Michael Joseph Malach and Darlene Miriam Malach-Vourman as Trustees of the Malach Premises Trust, Petitioners, v. Henry Chalian and Sergio Barrios, et al, Respondents.

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Civil Court, City of New York.

Michael Joseph Malach and Darlene Miriam Malach-Vourman as Trustees of the Malach Premises Trust, Petitioners, v. Henry Chalian and Sergio Barrios, et al, Respondents.

L & T 52757/19-KI

Decided: June 14, 2019

David Schreier, Esq. Borah Goldstein Altshuler Nahins & Goidel PC Attorneys for Petitioner 377 Broadway, 6th Floor, New York, NY 10013-6020 Phone:(212) 431-1300 Andrew D. Cassidy, Esq. Ween & Kozek, PLLC 20 Jay Street, Suite 814, Brooklyn, NY 11201 Phone:(212) 964-1822

Recitation pursuant to CPLR § 2219 (a) of the papers considered in the review of this motion and cross-motion for summary judgment:

Papers/Numbered

Notice of Motion, Affirmation, Affidavit, and Memo of Law Annexed 1

Cross-Motion, Affirmation, Affidavit in Opposition 2

Memo of Law in Opposition to Cross-motion 3

Affirmation in Further Support of Cross-motion 4

In this chronic rent delinquency proceeding to recover possession of a loft unit, Respondents move for summary judgment dismissing the petition. Petitioner cross-moves for summary judgment in its favor. Each side opposes the other's motion.

Factual and Procedural Background

Petitioner is the owner and Respondents are the statutory tenants of Unit No.2 located in the building known as 104-106 Green Street in Brooklyn. Respondents first entered into possession of the premises pursuant to a written lease dated April 4, 2003 that expired in 2006. It is undisputed that the subject premises is governed by Article 7-C of the Multiple Dwelling Law, commonly referred to as the "Loft Law." Sometime in 2013, Respondents and other occupants in the building jointly filed an application before the Loft Board to legalize their respective unit, but thereafter withdrew their application because Petitioner consented to register their unit as an interim multiple dwelling (IMD) in or around March 31, 2015.

About one year later, Petitioner commenced a nonpayment proceeding against Respondents seeking September 2015 through February 2016 rent (2016 proceeding). In his answer, Respondent Chalian alleged a breach of the warranty of habitability, to wit, for "harassment, tampering with Respondents' mailbox, and failing to provide pest control." Chalian also alleged that Petitioner could not collect rent because it had not complied with the Loft Law. Notwithstanding these allegations, in a May 25, 2016 stipulation of settlement (2016 stipulation), Respondent Chalian consented to a final judgment in the amount of $11,398.02 but stayed execution of the accompanying warrant for payment of said amount. Notably, in the 2016 stipulation, Chalian withdrew his answer and defenses with prejudice (emphasis added). The parties ultimately discontinued the proceeding on August 31, 2016 because Respondents paid all outstanding arrears.

In or about June 2017, Petitioner commenced a second nonpayment proceeding seeking a portion of April and all of May 2017 rent (the 2017 proceeding). Respondents, who answered with a general denial, did not allege repairs. About one month later, on July 7, 2017, the parties stipulated to adjourn the proceeding for ten days for payment of arrears. Petitioner also agreed to inspect and repair the premises' electric submeter in the interim. On the adjourn date of July 17, 2018, the parties stipulated to discontinue the proceeding, ostensibly because Respondents paid outstanding arrears.

In or around October 2018, Petitioner commenced a third nonpayment proceeding seeking the balance of August and all of September 2018 rent. Less than a month later, on October 25, 2018, the parties again agreed to discontinue the proceeding because Respondents were current through October 2018.

Additionally, Petitioner alleges that it had to serve four rent demands, dated April 13, 2018, May 21, 2018, June 28, 2018, and July 31, 2018, that did not result in commencement of a nonpayment proceeding.

On December 19, 2018, Petitioner mailed to Respondents the instant Termination Notice stating, in relevant part:

"PLEASE TAKE NOTICE, that you have violated and continue to violate a substantial obligation of your tenancy and lease originally dated April 4, 2003 as well as Title 29 of the Rules of the City of New York, Chapter 2, § 2-08.1(a)(2) and (3), in that you have consistently, chronically, and unjustifiably exhibited a pattern of late payment of rent, failing to pay rent when due, and/or compelled the landlord to commence numerous proceedings in the New York City Housing Court to collect rent.

