewal period, possibly two years later if the tenant chooses to renew for a two-year term. Of

32 9 NYCRR § 2524.4.

33 9 NYCRR § 2524.4(a)(1).

34 9 NYCRR § 2524.5(a)(2).

35 9 NYCRR § 2524.2 (c)(2); Golub v. Frank, 65 N.Y.2d 900 (1985).

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course, a lease providing greater rights to the tenant (e.g., requiring six months’ notice) has been held enforceable.36

The Golub notice not to renew a Rent Stabilized lease based upon non-primary residence must state specific facts supporting the non-primary residence claim.37 A written thirty-day notice of the landlord’s intention to commence an eviction proceeding must also be given to the tenant, though it can be combined with the Golub notice.38

B. TERMINATION OF A RENT STABILIZED TENANCY BASED UPON GROUNDS IN STATUTE

A Rent Stabilized tenancy may only be terminated on grounds delineated in the Rent Stabilization Code at 9 NYCRR § 2524.3. Some examples are: (i) the violation of a substantial obligation of the tenancy39 (this is a good catch-all provision for situations wherein the tenant is violating a provision in the lease); or (ii) illegal subletting.40

9 NYCRR §§ 2524.2 and 2524.3 govern whether or not the predicate ground selected requires the tenant to be given: (i) a notice to cure and a cure period; (ii) identification of the length of such cure period; and/or (iii) identification of the length of the termination notice period.

A termination notice pursuant to these statutory schemes should cite the sections of the lease and the provisions of the statutes relied upon, as well as the specific facts (conclusory allegations will not suffice) upon which the landlord relies to terminate the tenancy.41

9 NYCRR § 2524.2 through 9 NYCRR § 2524.4 are tricky little statutes. When working with them, one should read and re-read them carefully.

36 See, e.g., Minick v. Park, 217 A.D.2d 489 (1st Dept. 1995); Rosenberg v. 926 Park Ave. Corp., 254 A.D.2d 224 (1st Dept. 1998).

37 Berkeley Associates Co. v. Camlakides, 173 A.D.2d 193 (1st Dept. 1991), aff’d, 78 N.Y.2d 1098, (1991) (“The statement in the first timely Notice that ‘you do not occupy the [p]remises as your primary residence’ simply stated the ground for the non-renewal…[it was not a statement of] “‘the facts necessary to establish the existence of such ground.’”).

38 9 NYCRR § 2524.4(c); Melohn v. Doyle, N.Y.L.J., 7/18/90 at 20,col. 5 (Civ. Ct. N.Y. 1990).

39 9 NYCRR § 2524.3(a).

40 9 NYCRR § 2524.3(h).

41 Daffodil v. Pritzker, 10/1/96 N.Y.L.J. 21 (col. 1) (1st Dept. 1996).

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Rent Stabilization Laws are kind of like a field of daisies. (Not really.)

V. NON-PRIMARY RESIDENCE

A. UNDERSTANDING NON-PRIMARY RESIDENCE CASES

First we want to talk about what is a non-primary residence case is and how can be won or lost. We find that landlords often have many misconceptions about this area. They often think there is some magic “180 days in the apartment” rule, or that the case comes down to where the tenant has their voter registration card. Such assumptions are incorrect.

Non-primary residence is a very frequently litigated area of Rent Stabilization Law.42 The first and most important point to note is that there are no absolute bright line rules when it comes to determining what constitutes a non-primary residence; the cases are highly fact specific. You can have two separate cases where the tenant is away from the apartment frequently to care for elderly, sick parents; in one case a court will find that the apartment is the tenant’s primary residence, while another court will find that the apartment is not the tenant’s primary residence. The court is looking at the credibility of the witnesses at trial and an overall totality of circumstances.

42 One of the most common reasons that a landlord may refuse to renew a Rent-Stabilized lease is that the tenant does not occupy the premises as his primary residence, pursuant to 9 NYCRR § 2524.4.

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Courts Consider the Following Kinds of Evidence in a Rent Stabilization Non-Primary Residence Case (I will limit myself to under twenty items):

(1) The tenant’s intention regarding the apartment (Is it vague or definite?).43

(2) The tenant’s ability to return to the apartment (Is he stuck in jail or at a nursing home indefinitely? Or will he be back soon?).44

(3) The number of days a year the tenant is gone from the apartment (There is not, however, an absolute requirement that a tenant quantify the numbers of days he or she spent in the apartment for each relevant year.).45

(4) The reason the tenant is gone from the apartment (Is he caring for a dying relative? But did the relative die a year ago without the tenant returning?).46

(5) The tenant’s job (Is she an Opera singer on the road ten months a year? Or does she have a full-time desk job in Minnesota?).47

(6) Documents – driver’s license, voter registration, tax returns, bank statements, etc. (obtained before the proceeding began so they are not self-serving).48

(7) Who is actually in the apartment (Is anyone else living there or using the apartment while the tenant is gone? Are the occupants paying the tenant? Did the occupants put the telephone and cable accounts in their names?).49

43 Rockledge Equities v. Michaelson, N.Y.L.J., 8/10/93 at 21,col. 2 ([App. Term. 1st Dept.]).

44 1286 First Realty Assoc. v. Malatinsky, 176 Misc.2d 596 (App. Term. 1st Dept. 1998); Emay Prop. Corp. v. Norton, 136 Misc.2d 127 (App. Term. 1st Dept. 1987); Katz v. Gelman, 177 Misc.2d 83(App. Term. 1st Dept. 1998).

45 409-411 Sixth Street, LLC v. Mogi, 100 A.D.3d 112 (1st Dept. 2012), reversed on other grounds, SEE 22 N.Y. 3d 875.

46 Lance Realty Co. v. Fefferma, 5 Misc.3d 134(A) (App. Term. 1st Dept. 2004); Nussbaum Resources I, LLC. v. Gilmartin, 2003 WL 262341 (App. Term. 1st Dept. Jan. 29, 2003); Kalimian v. Homberg, 2001 WL 1530165 (App. Term. 1st Dept. Sept. 17, 2001).

47 Patchin Place LLC v. Fox, 3 Misc.3d 127(A) (App. Term. 1st Dept. 2004); Sommer v. Ann Turkel, Inc., 137 Misc.2d 7 (App. Term. 1st Dept. 1987).

48 Bobbyson 328, Inc. v. Heilbut, 2002 WL 825117 (App. Term. 1st Dept. Apr. 16, 2002).

49 406 W. 47th St. HDFC v. Picot, 2003 WL 22928570 (App. Term. 1st Dept. Nov. 25, 2003); 89 E. 3rd St. Tenants Ass’n. v. Lamotta, 2001 WL 1682424 (App. Term. 1st Dept. Oct. 11, 2001).

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(8) The tenant’s degree of convenience or personal gain garnered by the apartment (Is there evidence that the apartment is being used as a pied-a-terre or NYC Office?).50

(9) The condition of the apartment (Was the tenant forced to leave due to asbestos or mold?)51

(10) Tenant’s immigration status.52

(11) The number of witnesses the landlord calls on his behalf and how credible they are (Neighbors, the superintendent, etc.).53

(12) Where the rest of the tenant’s immediate family resides (Although a husband and wife can maintain separate primary residences).54

(13) Electric and gas usage in the apartment (Is it sporadic or minimal?).55

(14) Whether the tenant has other leases or deeds in her name, and how well the tenant explains why he has other leases or deeds in her name.56

(15) Benefits received by the tenant as a result of other residences (Did the tenant claim a homestead exemption at his Florida residence?).57

50 Park Towers S. Co., LLC. v. Universal Attractions, 274 A.D.2d 312 (1st Dept. 2000); Rocky 116 LLC. v. Weston, 186 Misc.2d 251 (App. Term. 1st Dept. 2000), aff’d, 284 A.D.2d 139 (2001).

51 Emel Realty Corp. v. Carey, 288 A.D.2d 163 (1st Dept. 2001).

52 Katz Park Ave. Corp. v. Jagger, 11 N.Y.3d 314 (2008).

53 N.Y. Hanover Corp. v. Las Casas, 2 Misc.3d 140(A)(App. Term. 1st Dept. 2004); Carmine Ltd. v. Gordon, 41 A.D.3d 196 (1st Dept., 2007); 3657 Realty Co., LLC v. Jones, 18 Misc.3d 82 (App. Term. 1st Dept. 2007), aff’d, 52 A.D.3d 272 (2008).

54 60 West 57 Realty, Inc. v. Durante, 17 Misc.3d 71 (App. Term. 1st Dept. 2007).

55 Goldman v. Lensky, 4 Misc.3d 140(A) (1st Dept. App. Term. 2004).

56 520 E 81st v. Roberts, N.Y.L.J. at 22, col. 4 (1st Dept. Sept. 20, 1993).

57 335-7 LLC v. Tirelli, 2003 WL 21512452 (App. Term. 1st Dept. June 27, 2003); 985-987 First Ave. LLC v. Aretakis, 25 Misc.3d 62 (App. Term. 1st Dept. 2009).

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(16) Instances where the tenant lists other residences on documents (Did she file bankruptcy claiming her address as New Jersey?).58

(17) The amount of furniture and personal items tenant has in the apartment.59

(18) The location of the tenant’s regular place of worship or health club.60

(19) One case turned on the fact that “Tenant was always announced from the lobby of his girlfriend’s apartment as a visitor.” Thus, the court concluded that he hadn’t abandoned his Rent Stabilized apartment to live with her.61

The takeaway is that these are fact-specific cases. The court knows a non-primary residence when it sees it, and the landlord’s attorney’s job is to make the judge see it.

B. CASES THAT EXPLAIN THE EFFECT OF TENANT'S INTENT IN NON- PRIMARY RESIDENCE CASES

Below are some cases that explain the effect of Tenant’s intent in non-primary residence cases:

1. 1286 First Realty Assoc. v. Malatinsky, 176 Misc.2d 596 (App. Term. 1st Dept. 1998). Found for Landlord. Tenant was in a health care facility for a year. Tenant made no representation as to his intention or ability to resume occupancy. The court held: “Where there has been a prolonged absence from the apartment, a vaguely articulated intent to return at some unspecified time in the future is insufficient to defend a non-primary residence claim.”

