BADESCH v. FORT 710 ASSOCIATES (2024)

Order, Supreme Court, New York County (Eric Schumacher, J.), entered February 28, 2024, which, to the extent appealed from as limited by the briefs, denied defendant's motion for leave to file an amended answer, unanimously reversed, on the law and in the exercise of discretion, without costs and the motion granted.

Supreme Court improvidently exercised its discretion in denying defendant's motion (see Kimso Apts., LLC v. Gandhi, 24 N.Y.3d 403, 411, 998 N.Y.S.2d 740, 23 N.E.3d 1008 [2014]).  Motions for leave to amend pleadings should be freely granted (CPLR 3025[b]) absent prejudice or surprise resulting from the proposed amendment, unless the proposed amendment is palpably insufficient or patently devoid of merit (see MBIA Ins. Corp. v. Greystone & Co., Inc., 74 A.D.3d 499, 500, 901 N.Y.S.2d 522 [1st Dept. 2010];  see also Ferrer v. Go New York Tours Inc., 221 A.D.3d 499, 500, 198 N.Y.S.3d 345 [1st Dept. 2023] [“The legal sufficiency or merits of a proposed amendment to a pleading will not be examined unless the insufficiency or lack of merit is clear and free from doubt”] [internal quotation marks and citation omitted]).  Defendant's proposed affirmative defense, which seeks to offset damages for any rent overcharges on a rent-stabilized apartment based on rental income plaintiff received during his tenancy, is not palpably insufficient or patently devoid of merit so as to warrant denial of the motion.

Contrary to Supreme Court's assertion that a tenant may sublet a rent-stabilized unit at whatever price the market will bear, a rent-stabilized tenant may sublet a unit for no more than the legal regulated rent, plus a 10% surcharge for units sublet fully furnished (see 9 NYCRR 2525.6[b];  Goldstein v. Lipetz, 150 A.D.3d 562, 564, 53 N.Y.S.3d 296 [1st Dept. 2017], appeal dismissed 30 N.Y.3d 1009, 66 N.Y.S.3d 229, 88 N.E.3d 391 [2017]).  Furthermore, a violation of the Rent Stabilization Code, to the extent it can be interpreted as a breach of implied covenant under the lease (see Fairbanks Gardens Co. v. Gandhi, 168 Misc.2d 128, 129, 645 N.Y.S.2d 262 [App. Term 2d Dept. 1996], affd 244 A.D.2d 315, 665 N.Y.S.2d 540 [2d Dept. 1997]), could justify an offset of plaintiff's alleged damages (see Brushton–Moira Cent. School Dist. v. Thomas Assoc., 91 N.Y.2d 256, 261, 669 N.Y.S.2d 520, 692 N.E.2d 551 [1998]).  Plaintiff does not argue that he would be prejudiced by the proposed pleading.