The Termination Notice further alleges that Respondents chronically and systematically paid rent late each month. Specifically, the Notice claims that Respondents paid rent when due only three out of the forty months preceding the date of the Notice. As a result, Petitioner was compelled to serve at least seven rent demands, three of which resulted in the commencement of a nonpayment proceeding.

The within motion and cross-motion for summary judgment ensued.

Arguments

On their motion, Respondents contend that summary judgment dismissing the petition is warranted on three grounds. First, Respondents argue that the Loft Board's regulations, to wit, 29 RCNY § 2-08.1 (a) do not expressly provide for an eviction based upon a violation of a substantial obligation of the lease, let alone one for chronic rent delinquency. Second, Respondents argue that, assuming arguendo such a claim exists, the Termination Notice herein is defective because it does not comply with Real Property Law (RPL) § 232-a, which terminates a month-to-month tenancy, requiring a thirty-day notice be served pursuant to Real Property Actions and Proceedings Law (RPAPL) § 735. Lastly, Respondents contend that the prior nonpayment proceedings are insufficient as a matter of law to form the basis for a chronic rent delinquency cause of action. In support of this last argument, Respondents rely on the affidavit of Henry Chalian annexed to the moving papers, who avers that they owed less than one month's rent at the time the April, May, June, and July 2018 rent demands were served. Chalian, however, does not dispute that arrears were owed at the time the 2016, 2017, and 2018 proceedings were commenced, nor does he claim that any rent was withheld in this proceedings based on repairs.

In opposition and in support of their cross-motion for summary judgment, Petitioner argues that the Loft Law and regulations are to be read in pari materia with the Rent Stabilization Code. Because it is well-established that a claim for chronic nonpayment of rent as a violation of a substantial obligation of the lease may lie against a rent-stabilized tenant, Petitioner argues that the same should apply to a loft tenant. In support, Petitioner relies on the Appellate Division's holding in BLF Realty Holding Corp. v Kasher, 299 AD2d 87 [1st Dept 2002]) which sustained an eviction proceeding against a loft tenant based on rent-gouging. Second, Petitioner contends that, based on the doctrine of pari materia, the instant Termination Notice was properly served in accordance with § 2524.3 of the Rent Stabilization Code (RSC). Petitioner further points out that it gave more notice than the five days required under paragraph 14 of the parties' expired, 2003 lease. Lastly, Petitioner contends that the prior nonpayment proceedings are not only sufficient to survive Respondents' motion, but the undisputed facts in this proceeding warrant granting judgment on the petition. Namely, Petitioner relies on the affidavit of its managing agent, Abraham Malachi, who avers that in addition to commencing three nonpayment proceedings and serving four additional rent demands, Respondents failed to timely pay rent 37 out of the 40 months immediately preceding December 2018.

In opposition to the cross-motion, and even though Respondents have never seriously disputed Petitioner's right to collect rent in the prior nonpayment proceedings, Respondents now contend that permitting Petitioner to evict a loft tenant for their alleged chronic nonpayment of rent undermines the purpose of the Loft Law.

Discussion

"On a motion for summary judgment, the movant carries the initial burden of tendering sufficient, admissible evidence to demonstrate the absence of a material issue of fact as a matter of law" (Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986]). The court's function is "issue-finding, rather than issue-determination" (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]) and the evidence will be construed in the light most favorable to the non-moving party (see Kershaw v Hosp. for Special Surgery, 114 AD3d 75, 82 [1st Dept 2013]). Once the movant meets its initial burden, the burden then shifts to the opposing party to "show facts sufficient to require a trial of any issue of fact" (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

Whether a Violation of a Substantial Obligation of the Lease based on Chronic Rent Delinquency May be Maintained Against a Loft Tenant:

The issue of whether a loft tenancy may be terminated based on a violation of a substantial obligation of the lease due to chronic rent delinquency appears to be a matter of first impression. None of the papers filed on the motion and cross-motion cite to a single case and research by this Court yields no legal authority that addresses the propriety of the instant holdover theory.

In any event, the analysis begins with 29 RCNY § 2-08.1 (a), which provides in relevant part:

"Grounds for eviction. The landlord of an IMD registered with the Loft Board may bring eviction proceedings against the residential occupant of a unit in a court of competent jurisdiction on any of the following grounds:

. . .

(2) that the residential occupant is committing or permitting a nuisance in such unit; or is maliciously or by reason of gross negligence substantially damaging the building; or his or her conduct is such as to interfere substantially with the comfort and safety of the landlord or of the other occupants of the same building or of adjacent buildings or structures; or

(3) any of the grounds for eviction specified in the Real Property Law or the Real Property Actions and Proceedings Law, to the extent that such grounds are not inconsistent with Article 7-C and any regulations promulgated by the Loft Board."