2. Rockledge Equities v. Michaelson, N.Y.L.J. at 21, col. 2 (Aug. 10, 1993). “Where…a rent regulated tenant is shown to be physically absent from the apartment premises for an extended time period, a vague intent to return at some unspecified time in the future does not meet the test of primary residence.”

58 ALH Prop. Two, LLC. v. Castaldo, 19 Misc.3d 140(A) (App. Term. 1st Dept. 2008).

59 Glenbriar v. Lipsman, 5 N.Y.3d 388 719 (2005).

60 422 East 9th LLC v. Patton, 29 Misc.3d 137(A)(App. Term. 1st Dept. 2010).

61 Sutton Assoc. v. Hutton, 4 Misc.3d 132(A) (App. Term. 1st Dept. 2004).

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3. Sommer v. Ann Turkel, Inc, 137 Misc.2d 7 (App. Term. 1st Dept. 1987). Found for LL where for several years tenant worked extensively as a model and actress in California where she rented a house. Tenant testified to being in New York 60-75 days per year but claimed the New York apartment was more furnished than the California house; tenant “regards New York as her home and intends to return when her work permits her to do so”. Tenant paid New York State and City income taxes, had a California driver’s license, and did not sublet the premises. Court held that:

a tenant’s domicile may be New York City, but if he is residing elsewhere almost all of the time…it would be illusory to maintain that the New York apartment is the tenant’s primary residence. A tenant’s domicile may be a factor to consider, particularly in the situation where a tenant spends little time in New York but is not shown to have any other primary residence…[citations omitted] But that is, of course, quite different from saying that because an apartment is an individual’s domicile it is also necessarily his primary residence. As we have recently stated, ‘The issue is not so much one of legal domicile as it is of primary residence. We take primary residence to mean an ongoing, substantial, physical nexus with the controlled premises for actual living purposes—which can be demonstrated by objective, empirical evidence…Domicile is, inter alia, a state of mind, and to the extent that tenant may honestly intend to return to New York at some indeterminate time in the future, that is not sufficient to maintain stabilization rights in the face of evidentiary proof that primary residence is lacking. An acknowledged purpose of the Rent Stabilization law is to secure from eviction, during a period of scarcity in rental accommodations, those tenants who actively require and actively use their apartments for dwelling purposes. Persons such as tenant herein, who live outside New York but who reserve a New York address for secondary purposes of convenience and occasional use when they visit the city, cannot fairly cloak themselves with the protections of extended stabilized status.

4. Emay Prop. Corp. v. Norton, 136 Misc.2d 127 (App. Term. 1st Dept. 1987).Held for Landlord where tenant was convicted of murder and sentenced to fifteen years to life with the Premises not occupied by anyone. The court held: “[A]n overriding purpose of

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[the non-primary residence law] was to ensure that those New Yorkers using their apartments as their primary residences would reap the benefits of the status” and to alleviate the shortage of housing in New York City by returning underutilized apartments to the marketplace. “These legislative objectives will not be served by simply permitting the apartment to remain vacant while the tenant serves a lengthy indeterminate sentence. . . .That the tenant may subjectively intend to return to the premises if and when he is released, is not the determinative consideration.”

C. NON-PRIME NOT CURABLE & THE EFFECT OF TRYING TO REESTABLISH RESIDENCE UPON RECEIVING A NOTICE OF NON- RENEWAL

Below are some cases that demonstrate non-primary residence is not subject to cure.62

1. 45th St. Assoc. v. Spence, 180 Misc.2d 93 (App. Term. 1st Dept. 1999). Tenant’s attempt to re-establish her residence in Manhattan by returning after service of the notice of non-renewal is unavailing. “It was…not the intent of the Legislature in exempting apartments not used as a primary residence to give the non-primary tenant the opportunity to periodically pose as a primary resident[.]” 45th Street v. Spence, 180 Misc.2d 93, 689 N.Y.S.2d 355 (1st Dept. 1999).

2. Lufkin v. Drago, 126 Misc.2d 177 (N.Y. Civ .Ct. 1984), aff’d, 129 Misc.2d 1108 (1st Dept. 1985).Tenant moved out of premises pursuant to divorce agreement, wherein his former wife was permitted to continue to reside in the apartment on her own, it being understood that if she were not to use the premises, that he would be able to retake possession for use as his primary residence. This agreement was not adhered to and wife sublet to an unrelated party. The sub-tenancy was created without tenant’s consent or knowledge. Tenant sought permission to cross-claim against the sub-tenant, so he could “cure” his non-primary residence. The Court held that tenant’s rights to possession against the subtenant are irrelevant. Non-prime is simply not curable; “The disfavor toward forfeitures is balanced by the clear command of the Legislature to stop protecting tenants who fail to maintain their apartments as their primary residences.”

62 O’Quinn v. N.Y.C. Dep’t of Hous. Pres. & Dev, 248 A.D.2d 211 (1st Dept. 2001).

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D. WAREHOUSING CASES

1. Park Towers S. Co., LLC v. Universal Attractions, 274 A.D.2d 312 (1st Dept. 2000). Tenant’s motion to dismiss denied where tenant claimed that landlord contracted away the right to claim non- primary residence in an earlier proceeding. “Tenants who maintain primary residences elsewhere while retaining rent-stabilized apartments for convenience or personal gain are not victims of the housing crisis, and therefore not within the class of who the rent stabilization laws were designed to protect.”

2. Rocky 116 LLC. v. Weston, 186 Misc.2d 251 (App. Term. 1st Dept. 2000), aff’d, 284 A.D.2d 139 (2001). Tenant’s motion to dismiss denied where tenant claimed that landlord contracted away the right to claim non-primary residence in an earlier proceeding. “The practice of permitting tenants to stockpile rent-stabilized apartments, immune from the requirement of primary residence, should not be rewarded …. Tenants who maintain primary residences elsewhere while retaining rent-stabilized apartments for convenience or personal gain are not victims of the housing crisis, and therefore not within the class of who the rent stabilization laws were designed to protect.” (internal quotation marks and citation omitted).

E. NON-PRIME VS. ILLEGAL SUBLET

Illegal sublet is often more appealing to landlord than non-primary residence because illegal sublet notices, as discussed above, do not need to be sent during the Golub window period of 90 to 150 days, thus illegal sublet appears, at first, to be a more readily available ground for terminating a tenancy. But illegal sublet is distinct from non- primary residence, and the square peg of illegal sublet cannot be forced into the round hole of non-primary residence. To prove an illegal sublet, one must prove the existence of an actual sub-tenancy. This is not so easy to do. For example, the presence of permissible family members cannot constitute the basis for eviction for illegal sublet.63

63 9 NYCRR 2525.6 (f); N.Y. Real Property Law § 235-f; PLWJ Realty, Inc. v. Gonzalez, 285 A.D.2d 370 (1st Dept. 2001); 61 Jane St. Assoc. v. Kroll, 102 A.D.2d 751 (1st Dept. 1984); Santorini v. Picarra, 2003 WL 1793090 (App. Term. 1st Dept. Mar. 26, 2003);Hudson Street v. Escoffier, 2003 WL 21994079 (App. Term. 1st Dept. Aug. 15, 2003).

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F. EFFECT OF IMMIGRATION STATUS ON NON-PRIMARY RESIDENCE

A foreign national who is in the United States on a tourist visa cannot meet the primary residence requirement of New York City’s rent regulations.64

G. EFFECT OF MENTAL ILLNESS ON NON-PRIMARY RESIDENCE

In Toa Construction v. Tsitsires, 54 A.D.3d. 109 (App. Div. 1st Dept. 2008), Tenant suffered from a mental illness that resulted in him feeling compelled to spend virtually all his time away from the subject apartment. Tenant lived the life of a homeless person, in the vicinity of the apartment, but rarely going in. He kept his personal belongings in the apartment and received mail in the apartment. Because there was no showing that Tenant would ever return to the apartment, eviction was warranted.

H. NON-PRIMARY RESIDENCE CASES AND SURVEILLANCE CAMERAS

Sometimes, a long list of evidentiary items presented above still leaves the Court on the fence. Maybe the documentary evidence indicates that the apartment is the tenant’s primary residence, but the tenant has a deed in his name to a house on western Long Island. Maybe the tenant’s friend testifies that the tenant is often in the apartment, but the superintendent testifies that the tenant is never in the apartment, and the two witnesses are equally credible. In such instances, a video can be worth a thousand words.

It is permissible to install and utilize video cameras to prove a non-primary residence case under the Rent Stabilization Law. In a case litigated by our firm, the Appellate Term, First Department held that the use of video cameras in a non-primary residence case was permissible, because, with the exception of a limited set of circumstances, the New York City Civil Court lacks the ability to force the landlord to remove the camera.65

The landlord’s counsel needs to work closely with the surveillance camera technologists to streamline both the technical and legal process involved with utilizing cameras, or else the evidence obtained from the cameras might not be admissible. A videotape must be “authenticated” before it can be used as evidence in a court proceeding. It is,

64 Katz Park Ave. Corp. v. Jagger, 11 N.Y.3d 314 (2008).

65 Broome Realty Assoc. v. Sek Wing Eng, 182 Misc.2d 917, 918 (App.Term, 1st Dept. 1999); see also 521 E.5th LLC v. Brandon, 25 Misc.3d 134(A)(App. Term. 1st Dept. 2009) (“Landlord presented video surveillance tapes and testimony by the building's resident superintendent tending to establish the tenant's sporadic use of the subject Manhattan apartment and the frequent presence therein of a series of other persons.”); TOA Const. Co., Inc. v Tsitsires, 54 A.D.3d 109, (1st Dept. 2008) (overturning the Appellate Term’s decision, holding that the landlord had sufficiently proven, via the use of surveillance camera footage and testimony from a superintendent, that the premises were being used as a non-primary residence).

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therefore, often helpful if someone actively monitors the recording, rather than allowing months of footage to build up before reviewing it.66 However, it is not absolutely necessary to monitor the video feed. Testimony from a superintendent or someone else who has knowledge of the circumstances and who actually reviewed the footage is usually sufficient.67

Motion-activated cameras can mean that there is much less footage to review. Imagine using a motion-activated, hidden camera. And the camera reveals that:

 Tenant comes and goes from the apartment much less frequently than tenant otherwise testifies to;

 Someone else other than tenant is coming and going from the apartment and tenant is not there at all, contrary to tenant’s testimony; or

 The people coming and going from the apartment change all the time, stay for the weekend only, and have suitcases! Tenant is in the mini-hotel business making money on your real estate by using it as an “Air B&B”! Hey – it’s a hot trend.68

Moreover, what used to make cameras cost a lot was not so much the camera, but their wiring. Today, there are wireless camera installations available.

We often advise landlord clients to stop guessing about whether the tenant is really there or not, and to simply see for themselves!

I. NON-PRIMARY RESIDENCE CASES AND ELECTRONIC DISCOVERY

1. What is Electronic Discovery?

At this point, it is surprising if a whole week passes without some scandal coming to light because a muckraker has unearthed damaging emails, texts, Tweets, Facebook posts or any myriad of other kind of digital information about a public figure. Welcome to the world of electronic "metadata" evidence and its offspring - the legal process called “e-discovery.” In this new world, anything that someone involved in a lawsuit or under

66 See e.g., People v. Fondal, 154 A.D.2d 476 (2nd Dept. 1989)(holding that there was an adequate foundation for the introduction of a videotape into evidence where an employee observed, through the medium of a closed-circuit television, defendants engaged in the commission of a theft, and testified that the videotape accurately depicted the events which he had observed.).

67 See Zegarelli v. Hughes, 3 N.Y.3d 64, 69(2004) (“[T]estimony, expert or otherwise, may also establish that a video tape truly and accurately represents what was before the camera”)(internal quotation marks and citation omitted).

68 http://en.wikipedia.org/wiki/Airbnb.

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investigation ever e-mailed, texted, revealed in social media, or digitally blurted can be dug up and used against them.

Discovery, in traditional legal terms, is the pre-trial stage where litigants must provide the other side with all documents relating to the matter at hand. In the past, this typically meant stacks and boxes of printed material.

Thanks to recent court rulings and regulations, courts allow high-tech investigators to search the hidden documents and data on any computer used by a litigant or relevant third-party for a "smoking gun." Moreover, if you are found to have deleted or erased potentially damaging e-mails or other e-data that figure in a case, it can adversely affect the outcome as much as an outright admission of guilt.

E-discovery is now an element in most litigation – real estate, contract disputes, intellectual property cases, personal injury – and it can show up in landlord and tenant cases as well.

People are frequently careful about what they do and do not put into formal writing. Unfortunately, they often drop their guard in informal communications like emails and text messages. This lapse can come back to haunt them. Cases can also be lost when an attorney does not adequately consider or understand these issues. Our firm recently handled a case in which defendants who claimed ignorance of a misdeed were shown to have received emails about it, and another case where parties in a suit were found to have emailed statements totally contradictory to what they testified in court.69

Resolving e-discovery issues is a new and complex aspect of law. Navigating this area requires new forms of legal expertise and diligence. What an attorney knows and does about e-discovery issues can dramatically affect the outcome and the cost of litigation. Thus, a landlord-tenant lawyer should not dismiss the need to educate himself about electronic discovery, notwithstanding that it is a relatively new dimension to consider in non-primary residence cases.70

69 Einstein and Boyd v. 357 LLC and the Corcoran Group, et. al., Index No. 604199/2007 (Sup. Ct. N.Y. Cnty, 10/21/2009).

70 See http://itkowitzteachingandpublishing.blogspot.com/2010/11/you-must-know-about-electronic-evidence.html:

Here are four things every business person needs to know about e-discovery:

(1) Never write or text anything you wouldn't want to have some day surface in a court.

(2) Should you become party to a lawsuit, resist the temptation to delete potentially damaging files from your computer. Cyber-sleuths working under court order can detect such cover-ups, and you will face serious sanctions. The obligation to preserve begins the minute it becomes apparent that you will be sued or suing.

(3) Have adequate backup and storage in place for all old files and emails. Neither "auto-deleting" nor "insufficient storage space" is an excuse for failing to preserve your system data, and will be

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2. Electronic Discovery and Residential Landlord-Tenant Cases

The prevalence of e-discovery in present-day litigation and the widespread use of social media stand to drastically change the non-primary residence area of the landlord-tenant law. Indeed, even photographs shared on social media platforms could be used to contradict a tenant’s testimony that the unit was his/her primary residence.

A few years back, when Facebook was new and people were not yet making their profiles private, this firm prosecuted a non-primary residence case against a tenant in Park Slope, Brooklyn. Right there on the tenant’s Facebook page were invitations to friends to come and see her and her new fiancé at their home…in Washington D.C.! By merely printing out and mailing those pages to the tenant, we were able to get her to surrender the keys.

Today, most people’s social media profiles are private, and attorneys and their agents may not pretend to be “friends” in order to see private profiles.71 This is where e- discovery comes in.

Recently an appellate court held that litigants can get to some aspects of an opponent’s private Facebook postings. For instance, in one case, a plaintiff who commenced an action to recover damages for personal injuries arising out of an automobile accident testified at a deposition that she sustained injuries as a result of the accident that impaired her ability to play sports, and caused her to suffer pain that was exacerbated in cold weather. In searching portions of her Facebook profile that were not blocked by privacy settings, the attorneys for the defendant discovered photographs, dated after the accident, depicting plaintiff on skis in the snow.

The defendant then served a demand for authorizations seeking access to all status reports, emails, photographs, and videos posted on the allegedly-injured plaintiff’s

held against you. Involve legal counsel and senior management when your organization's IT department makes policy decisions on system wide storage and backup.

(4) Never discuss a pending court matter in writing with employees, vendors, business partners or anyone except your lawyer. Discussions with your attorney are protected by the lawyer-client privilege. Forwarding a file about that discussion to a third party, absent a privilege, shatters that protection.

71 For example, the New York City Bar on Professional Ethics, Formal Opinion 2010-2, says, with respect to prospective jurors:

Attorneys may use social media websites for juror research as long as no communication occurs between the lawyer and the juror as a result of the research. Attorneys may not research jurors if the result of the research is that the juror will receive a communication. If an attorney unknowingly or inadvertently causes a communication with a juror, such conduct may run afoul of the Rules of Professional Conduct. The attorney must not use deception to gain access to a juror's website or to obtain information, and third parties working for the benefit of or on behalf of an attorney must comport with all the same restrictions as the attorney.

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Facebook profiles since the date of the accident. The plaintiff cross-moved for a protective order striking the demand for authorizations. The defendant demonstrated that the plaintiff's Facebook profile contained a photograph that was probative of the issue of the extent of her alleged injuries, and the court held that it was reasonable to believe that other portions of her Facebook profile may contain further evidence relevant to that issue. However, the court decided to conduct an in camera inspection of plaintiff’s Facebook material due to the likely presence of non-lawsuit-related, private material in the plaintiff's Facebook profile..72

Accordingly, courts are allowing litigants to circumvent claims of privacy to get to the truth. A landlord’s motion to compel ediscovery of such material to determine the tenant’s actual place of residence would most likely be successful considering the presumption in favor of discovery in non-primary residence proceedings.73

Moreover, from a strategic perspective, many tenants will be loath to even have the specter hanging over them of possibly having their personal online lives aired out in a public forum, and may, therefore, opt for settling a non-primary residence case before it even goes to trial. Thus, at the very least, e-discovery offers landlords a powerful tool to gain leverage in such matters.

Due to the relative novelty of the issue, there is currently scant case law involving the use of electronic and social media evidence in non-primary residence litigation. That is bound to change soon.

J. SUCCESSION

Landlord may be able to evict the tenant of record for nonpriamry residence, only to find that a family member of tenant remaining in the premises has succession rights.74

DHCR Fact Sheet # 30 has an excellent treatment of this subject and I borrow largely from it here.

For Rent Stabilized (and rent controlled apartments) throughout New York State, a "family member" of the tenant may have the right to a Rent Stabilized renewal lease or protection from eviction in an apartment under rent control when the tenant dies or permanently leaves the apartment.

A family member has the right to a renewal lease or protection from eviction if he or she resided with the tenant as a primary resident in the apartment for two (2) years immediately prior to the death of, or permanent departure from the apartment by the

72 Richards v Hertz Corp. 100 A.D.3d 728 (2nd Dept. 2012).

73 Cox v. J.D. Realty Assoc., 217 A.D.2d 179, 183–184 (1st Dept. 1995).

74 72A Realty Associates v. Kutno, 15 Misc.3d 100 (AT1st 2007).

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tenant. The family member may also have the right to a renewal lease or protection from eviction if he/she resided with the tenant from the inception of the tenancy or from the commencement of the relationship. If the family member trying to establish succession rights is a senior citizen or disabled person, then the minimum period of co- occupancy is reduced to one (1) year.

"Family member" is defined as either a spouse, son, daughter, stepson, stepdaughter, father, mother, stepfather, stepmother, brother, sister, grandfather, grandmother, grandson, granddaughter, father-in-law, mother-in-law, son-in-law or daughter-in-law of the tenant or permanent tenant.

The definition of "family member" also includes any other person(s) residing with the tenant or permanent tenant in the housing accommodation as a primary resident, who can prove emotional and financial commitment and interdependence between such person(s) and the tenant.

The following are to be considered in determining whether emotional and financial commitment and interdependence between the tenant and such other occupants existed:

 longevity of the relationship  sharing of or relying upon each other for payment of household or family expenses, and/or other common necessities of life;  intermingling of finances as evidenced by, among other things, joint ownership of bank accounts, personal and real property, credit cards, and loan obligations, sharing a household budget for purposes of receiving government benefits, etc.;  engaging in family-type activities by jointly attending family functions, holidays and celebrations, social and recreational activities, etc.;  formalizing of legal obligations, intentions, and responsibilities to each other by such means as executing wills, naming each other as executor and/or beneficiary, granting each other a power of attorney and/or conferring upon each other authority to make health care decisions each for the other, entering into a personal relationship contract, making a domestic partnership declaration, or serving as representative payee for purposes of public benefits, etc.;  holding themselves out as family members to other family members, friends, members of the community or religious institutions, or society in general, through their words or actions;  regularly performing family functions, such as caring for each other's extended family member and/or relying upon each other daily for family services;  engaging in any other pattern of behavior, agreement, or other action which evidences the intention of creating a long-term, emotionally committed relationship.