The Court of Appeals has decreed that the Loft Law is to be interpreted in pari materia with the Rent Stabilization Law, meaning that the statutes and regulations are to be construed "together and as intended to fit into existing laws on the same subject unless a different purpose is clearly shown" (Lower Manhattan Loft Tenants v New York City Loft Bd., 66 NY2d 298, 304 [1985]). Indeed, where the Loft Law and Rent Stabilization Code "speak on the same subject matter or area" and share a similar legislative intent, the statutes should be read together (see BLF Realty Holding Corp. v Kasher, 299 AD2d at 92). Thus, although neither of the above grounds expressly include a provision for an eviction based on violation of a substantial obligation of the lease, the eviction of a loft tenant premised upon this general theory has been upheld (see e.g. BLF Realty Holding Corp. v Kasher, 299 AD2d 87 [1st Dept 2002]).

Specifically, in BLF Realty Holding Corp., the loft tenant argued that because an eviction proceeding based on profiteering was not explicitly provided as a basis for eviction in the Loft Board's regulations, the owner's ejectment action for same could not lie. Relying on Cont. Towers Ltd. Partnership v Freuman (128 Misc 2d 680, 681 [App Term, 1st Dept 1985]), which held that rent-gouging was an uncurable violation of a substantial obligation of a rent-stabilized lease, the Appellate Division disagreed and held that the provisions of 29 RCNY § 2-08.1 (a) were to be read in pari materia with the Rent Stabilization Code. The court stated that "[w]hile there is no specific provision in the Loft Board's regulations authorizing eviction proceedings on the basis of rent gouging we see no rationale for not extending the same remedy [as provided for under the Rent Stabilization Code] to accommodations covered by the Loft Law" (see BLF Realty Holding Corp., 299 AD2d at 93). The court also reasoned that because "the [Loft Law] legislation has as its goal the integration of the rental units, known as IMD units into rent stabilization," it is illogical to permit an eviction proceeding for profiteering once the unit is rent-stabilized, but not before (id., at 92-93).

Here, there is no question that an eviction proceeding for violation of a substantial obligation of the lease by virtue of chronic nonpayment of rent may be maintained against a rent stabilized tenant (see GIT LEB, LLC v Golphin, 51 Misc 3d 144(A) [App Term, 2d Dept 2016] citing Adam's Tower Ltd. Partnership v Richter, 186 Misc 2d 620, 622 [App Term, 1st Dept 2000]). It is also undisputed that the subject premises is registered as an Interim Multiple Dwelling, which permits Petitioner to collect rent and, concomitantly, admittedly confers "protected" status to Respondents as a result. Indeed, in the 2017 and 2018 nonpayment proceedings brought against them, Respondents did not dispute Petitioner's entitlement to collect rent. To the extent Chalian — represented by counsel — asserted that Petitioner failed to comply with the Loft Law in the 2016 proceeding, he affirmatively discontinued that defense as a term of settling that proceeding.

This Court can discern no reason why the obligation to timely pay rent may not also be read into the instant statutory tenancy as a substantial obligation of the lease. While this Court agrees with Respondents' general contention that maintaining a chronic rent delinquency proceeding without demonstrating compliance with the Loft Law undermines its legislative purpose, non-compliance is not argued in this instance. Rather, to impair Petitioner's right to seek an eviction in this instance undermines the Loft Law's stated purpose toward "establish[ing] a system whereby residential rentals can be reasonably adjusted so that residential tenants can assist in paying the cost of such legalization without being forced to relocate" (Multiple Dwelling Law § 280). Lastly, Respondents fail to persuade this Court why the instant claim may be maintained only after the subject premises becomes rent-stabilized, but not before, especially since Petitioner's undisputed compliance with the Loft Law for the subject premises results in the issuance of a valid certificate of occupancy and, ultimately, conversion of this unit into a rent-stabilized apartment. Accordingly, in this instance, this Court holds that Loft Board regulation § 2-08.1 should be read in pari materia with the Rent Stabilization Code to permit the maintenance of a chronic rent delinquency claim as a violation of a substantial obligation of the lease (see RCS § 2524.3).

Whether the Instant Termination Notice is Insufficient as a Matter of Law

Pursuant to Real Property Law § 232-a, a month-to-month tenant may not be evicted without first having been served with 30-day notice in accordance with RPAPL § 735. In contrast, Section 2524.3(a) of Rent Stabilization Code permits service by mail of a 10-day notice where a tenant is violating a substantial obligation of the lease.