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The determination is not limited to any one factor, and in no event would evidence of a sexual relationship between such persons be required or considered.

On the DHCR Form “Notice To Owner Of Family Members Residing With The Named Tenant In The Apartment Who May Be Entitled To Succession Rights/Protection From Eviction” (DHCR Form RA-23.5), the tenant may at any time, inform the owner of the names of all persons (other than the tenant), who are residing in the apartment.

Or, the owner may at any time, but no more than once in any twelve months, request from the tenant the names of all such persons. This is a wise procedure for a landlord to follow.

VI. OWNER’S USE PROCEEDINGS

In New York City, an individual owner of a building may recover one or more Rent Stabilized units for his own use of that of his family.75 Note that this procedure cannot be utilized if a building is owned by a corporation or a limited liability company.

In order to do so, the landlord should demonstrate a “good faith” intention to occupy the apartment for personal or familial use. New York City regulations further require that the unit constitute the owner’s or the immediate family member’s “primary residence in the City of New York.”

Some very brief examples follow, and are included to demonstrate how very fact specific these cases are.

 Pennella v. Joy, 79 A.D.2d 606, (2d Dep’t 1980) (Landlord did not prove good faith intent when there were five other empty apartments in six-unit building.)

 Horsford v. Bacott, 5 Misc. 3d 132(A), (App. Term 2004) aff’d, 32 A.D.3d 310, (1st Dep’t 2006) (“A finding of a lack of good faith is not mandated by either the claimed availability of another apartment in the building or any prior discord between the parties.”)

 Gussow v. Hornblower, 4 Misc. 3d 131(A), (App. Term 2004) (“A finding of lack of good faith is not mandated by either the claimed availability of the apartment or any prior discord between the parties. Nor is it fatal to the landlord’s otherwise persuasive owner use claim that at the time of trial her daughter-in-law was not actively pursuing her stated plan to attend business school—one of the factors specified in the underlying notice of nonrenewal in support of the landlord’s possessory claim. ‘Absolute

75 (RSL) New York City Administrative Code § 26-511(c)(9)(b); (RSC) 9 NYCRR § 2524.4(a)(3).

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synchronicity’ between the trial evidence and the allegations set out in a predicate notice is not required.”)

 Raffo v. McIntosh, 3 Misc. 3d 127(A), (App. Term 2004) (”Landlord’s claim that a second bedroom in tenants’ apartment is required to provide for a ‘live-in’ caretaker for the parents was negated by evidence that a back room in the parents’ own apartment—of the same or larger dimension—is equally suitable or adaptable for that purpose.”)

 Matter of Bath, DHCR Admin. Rev. Dckt. No. JK910174RT (5/30/96) (Landlord demonstrated requisite immediate and compelling necessity and good faith when landlord’s 21-year-old son slept on pull-out bed in landlord’s dining room, was in the process of starting his own business, and only tenant’s apartment had expiring lease with rent that the son could afford.)

Unless the tenant is offered “equivalent or superior housing at the same or lower stabilized rent in a closely proximate area,” a landlord may not recover a unit for owner occupancy when the New York City Rent Stabilized tenant or the tenant’s spouse: is 62 years of age or older or suffers from an anatomical, physiological, or psychological impairment.76 There is no owner-occupancy exemption for New York City Rent Stabilized tenants on the basis of long-term occupancy.

Note, however, that turning 62 or suffering from an impairment does not mean that the Landlord cannot seek to recover the apartment for owner occupancy, but rather that he must provide you with an equivalent or superior housing accommodation at the same or lower stabilized rent in a closely proximate area. For purposes of owner occupancy, an "anatomical, physiological, or psychological impairment" is defined as an impairment, other than addiction to alcohol, gambling, or controlled substances, demonstrable by standard diagnostic techniques and which is expected to be permanent and to prevent the tenant from engaging in substantial, gainful employment.77

VII. DEMOLITION EVICTIONS: A REAL POSSIBILITY

Mr. Herbert J. Sukenik allegedly got a $17,000,000.00 payment and a $2,000,000.00 apartment with a $1.00 per month rent for life from Zekendorf in exchange for vacating his rent-regulated apartment at 15 Central Park West.78

76 (RSL) New York City Administrative Code § 26-511(c)(9)(b); (RSC) 9 NYCRR § 2524.4(a)(2).

77 New York City Administrative Code § 26-408(b)(1); (RSC) 9 NYCRR § 2523.5(b)(4).

78 http://nypost.com/2014/03/02/hotel-hermit-got-17m-to-make-way-for-15-central-park-west/.

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Buyouts are ubiquitous these days,79 and we will discuss them at length below in these materials. If you want to move Rent Stabilized tenants out of the way to redevelop a site, however, Demolition Eviction may be a better pathway to development for both the landlord and the tenant.

A. DEMOLITION EVICTION – THE STATUTE AND REGULATIONS

A landlord who intends to demolish a Rent Stabilized building may recover such units, subject to certain exceptions and limitations.80

You need to look at the full text of these statues and regulations:

 9 NYCRR 2524.5, Rent Stabilization Code § 2524.5 (Grounds for refusal to renew lease or discontinue hotel tenancy and evict which require approval of the DHCR [NYS DHCR]).

 NYS DHCR Fact Sheet #11

 NYS DHCR Operational Bulletin 2009-1

B. REQUIREMENTS FOR DEMOLITION EVICTION

In order to achieve an eviction on the grounds of demolition, you must comply with the following requirements:

1. Permission from the DHCR

Demolition Eviction requires the owner to first get the permission of the DHCR.81 That process can take months or years.

2. Proof You Have the Money for the Project

The owner must submit proof to the DHCR of the owner’s financial ability to complete the project.82

79 http://bedfordandbowery.com/2014/01/this-woman-says-the-chelsea-hotels-new-owner-offered-her-nearly-half-a- million-to-move/; http://nymag.com/nymetro/realestate/features/755/.

80 9 NYCRR § 2524.5.

81 9 NYCRR § 2524.5(a).

82 9 NYCRR § 2524.5(a)(2)(i).

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Evidence of financial ability to complete the project may include a Letter of Intent or a Commitment Letter from a financial institution, or such other evidence as the DHCR may deem appropriate under the circumstances.83

3. Building Plans Approved by the City

The plans for the project must have been already approved by the appropriate city agency (Department of Buildings, Landmarks, Department of Environmental Protection, whatever is required).84

4. Paying the Tenant

a. Moving Expenses

The owner must pay the tenant’s reasonable moving expenses.85

b. Stipend

The owner must pay the tenant a “stipend” of $5,000.00, provided the tenant leaves by the vacate date in the DHCR’s order.86

5. Relocate Tenant or Pay an Additional Stipend Based on an Established Formula

The owner must relocate the tenant or pay the tenant a large additional stipend based on a formula established by the DHCR.87

a. “Permanent” Relocation

The owner has the option of moving the tenant out of the way permanently. In that case, the alternative housing must satisfy at least three criteria88:

83 DHCR Operational Bulletin 2009-1; see also Peckham v. Calogero, 12 N.Y.3d 424 (2009).

84 9 NYCRR § 2524.5(a)(2)(i).

85 9 NYCRR § 2524.5(a)(2)(ii)(a).

86 9 NYCRR §§ 2524.5(a)(2)(ii)(a) and (b)(1).

87 9 NYCRR § 2524.5(a)(2)(ii)(b)(1).

88 9 NYCRR § 2524.5(a)(2)(ii)(b)(1).

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b. Suitable Housing Accommodation

The alternate housing accommodation must be “suitable”.89 Let us now examine what “suitable” means under the law.

c. Time Table

In the event a comparable housing accommodation is offered by the owner, a tenant may file an objection with the DHCR challenging the suitability of a housing accommodation offered by the owner for relocation within 10 days after the owner identifies the housing accommodation and makes it available for the tenant to inspect and consider the suitability thereof. Within 30 days thereafter, the DHCR shall inspect the housing accommodation, on notice to both parties, in order to determine whether the offered housing accommodation is suitable. Such determination will be made by the DHCR as promptly as practicable thereafter. In the event that the DHCR determines that the housing accommodation is not suitable, the tenant shall be offered another housing accommodation, and shall have 10 days after it is made available by the owner for the tenant’s inspection to consider its suitability. 90

In the event that the DHCR determines that the housing accommodation is suitable, the tenant shall have 15 days thereafter within which to accept the housing accommodation. A tenant who refuses to accept relocation to any housing accommodation determined by the DHCR to be suitable shall lose the right to relocation by the owner, and to receive payment of moving expenses or any stipend. 91

89 9 NYCRR § 2524.5(a)(2)(iii).

90 9 NYCRR § 2524.5(a)(2)(iii).

91 Id.

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STEPS FOR OFFERING TENANT ALTERNATIVE DAYS UNTIL NEXT STEP HOUSING ACCOMMODATIONS

Owner offers comparable housing accommodation ______and makes it available for the tenant to inspect. Tenant has 10 days to challenge comparable housing accommodation. If tenant objects - go to 10 Days next step. Within 30 days DHCR shall inspect the housing accommodation, on notice to both parties, in order to determine whether the offered housing accommodation is suitable. Then DHCR shall 30 days decide "as promptly as practicable thereafter". If DHCR decides the accommodation is not suitable, go to next step. The tenant is offered another housing accommodation, and shall have 10 days after it is Assuming owner can immediately offer tenant made available by the owner for the tenant’s another accommodation - tenant has another 10 inspection to consider its suitability. If tenant days to inspect. objects - go to next step. Here, the statute is unclear, but we assume DHCR 30 Days has another 30 days to inspect … …and another period of time to decide which will The process could theoretically continue. be "as promptly as practicable thereafter". If the DHCR ever approves of an accommodation the tenant rejects, then tenant shall have 15 days 15 days thereafter within which to accept the housing accommodation. Any aggrieved party can then go into the appeal …which is lengthy. process…

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d. Size, Features, Services

Suitable housing accommodations shall mean housing accommodations which are similar in size and features to the respective housing accommodations now occupied by the tenant. 92

Such housing accommodations shall be freshly painted before the tenant takes occupancy, and shall be provided with substantially the same required services and equipment the tenants received in their prior housing accommodations. 93

e. No Violations

The building containing such housing accommodations shall be free from violations of law recorded by the city agency having jurisdiction, which constitute fire hazards or conditions dangerous or detrimental to life or health, or which affect the maintenance of required services. 94

f. The New Accommodations Do NOT Have to Be Rent- Stabilized

The DHCR will consider housing accommodations proposed for relocation that are not presently subject to rent regulation, provided the owner submits a contractual agreement that places the tenant in a substantially similar housing accommodation at no additional rent for a period of six years, unless the tenant requests a shorter lease period in writing. 95

g. At the Same of Lower Regulated Rent

The alternate housing accommodation must be “at the same or lower legal regulated rent”. 96

h. Closely Proximate Area

The alternate housing accommodation must be “in a closely proximate area”. 97

92 9 NYCRR § 2524.5(a)(2)(iii).

93 Id.

94 9 NYCRR § 2524.5(a)(2)(iii).

95 Id.

96 Id.

97 Id.

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g. Temporary Relocation

If the owner intends to put the tenant back in the newly constructed building on the site, then the owner has to house the tenant in suitable interim housing at no cost to the tenant.98

6. Pay an Additional Stipend Based on an Established Formula

Alternatively, the owner can, in essence, buy the tenant out, but such “buyout” is really a 72 month stipend based on an established formula set by the DHCR that is calculated based on the number rooms in the apartment (no less than three) and the tenant’s current rent.99

This option is NOT available, however, if the stipend would result in the tenant losing a subsidy or other governmental benefit which is income-dependent. In that case, the tenant may elect to waive the stipend and have the owner at his or her own expense, relocate the tenant to a suitable housing accommodation at the same or lower legal regulated rent in a closely proximate area.100 Therefore, it is important to note that this third option (perhaps the most desirable) is not always available.

C. WHO IS THE “OWNER”

When it comes to development, ownership usually has a whole bunch of entities floating around and there are all kinds of transfers happening. While that is being handled by a transactional attorney, landlord’s counsel on the Demolition Eviction Application has to be kept apprised. It is possible to be bounced from the DHCR because the application was not filed by “the owner”. The term, "owner", is specifically defined in 9 NYCRR § 2520.6(i).101

98 9 NYCRR§ 2524.5(a)(2)(ii)(b)(1).

99 9 NYCRR § 2524.5(a)(2)(ii)(b)(3). A copy of the “Demolition Stipend Chart” is included with Operational Bulletin 2009-1; for example, an owner would have to pay a tenant in a six room apartment, whose rent is $1,000.00 per month, $1,958.00 per month for 72 months, or $140,976.00. 9 NYCRR § 2524.5(a)(2)(ii)(b)(1).

100 9 NYCRR § 2524.5(a)(2)(ii)(c).

101 9 NYCRR § 2520.6(i):

Owner. A fee owner, lessor, sublessor, assignee, net lessee, or a proprietary lessee of a housing accommodation in a structure or premises owned by a cooperative corporation or association, or an owner of a condominium unit of the sponsor of such cooperative corporation or association or condominium development, or any other person or entity receiving or entitled to receive rent for the use or occupation of any housing accommodation,…Any separate entity that is owned, in whole or in part, by an entity that is considered an owner pursuant to this subdivision, and which provides only utility services shall itself not be considered an owner pursuant to this subdivision.

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D. THE DHCR APPLICATION PROCESS; NO RENT INCREASES WHILE APPLICATION PENDING

The owner is required to file Form RA-54, "Owner's Application for Order Granting Approval to Refuse Renewal of Lease and/or to Proceed for Eviction" with the DHCR.102 The DHCR may conduct a hearing on the application.103

Once an application has been filed, an owner may refuse to renew tenants' leases until a determination of the owner's application has been made. Tenants may remain in occupancy during such period, and the owner may not increase the rents. Should the application be denied or withdrawn, the owner must again offer prospective renewal leases to the tenants, as directed in the DHCR's order of denial or withdrawal.104

As elsewhere in these materials, in New York City, pursuant to 9 NYCRR § 2524.2(c)(3), after filing a demolition application, an owner must serve each tenant with a Termination Notice at least 90 and not more than 150 days (the “Golub Period”) prior to the expiration of the tenant's lease term. Provided each tenant whose "window period" occurs prior to the issuance of the order is served with a timely Termination Notice, the order granting the application may be issued. 105

The Termination Notice may be served either personally or by regular or certified mail. A contemporaneous affidavit providing dispositive facts by the person making the service or mailing a receipt indicating proof of certified mailing shall constitute sufficient proof of service. When service is by registered or certified mail, the stamped post office receipt shall constitute sufficient proof of service. Once such proof of service has been submitted to the DHCR, the burden of proving non-receipt falls on the tenant.

Except as is otherwise provided in sections 2522.3 and 2526.1(f) of this Title, a court-appointed receiver shall be considered an owner pursuant to this subdivision.

102 DHCR Fact Sheet #11.

103 Id.

104 DHCR Operational Bulletin 2009-1.

105 Id.

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The Termination Notice should state that:

1. the owner will not renew the tenant's lease because the owner has filed an application for permission to recover possession of all housing accommodations in the building for the purpose of demolishing them, for which plans and financing have been obtained, as stated in the application;

2. while the application is pending, the tenant may remain in occupancy;

3. the tenant shall not be required to vacate until the DHCR issues a final order approving the application and setting forth the time for vacating, stipends and other relocation conditions; and

4. the tenant must be offered a prospective renewal lease if the application is withdrawn or denied.

The DHCR cannot order the eviction of any tenant. In other words, if you get a vacate order from the DHCR and the tenant does not go, then you need to take the tenant to Housing Court. Warrants of eviction must be obtained from courts of competent jurisdiction.106

Any party aggrieved by the DHCR's determination may file a Petition for Administrative Review (PAR) in accordance with 9 NYCRR § 2529. Filing a PAR will stay the order until the final determination of the PAR by the DHCR Commissioner. The DHCR Commissioner may entertain requests for expedited processing of the PAR upon a showing that there are equitable grounds.

E. WHAT IS “DEMOLITION”

The definition of “demolition” has been challenged, and the law is governed by the Pekham case (Peckham v. Calogero, 12 N.Y3.d 424 (2009)), so we examine the case in detail below. Pekham also contains an important holding regarding the definition of “financial ability” to complete a Demolition project.

Peckham v. Calogero, 12 N.Y.3d 424 (2009).

Peckham started in 2004 and took until 2009 to resolve because it went all the way up the New York State’s highest court. Landlord won. The building was a 40 foot deep, three story, 8 unit Rent Stabilized building in Manhattan. The owner wanted to build a 70 foot deep building with 12 units in its place.

106 DHCR Operational Bulletin 2009-1.

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According to owner's plan, “[t]he Demolition will entail the removal of (a) the roof, (b) entire interior of the Building, (c) all partitions, (d) floor joints, (e) subfloors, and (f) building systems. In addition, much of the facade, and the entire rear wall of the Building will be removed.”107

Tenant opposed owner's application, arguing that (1) owner advised the New York City Department of Buildings (DOB) that the job involved “a reconstruction or an alteration” and (2) the evidence of financial ability could not be relied upon because the only thing it established was that the funds in question were held in the name of an entity other than owner. Moreover, tenant challenged what was meant by “demolition.”

The state’s highest court ultimately held that it was not important that there is no precise or expansive definition of “demolition” in the Rent Stabilization Law and Code. Numerous terms and concepts lack such a definition. Further, over the years, the DHCR has not required the proponent of a demolition application to show that it intends to “raze the structure to the ground” (the dictionary definition of “demolition”) in order to be successful. An intent to gut the interior of the building, while leaving the walls intact, had been held as sufficient. Courts reviewing this interpretation of the term “demolition” have held likewise. Therefore, the Court held in Peckham that owner's demolition plan comported with the DHCR's long-held interpretation of “demolition.”

Regarding the “financial ability” that must be shown before a demolition application is granted, the DHCR has stated that “[e]vidence of financial ability to complete the project may include a Letter of Intent or a Commitment Letter from a financial institution, or such other evidence as the DHCR may deem appropriate under the circumstances” (DHCR Operational Bulletin 2002-1). In Peckham, owner submitted (1) a printout from JPMorgan Chase Bank verifying that a bank account had been opened and funded in the amount of $4,800,000 and (2) a letter indicating that these funds were to be applied toward Owner's demolition/construction project. Although the letter was addressed to a different Limited Liability company (“LLC”) than the ownership LLC, there was ample basis for the DHCR to infer that the borrower LLC and ownership LLC were affiliates.

It is interesting to note that there are very few recent reported decisions on Demolition Eviction. Extel, however, applied for a demolition eviction on East 17th Street in 2006, according to the Village Voice.108

F. THE RELATIONSHIP BETWEEN DEMOLITION EVICTION AND BUYOUT

There can be a relationship between an owner’s attempt to secure a buyout on favorable terms and the degree to which owner is willing to push forward on a Demolition Eviction application. Here is where we come full circle to Mr. Herbert J.

107 Pekham, supra, at 428. 108 http://thevillager.com/villager_174/developerbuys.html.

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Sukenik and his $17,000,000.00 buyout. Demolition Eviction may take a long time to secure and it may cost a lot of money, but it can be better than making the last holdout tenant a virtual partner in your building by paying him huge numbers. When faced with a Demolition Eviction application, and the prospect that they may just end up in a different Rent Stabilized apartment, a tenant’s number might go down.

G. KEEP THE RENT STABILIZED LEASES IN EFFECT

Many of my clients come to me with buildings where their predecessor-in interest has allowed the Rent Stabilized leases to lapse. This is, for so many reasons, a terrible thing for an owner to do. In Rent Stabilization the lease protects the owner much more than the tenant. The tenant has all her rights, lease or no lease. The landlord, however, loses all kind of rights, even to sue for nonpayment of rent, if a properly renewed Rent Stabilized lease is not in place.