Respondents contend that the failure to serve a 30-day notice in accordance with RPL § 232-a renders this proceeding fatally defective, whereas Petitioner contends that the instant Termination Notice served pursuant to RSC § 2524.3(a) is all that is required. Yet, it is the parties' written lease that governs the propriety of the predicate notice in this instance. Namely, in an action to recover possession of an IMD unit for illegal subletting, the termination notice at bar was held sufficient because "plaintiff served a notice under the terms of the expired lease, which carried over into the statutory tenancy and governed the amount of notice required when the tenant violates a substantial obligation of his tenancy or is alleged to have engaged in illegal conduct" (Aurora Assoc. LLC v Hennen, 157 AD3d 608, 609 [1st Dept 2018] [emphasis added] ). To the extent Respondents rely on a contrary ruling in Kiamie-Princess Marion Realty Corp. v Lipton (20 Misc 3d 423 [2008]), that portion of Kiamie-Princess' decision requiring a "current" lease between the parties was overruled by Aurora. In any event, even the court in Kiamie-Princess Marion Realty Corp. acknowledged that, had there been a current written lease, it would "otherwise govern service of the predicate notice" (id., at 424).

Here, the terms of the 2003 lease required a five-day notice be served before terminating the lease. Insofar as a notice to cure is not required on a chronic rent delinquency claim, the expired lease's terms carried over into the statutory tenancy. Since Petitioner herein served, at the very least, a 10-day notice in accordance with RSC § 2524.3(a), the Termination Notice is sufficient as a matter of law. Accordingly, Respondents' motion for summary judgment based upon a defective predicate notice is denied.

Whether the prior nonpayment proceedings viewed in the context of the entire rental history entitles either side to summary judgment

It is well-established that "[t]he number of nonpayment actions commenced is relevant only in the context of the entire circumstances surrounding the alleged withholding of rent" (31-67 Astoria Corp. v Cabezas, 55 Misc 3d 132(A) [App Term, 2d Dept 2017]). Indeed, "where 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" (31-67 Astoria Corp., 55 Misc 3d *1).

Respondents here fail to meet their initial burden on their motion for summary judgment dismissing the petition. Namely, and although the answer in the 2016 proceeding alleged repairs, Respondent Chalian expressly discontinued this affirmative defense with prejudice in the 2016 stipulation. As far as the 2017 and 2018 proceedings, Chalian fails to state in his affidavit that he or co-Respondent Barrios withheld any rent based on Petitioner's failure to effectuate repairs. Even if one or more of the prior nonpayment proceedings is not chargeable to Respondents, the undisputed averment by Malachi that they failed to timely pay rent 37 out of the past 40 months is sufficient to raise an issue of fact requiring denial of Respondent's motion (see e.g. Greene v Stone, 160 AD2d 367, 368 [1st Dept 1990] declined to be followed on other grounds by Carol Mgt. Corp. v Mendoza, 197 AD2d 687, 687 [2d Dept 1993]).

Nor is summary judgment on the petition warranted. Contrary to Petitioner's arguments in its cross-motion, a question of fact exists as to whether tenant's rent history constituted a pattern of chronic rent delinquency (see e.g. S. Park Estates Co., L.P. v Erwiah, 2003 NY Slip Op 50646(U) [App Term, 2nd Dept 2003]). While the 2016 proceeding resulted in a final judgment, the 2017 and 2018 proceedings were discontinued and, as such, may be not be chargeable against Respondents (see Cabezas, 55 Misc 3d 132(A) *1 [App Term, 2d Dept 2017] [noting that two predicate proceedings which had been discontinued or unpursued could not be chargeable against tenants] ). Moreover, four of the rent demands may be improper since Petitioner does not dispute that less than a month's rent was owed when the demands were served. Since they also may not be chargeable to Respondents, a triable issue of fact exists as to whether Petitioner may ultimately prove Respondents' "long term, unjustified and persistent failure" to pay rent as it became due in breach of a material leasehold obligation (see Adam's Tower Ltd. Partnership v Richter, 186 Misc 2d 620, 621 [App Term, 1st Dept 2000]). Construing the evidence in the light most favorable to the non-movants on the motion and cross-motion, this Court finds that neither party is entitled to judgment as a matter of law. Accordingly, it is

Ordered that Respondents' motion and Petitioner's cross-motion for summary judgment is denied; and it is further

Ordered that the parties are directed to appear on July 26, 2019 at 9:30 a.m. in Part E for trial or settlement.

Dated: June 14, 2019

E N T E R:

___________________________

Zhuo Wang, J.