Demolition eviction is predicated on refusal to renew an existing lease. The allowable time for the notice of non-renewal is within 90 to 150 days of the expiration of an existing lease. Absent a lease being in effect, the 90 to 150 day period cannot be reached.109 Therefore, until you have a firm plan of action for your Rent Stabilized building, make sure you renew the leases in a timely fashion and keep the building properly registered with the DHCR.

VIII. TERMINATION OF A TENANCY FOR CHRONIC NON-PAYMENT OF RENT

Sometimes a tenant is so often behind in the rent that the landlord is forced to bring multiple summary non-payment proceedings, but can never secure the tenant’s eviction. This is because, as discussed earlier in these materials, at any time prior to eviction, a tenant may pay all the rent and, thereby, avoid being evicted.

For example: Landlord brings a non-payment proceeding against Tenant for rent arrears and obtains a judgment for unpaid rent from January through July. On the eve of the eviction, which does not get scheduled until early September, Tenant pays six months of rent, thus satisfying the judgment. Therefore, the judgment and warrant are vacated. In the meantime, however, Tenant does not pay August or September rent. Landlord’s only option, at this point, is to begin a new proceeding against Tenant for August and September rent. So Landlord serves Tenant with a new rent demand for August and September rent, and plans to bring a nonpayment proceeding as soon as possible, which will probably produce a first court date in October. Before Landlord even serves the proceeding, however, Tenant pays rent from August through October. Tenant does not pay November or December. The cycle continues.

109 Santorini Equities, Inc. v. Picarra, 72 A.D.3d 73 (1st Dept. 2010).

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This can be quite frustrating and expensive for a landlord. However, the landlord has the option of commencing a holdover proceeding based upon the tenant’s chronic nonpayment of rent.

A. THEORY BEHIND CHRONIC NONPAYMENT -- SUBSTANTIAL VIOLATION OF LEASE

Termination for chronic non-payment of rent may be based on either of two theories: a) nuisance; or b) violation of a substantial obligation under the terms of the lease. The latter of these two options is the preferable choice for reasons discussed below.

Although it is not recommended, for reasons explained herein, a tenancy may be terminated based upon the nuisance created by the chronic non-payment of rent.110 It is very difficult, however, to prove the necessary elements of a cause of action sounding in nuisance that emanates from chronic non-payment.

The landlord must establish that the chronic non-payment interfered with the use or enjoyment of the landlord’s property, and that tenant’s untimely rent payments compelled landlord to bring numerous non-payment proceedings within a relatively short period, and that the tenant’s non-payment was willful, unjustified, without explanation, or accompanied by an intent to harass the landlord. Under the nuisance theory, merely showing that the landlord was forced to serve rent demands and commence proceedings is not enough.111 If the landlord fails to show “aggregating circumstances” and no “intention of intent to harass by respondent” then a chronic non-payment based upon nuisance cannot be maintained.112

A tenancy may be terminated based upon chronic nonpayment as a violation of a substantial obligation under the lease between the parties. Here, the general rule is that the landlord must simply show that it has been forced to repeatedly commence nonpayment proceedings and to serve rent demands on the tenant in order to collect the chronically late rental payment.113

In the chronic non-payment context, it is obviously easier to prove the necessary elements of a cause of action sounding in substantial violation of the lease, than it is to prove the necessary elements of a nuisance cause of action.

110 Greene v. Stone, 160 A.D.2d 367 (1st Dept. 1990). Note: the 2nd Dept. declined to follow this in Carol Mgmt. Corp. v. Mendoza, 197 A.D.2d 687 (2nd Dept. 1993).

111 Sharp v. Norwood, 223 A.D.2d 6, (1st Dept. 1996), aff’d, 89 N.Y.2d 1068 (1997); Century Apts. Assoc. v. Postal, N.Y.L.J. at 25,col. 2 (June 3, 1997); 9 NYCRR § 2524.3(a).

112 Id.

113 Id.

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It should be noted that a chronic non-payment holdover can be maintained against a Rent Stabilized tenant, but it cannot be the basis for the non-renewal of the Rent Stabilized tenant’s lease.114

B. NO NOTICE TO CURE REQUIRED FOR CHRONIC NONPAYMENT

Courts have found that it is impossible to cure the chronic non-payment of rent.115 “One cannot turn back the clock and pay on time for past arrears.”116 Thus there is no need for the landlord to serve a notice to cure, even if required under the lease. The only predicate notice that needs to be served is the notice of termination.

C. HARDSHIP IS NOT A DEFENSE TO CHRONIC NONPAYMENT

Hardship is not a defense to chronic nonpayment of rent.

In Adams Tower v. Richter117, for example, the Appellate Term found that after years of consistently late rent payments, landlord was required to commence nine nonpayment proceedings during the period June 1995 through October 1998. These proceedings were uniformly resolved by so-ordered stipulations in which tenants consented to judgment and agreed to pay out the arrears sought, in full, without abatement. There was no suggestion that rent was withheld because of uninhabitable conditions within the Premises. Rather, tenants acknowledged that they had experienced financial difficulties attributable to expenses occasioned by their son's medical condition. This proceeding was brought upon the allegation that tenants’ long-term, unjustified and persistent failure to pay rent as it became due breached a material leasehold obligation. That breach was firmly documented in the record, particularly in the absence of a bona fide habitability claim or dispute as to the amount of rent owed. The court held that a temporary financial embarrassment may excuse isolated instances of late payment, but inability to pay cannot excuse chronic and continuing delinquency. While the court was not unsympathetic to tenants’ situation, it held that a landlord in a regulated tenancy cannot be expected to meet its obligations when rent is tendered only as a consequence of eviction proceedings.

114 See Solow v. Pegushin, N.Y.L.J. 25,col. 1 (Mar. 26, 1992).

115 Century Apts. Assoc, supra, at 25; see also, Herald Towers, LLC v. Perry, N.Y.L.J. 18,col 2 (Feb. 13, 2002); 3363 Sedgwick, L.L.C. v. Medina, 187 Misc.2d 421 (App. Term. 1st Dept. 2001).

116 Adam's Tower Ltd. Partnership v. Richter, 186 Misc.2d 620 (App. Term. 1st Dept. 2000).

117 Id.

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D. REPAIRS ARE A DEFENSE TO CHRONIC NONPAYMENT

Repairs have been held to be a defense to chronic nonpayment.

In Hudson St. Equities v. Circhi118, for example, the Appellate Term held that landlord failed to establish a pattern of unjustified rent defaults on the tenant’s part sufficient to constitute a violation of a substantial obligation of the tenancy. While the records in Circhi showed that tenant’s rent defaults led to the commencement of five nonpayment proceedings over a four and a half year period, at least two of those proceedings were settled by so-ordered stipulations requiring landlord to make repairs or cure violations, and a third proceeding was dismissed for the landlord's nonappearance and was never restored. Where, as here, bona fide claims are shown to exist that an apartment is in need of repairs, precipitating the withholding of rent, a holdover petition based upon chronic nonpayment will not lie.119

E. PROCEEDINGS MUST BE COMMENCED TO SUPPORT CHRONIC NONPAYMENT

Proceedings against the tenant must be commenced to support a claim of chronic nonpayment.

In 1675 Realty v. Castillo120, landlord commenced six non-payments cases since 1998. Tenant claimed that the Department of Social Services (DSS) was responsible for the tenant’s non-payment of rent. The Court found that the tenants did not make their share of the rent payment on time regardless of whether DSS was paying its share. The tenant could not blame DSS. The Court did not give the tenant any post judgment stay in the issuance and execution of the warrant of eviction.

In PWV Acquisitions, LLC v. Maddox121, the Appellate Term held that, in the absence of any claim or showing by landlord that the rent delinquencies now complained of caused it to institute a single nonpayment proceeding against the tenants or to otherwise resort to legal process to enforce the tenants' rental obligations, no possessory remedy is available to the landlord in the within holdover eviction proceeding.

118 9 Misc3d 138A (App. Term.,1st Dept., 2005).

119 In 601 West Realty, LLC v. Chapa, N.Y.L.J. 17, col 1(N.Y. Civ. Ct. Aug. 20, 2003), Landlord commenced six non-payment proceedings in five years. Stipulations in those proceedings required the landlord to make repairs to the premises. The Court held that the tenant’s defenses in prior suits regarding conditions that existed in the premises, combined with the tenants’ claim that non-payment of rent was due in part of failures of the Department of Social Services to pay its share, were adequate to defeat a chronic non-payment of rent holdover. The Court held that a chronic non-payment suit is appropriate only were there was an “absence of a bona fide habitability claim or dispute as to the amount of rent owed.”

120 1675 Realty v. Castillo. N.Y.L.J. 19,col 2 (N.Y. Civ. Ct. June 25, 2003).

121 8 Misc. 3d 127(A) (App. Term. 1st Dept. 2005).

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F. CHRONIC NONPAYMENT STIPULATIONS UPHELD

When a tenant enters into a probationary period via a stipulation of settlement in a chronic nonpayment case the courts will uphold the stipulation.

In 255 E. 10th St., LLC. v. Durante122, for example, the Appellate Term found that tenant repeatedly failed to comply with the payment terms of the parties’ so-ordered stipulation settling this chronic rent delinquency holdover proceeding. The Durante Court held that strict enforcement of the parties' stipulation was warranted based upon the principle that the parties to a civil dispute are free to chart their own litigation course. The court held that, given tenant’s extensive history of rent defaults, which continued unabated into the probationary term agreed to by the parties, a stay of execution of the warrant of eviction was unwarranted.123

G. NO POST-JUDGMENT STAY

In the chronic non-payment context a post judgment stay of the issuance of the warrant of eviction is not required.124 In 326-330 E. 35th Street Associates v. Sofizade,125 the Appellate Term found that this type of default under the lease was incurable and it made no sense to require the post judgment stay for the 10 day cure period.126 The Appellate Term did, however, leave judges room to grant a stay pursuant to CPLR § 2101, which states “except as otherwise proscribed by law, the court in which an action is pending may grant a stay of proceeding in a proper case, upon such terms as may be just.”127

122 13 Misc.3d 132 (App. Term. 1st Dept.2006).

123 See 377 Broome Street Corp. v. McManamon, 20 Misc.3d 134(A) (AT1st 2008); Henry Hudson Gardens, L.L.C. v. Bareda, 25 A.D.3d 466, (1st Dept., 2006); 291 Pleasant Avenue, LLC v. Morris, 12 Misc.3d 128 (App. Term., 1st Dept. 2006); 4966 Broadway Realty Corp. v. De La Rosa, 10 Misc.3d 143 (App. Term, 1st Dept. 2006); Strong Associates v. Vargas, 8 Misc.3d 127(A) (App. Term, 1st Dept., 2005); 2285 Sedgwick Realty Corp. v. Afua, 7 Misc.3d 134(A) (App. Term., 1st Dept., 2005); Sherman Nagle Realty Corp. v. Cruz, 5 Misc.3d 140(A) (App. Term. 1st Dept. ,2004); Uptown Realty Unlimited, L.L.C. v. Obregon, 4 Misc.3d 131(A), 791 (App. Term, 1st Dept.,2004). But see also 359 W. 126th LLC v. Aniton, 12 Misc.3d 146 (App. Term. 1st Dept., 2006); 2246 v. Nolasco, 52 A.D.3d 377 (AD 1st 2008)

124 N.Y.S. Real Property Actions and Proceedings Law (“RPAPL”) §753 (4).

125 191 Misc.2d 329 (App. Term. 1st Dept. 2002).

126 Id.

127 See, Sofizade, supra at 329.

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IX. BUYOUTS OF RENT STABILIZED TENANTS

Sometimes an owner needs a Rent Stabilized tenant and his or her property out of the way. Often the need for the vacancy is prompted by a ubiquitous development project. Sometimes the motivation is to rent to a better tenant. Sometimes the owner wants to live there himself. Whatever the reason, often enough an owner wants a tenant out…and the tenant will not just go – no matter how much incentive the owner offers.

This section takes a fresh look at the problem and suggests some approaches and solutions.

A. UNDERSTANDING WHY SOME TENANTS RESPOND FAVORABLY TO A BUYOUT, AND WHY OTHER TENANTS REJECT ANY OFFER

Most real estate professionals are familiar with the concept of the “Buyout” – paying a tenant to leave sooner than he or she legally has to. It’s a balancing act – how much is enough money to induce the tenant to leave, but not so much that paying doesn’t obviate the reason for getting the tenant out in the first place?

Consider two different tenancies:

TENANT 1 TENANT 2 Free Market, 22 months left on Apartment Status: the lease. Rent Stabilized Rent: $1,900.00 per month $975.00 per month Bedrooms: One Two Length of Tenancy : 2 years 15 years Tenant’s Age: 31 59 Tenant’s daughter and Other Occupants: None granddaughter Founded a tech-startup Tenant’s company. Doing well the last Profession: two years. Future uncertain. Works for the City Credit Score: Decent Low

Likes the neighborhood and the cool bars and restaurants, but does not see himself raising a family there. May move back to Philadelphia where his family Grew up in the neighborhood, resides, depending on his job. goes to church there, has lots of Tenant’s Ties to Sees himself owning a home friends there, has rented all her Neighborhood: one day. life.

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Now let’s assume that it does not make sense to offer the tenant a dime more than $40,000.00 to vacate the residence.

Obviously, Tenant #1 is more likely to take the buyout than Tenant #2. Tenant #1 is not protected by Rent Stabilization like Tenant #2, pays more rent than Tenant #2, and is less attached to the neighborhood than Tenant #2. Tenant #1 is younger and more nimble than Tenant #2. Additionally, Tenant #1 has a much better chance than Tenant #2 of being able to take the $40k and get a mortgage for a nice co-op or condo because he has a better credit score and has made more money over the last 24 months. Fundamentally, Tenant #1 sees himself as a temporary renter and a homeowner someday. Tenant #2 already has the perfect living situation – a two-bedroom, affordable, Rent-Stabilized apartment that she can pass on to her daughter.

Tenant #2 is never taking a $40,000.00 buyout.

B. GROUNDS FOR TERMINATING A RENT STABILIZED TENANCY

Let us review a list of some of the major grounds for removing Rent Stabilized tenants, other than for non-payment of rent.

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EFFECTIVENESS OF PRESSURE METHODS REQUIREMENTS FOR A BUY OUT NOTES Landlord must demonstrate that plans for the new building have been filed with, or approved by, the appropriate governmental agency and must further demonstrate a financial ability POOR to complete the project. An order granting a landlord's demolition application may Expensive, provide for the payment of complicated, time- relocation expenses and consuming. Project stipends to the tenants. See needs to be large and Demolition above materials. lucrative to justify. Works better the The breach of a covenant shorter the occupancy which restricts alterations has been. Although may constitute a significant courts have to take lease violation. Alterations unauthorized FAIR -- IF THEY which are non-structural, alterations seriously, if REALLY DID easily removable, and a tenant has lived UNAUTHORIZED consistent with the there for two decades, ALTERATIONS contemplated use of the the court tries to find a premises, may not be way around it. Also, sufficiently substantial so as the tenant always says Unauthorized to justify a tenancy's the landlord authorized Alterations forfeiture. the changes. Building must be owned in an Most buildings are not individual’s name. Landlord owned in an individual GOOD -- IF THE needs to really prove that name. Standard of OWNER IS have or a family member is proof is high and SINCERE ABOUT going to live there. Then the involves testimony of LIVING THERE Owner family member has to live multiple people. Takes Occupancy there for three years. too long. GOOD -- IF YOU REALLY But you either have SUSPECT NON- these circumstances Non-Primary PRIMARY or you don't. Residence See above text of materials. RESIDENCE

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C. MAKING YOUR BUYOUT OFFER MEANINGFUL

Tenant #2 is never moving out in exchange for $40,000.00. Many owners lament such situations and assume there is nothing they can do. However, there are some alternative, creative solutions that can be implemented in situations like these.

First, consider what it is that Tenant #2 really wants. She wants what she already has. She wants to stay in the area, to be assured of housing, and to pay an affordable rent. The owner can give that to her. And the owner can give it to her for $40,000.00, or less. But not by handing her cash.

1. First Possible Solution – Do Something Different With The Buyout Money

The owner can take a different approach with the buyout sum. Why not take the $40,000.00, buy a condo in the area that is nicer than Tenant #2’s current Rent Stabilized apartment (probably not that hard to do), and give Tenant #2 a Lease-for-Life for the new condo. When Tenant #2 dies, you have an appreciated asset.

Advantages to Tenant #2:

 This is actually MORE stable than a Rent-Stabilized unit. Rent- Stabilization is a statutory scheme, it may someday disappear (Hey, you never know!).  No more Rent Guideline Board’s increases.  No hassle on primary residence if Tenant #2 goes to Florida or for a long stay in the hospital.

Be Careful: Give a lease-for-life, DO NOT give a life estate.

What you want to convey here is a lease, the term of which is the remainder of Tenant #2’s life, what we call a “lease-for-life”. You do not want to convey a life estate.

While both a holder of a life estate and a tenant with a lease for life are, confusingly, called a “life tenant” there are stark differences at law between the two. For the sake of clarity, we will henceforth refer to the holder of a life estate as a “Life Estate Holder”. A life estate entitles a Life Estate Holder to the full and exclusive possession, control, and enjoyment of the property for the duration of his or her life.128 The Life Estate Holder is not a mere occupant,129 nor is he or she a mere encumbrancer.130 Generally, the Life

128 In re Hinman’s Will, 22 Misc. 2d 655 (Sur. Ct., Kings Cnty. 1960); Ackerman v. State, 199 Misc. 76 (N.Y. Ct. Cl. 1951); In re McCarty’s Estate, 158 Misc. 287 (Sur. Ct., Orange Cnty. 1936); Matter of Carey, 249 A.D.2d 542 (2nd Dept. 1998).

129 McFarland v. State, 5 Misc. 2d 884 (N.Y. Ct. Cl. 1957).

130 Ackerman, supra, at 536.

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Estate Holder has the power to sell, convey, or otherwise alienate his or her life estate, and may lease or mortgage the property. The Life Estate Holder is obligated to provide for all upkeep, carrying charges, and taxes on the property.131

A life estate is likely not what you want to convey in this situation. You want your tenant to be a tenant, with a life-long term; but you do not want to grant the tenant too much power and control over the property. Thus, it is important that your lawyer draft the lease-for-life carefully. You probably want some specific provisions in the in the lease, such as:

 specify that the grant is NOT a life estate;  specify that the tenant’s children or occupants of the subject unit are not entitled to succession; and  specify that the lease should not be recorded.

2. Second Possible Solution -- Move Tenant #2 To Another Rent Stabilized Apartment That The Landlord Owns

Another common solution is to move Tenant #2 to another Rent Stabilized apartment that the landlord owns or can otherwise locate.

Be Careful: You cannot get around any of the rules of Rent Stabilization just because you are contracting to do so with a tenant. For example, if Tenant #2 moves to a different Rent Stabilized unit where the legally-regulated rent is lower than what Tenant #2 was paying in the unit you are moving her from (after a guidelines and vacancy increase), you are stuck with the lower rent. The rent is what it is. You cannot contract around it, even if the tenant agrees.132

3. Third Possible Solution – Find Out What Tenant #2 Really Needs

We recently represented a Manhattan landlord in a matter where a tenant stood in the way of a development project. The tenant wanted money to get out, but the parties couldn’t settle on a number.

We sent an associate attorney to a routine court appearance. The tenant and our associate, two guys in the same age range, had a long wait on a bench in the court’s hallway. They hit it off and chatted (the tenant was pro se, so our associate could

131 In re Houlihan, 13 Misc. 3d 419 (Sur. Ct., Franklin Cnty. 2004).

132 Drucker v. Mauro, 30 A.D.3d 37 (1st Dept. 2006) (“[T]his Court holds that an agreement in…a landlord-tenant dispute which waives the benefit of a statutory protection is unenforceable as a matter of public policy, even if it benefits the tenant…. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void, and this Court has uniformly thwarted attempts, whether by mutual consent or by contract of adhesion, to circumvent regulated rent maximums.”) (internal citations omitted).

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speak to him without counsel). From that conversation, we discovered that one of the tenant’s biggest issues was getting his three little kids into a good school district so he would not have to pay for private school. The landlord ended up paying for a broker to relocate the tenant to a certain block in Park Slope.

You need to figure out what moves people. (Literally).

D. WHEN THE TENANT IS CRAZY, NOT AMENABLE TO A WIN-WIN SOLUTION AND UN-SWAYED BY LITIGATION

These two authors together have been practicing in the area of landlord and tenant law in the City of New York for over fifty-five years. We can tell you – there are people out there who NEED to hate their landlord. Hating their landlord is more important to them than money, a nice place to live, or even peace of mind.

An example: We represented a residential tenant named Betty.133 Betty never had a family, lost weight, or realized her full career potential. Why? Because of the massive leak in her apartment that happened ten years ago! The leak and the chaos that ensued were not something that any of us would want to live through. But neither should it have been debilitating. But Betty thought that it was and the landlord as “enemy” became an important part of her life’s narrative. It was an excuse; an outlet. It was something that she was comfortable with, which she was not letting go.

Another example: We represented a residential tenant named Shira.134 Shira had lived all her life in the same apartment with her parents until their deaths. She and her mother were very close. She never married and was not very focused on her career. She loved her apartment. She considered it her home, and she always wanted it to be her home. She said things like, “this is the place where I feel my mother’s spirit; she doesn’t want me to leave here.” The landlord was offering her a lot of money to go, and she could have used the money. But she preferred to stay embattled with her landlord and live in an empty apartment with ghosts.

We are not psychologists, but we can tell you with great certainty that some tenants develop irrational feelings about their landlords and unhealthy attachments to their rental apartments. These people cannot be reasoned with. There are usually no win- win solutions with such people, and if the law is on their side, they entrench. Thus, we present our final two pieces of advice in this section.

133 No, not her real name.

134 No, of course that’s not her real name.

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E. THE POWER OF “PLAN B”

Now we give you -- THE ULTIMATE EXAMPLE OF THE TENANT WHO WANTED TO BE A HOLDOUT RATHER THAN RICH.

The picture below is an exemplar—a testament to a holdout tenant, the rent control law and a developer’s determination to build a skyscraper. The below structure is found on the corner of 60th Street and Lexington Avenue in the heart of midtown Manhattan. The brownstone became merged into the structure of 750 Lexington Avenue. How did that happen?

A Buyout Could Not be Achieved at 750 Lex

In the mid-1980s Sherman Cohen, a legendary New York developer who recently passed away, was determined to build a beautiful building right across the street from Bloomingdales. A string of brownstones directly across from Bloomingdales were vacated and demolished. A single, remaining rent-controlled tenant lived on a fourth floor apartment of the brownstone, Ms. Herman. Our office, acting on behalf of the developer, negotiated with her and her attorney and state officials over trying to get her to voluntarily leave. She ultimately was offered $750,000(in the 1980s!) to vacate together with a new apartment elsewhere. Ms. Herman refused. She wanted to die a holdout tenant.

The developer had a Plan B. He was not going to be defeated by the Holdout. So, when it was clear that not Heaven, nor Earth, nor money, would get her to leave, he determined to use that same money to achieve his goal. While she remained in the

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building, and over strict oversight from the Department of Buildings, he shored up the structure, excised the rear half of the building and took off the top floor of the five-story walkup—all while she remained in the structure! Shortly after the building was completed, she passed away. Thereafter, the bottom part of the building was incorporated into the retail portion of the greater building, but the old brownstone—the testament to the holdout and the developer’s determination not to be stymied, remain in place today.

F. FINDING A WAY TO GET THINGS DONE – FINAL THOUGHTS…OUT ON A LIMB

This is where this author (Michelle Maratto Itkowitz) goes out on a limb.

I think that there are times when it is worth spending money to include a professional psychologist on the landlord’s team, to work up a psychological profile of a recalcitrant tenant. I understand that this suggestion is unorthodox. Nevertheless, I have experimented with this and found it somewhat helpful.

It is not that I put so much stock in psychology per se, or that I am seeking to be more human or altruistic than the next lawyer. I do not deserve that much credit.

In some cases, it might be as simple as the fact that the tenant is all alone in the world, and needs some simple services. Maybe the tenant has vision problems and is terrified of being relocated because they know their way around the neighborhood. Maybe some help with those issues could open up some possibilities. In other cases, it might be effective to do the old good cop - bad cop negotiation with the tenant. In other cases, a psychological workup might indicate that a full court press with litigation is the best and only way to go. There simply cannot be a one-size-fits-all approach to this work. And if a psychological profile can help the landlord and I negotiate better with the tenant, then I remain open to that advice.

This business is about finding solutions and getting things done.

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ABOUT THE AUTHORS

Michelle Maratto Itkowitz is the “Itkowitz” in Itkowitz PLLC, which she joined in 1997 and now heads. Michelle Maratto Itkowitz has been practicing real estate law, specializing in the area of residential and commercial landlord and tenant law in the City of New York, for over twenty years. She also is very experienced in general commercial litigation.

Michelle publishes and speaks frequently on real estate and legal issues. The groups Michelle has taught for or presented to and the publications she has written for include: Lawline.com, LandlordsNY, Lorman Education Services, The Association of the Bar of the City of New York, The New York State Bar Association, Real Property Section, Commercial Leasing Committee, Thompson Reuters, The Cooperator, The New York State Bar Association CLE Publications, The Brooklyn Real Estate Summits, The Association of the Bar of the City of New York, BisNow, The Columbia Society of Real Estate Appraisers

Michelle gets quoted in the press on real estate and legal issues. Michelle produces tons of original and useful content on real estate and law and gets it out to the world in many ways – from booklets to podcasts, as well as many useful articles that can be found on her Teaching and Publishing blog. Michelle is the Legal Expert for LandlordsNY, where she answers members questions on as a guest on their blog. Michelle recently taught a seven- hour, six session continuing legal education seminar for Lawline.com, entitled, “Landlord and Tenant Litigation in New York”. Michelle is currently co-authoring the New York State Bar Association's New York Commercial Landlord and Tenant Law and Procedure Book and she co-authored a chapter on lease remedy clauses for the New York State Bar Association Commercial Leasing. Michelle is a pioneer of Legal Project Management, a unique and better way for lawyers and clients to work together – check out her blog on Legal Project Management (you can link to it from Michelle’s profile on the website).

Michelle is admitted to practice in New York State and the United States District Court for the Southern District of New York. Michelle’s professional associations include: the New York State Bar Association - Real Property Law Section and Commercial and Federal Litigation Section, Gotham City Network - New York City Real Estate Chapter, and the Brooklyn Chamber of Commerce. Michelle received a, Bachelor of Arts in Political Science in 1989 from Union College, and a Juris Doctor, 1992, from Brooklyn Law School. Michelle is also a managing member of an executive office suite company. Michelle sits on the board of directors of Building Blocs, a not-for- profit organization, and she has been honored by the Brooklyn Bar Association Volunteer Lawyer's Project.

There are many ways to keep up with Michelle. When Michelle tweets, which is not an obnoxious amount, you cannot only actually understand what she is saying, but it is useful stuff about real estate, business, and the legal industry that you might miss between the headlines. Michelle would be happy to speak to you.

Here she is!

Michelle Maratto Itkowitz Itkowitz PLLC 26 Broadway 21st Floor New York, New York 10004 (646) 822-1805 itkowitz.com [email protected] See – good tweet right?! twitter: @[email protected]

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Jay B. Itkowitz has worked as a litigator, a strategist, and a trial lawyer specializing in sophisticated commercial litigation for over 30 years. As the Founding Partner at Itkowitz PLLC, he has represented hundreds of companies, individuals and major real estate companies in New York City. He handles complex trials, jury and non-jury, and appeals in both State and Federal Courts, including Bankruptcy Court.

Jay is admitted to practice in New York State, The State of New York, The United States District Court for the Southern District of New York, The United States District Court for the Eastern District of New York, The United States District Court for the Northern District of New York, The United States District Court for the District of Columbia, United States Court of Claims, The United States Court of Appeals for the Second Circuit.

Jay has lectured and authored articles extensively on real estate issues for the New York State Bar Association, New York Law School, Practicing Law Institute, the Rent Stabilization Association, LandlordsNY, Lorman Education Services, Lawline, the New York Association of Realty Managers, and the New York Law Journal, among others.

Jay received his Juris Doctor from New York Law School with honors in 1977, where he published a note in the New York Law School Law Review, "The Title Guaranty Theory and Related Decisions: Are the Courts Interfering With Exemption 7 of the Freedom of Information Act?", 23 New York Law School Law Review 275, 1977. He also received the American Jurisprudence Award for Contracts.

During law school, Jay was a student clerk for the Hon. Gerald Goettel, U.S. District Judge, Southern District of New York (1976) and the Hon. Nicholas Tsoucalas, New York State Supreme Court, Kings County (1976). Moreover, Jay contributed to a book on United States Supreme Court Justice Douglas, entitled, Independent journey: The Life of William O. Douglas, by James F. Simon, Harper & Row; 1st edition (1980). Jay received his Bachelor of Arts in English Literature from Queens College of the City University of New York, Flushing, New York in 1971.

Jay began his legal career as an Assistant Corporation Counsel for the City of New York, in the General Litigation, Environmental and Tort Divisions (1978 - 1982). Jay has been a managing partner of a number of residential and commercial real estate projects, and was instrumental in building an executive office company. Jay produced an independent film, Frozen River, which won the Grand Jury Prize at the 2008 Sundance Film Festival. The film went on to garner two Academy Award nominations, for Best Original Screenplay and Best Actress. Jay is a former investigative journalist for newspapers in the New York Metropolitan Area. He was a journalist, investigative and general assignment reporter, and copy editor for papers such as the New York Daily News, New York Post, Long Island Press, Newark Star Ledger, National Enquirer, and Village Voice, (1971 - 1978).

Jay B. Itkowitz Itkowitz PLLC 26 Broadway 21st Floor New York, New York 10004 (212) 646-1805 itkowitz.com [email protected] twitter: @jitkowitz Also look for me on Linkedin!

See his killer tweets ---

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