LLC v. Kenna Kindig, Karl Kurt Kindig, Respondents-Tenants.

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Civil Court, City of New York.

People's Home Improvement LLC, Petitioner-Landlord, v. Kenna Kindig, Karl Kurt Kindig, Respondents-Tenants.

65421/19

Decided: September 26, 2019

Petitioner's Atty Wenig & Saltiel LLP, 26 Court Street, Brooklyn NY 11242, Suite 1200 Respondent's Atty The Law Office of Ellery Ireland, 116 Pinehurst Avenue, New York, NY 10033, T43

Recitation, as required by CPLR § 2219(a), of the papers considered in the review of Respondent's Motion.

PAPERS

Respondent's Notice of Motion, Affirmation in Support, & Exhibits ("A" - "E")

Petitioner's Notice of Cross-Motion

Affirmation in Opposition

Respondent's Affirmation in Opposition to Cross-Motion

Petitioner's Affirmation in Reply to Cross-Motion

NUMBERED

1, 2

3, 4, 5, 6

Upon the foregoing cited papers, the Decision and Order is as follows:

In this nonpayment proceeding Respondent moves to dismiss the proceeding pursuant to CPLR § 3211(a)(7), claiming that petition fails to state a cause of action. Respondent also seeks summary judgment on its "counterclaims" pursuant to CPLR § 3212. Petitioner, in response cross-moves to amend the petition to reflect the correct basis for petitioner's assertion that the subject premises are deregulated.

The court addresses first petitioner's cross-motion. In the underlying petition it was alleged that the subject premises "is not subject to rent regulation as it is contained in a building constructed after June 1, 1974". While still claiming non regulatory status, petitioner's attorney concedes that the subject building was in fact built prior to 1974. Instead he asserts on behalf of petitioner that the subject premises is not subject to rent stabilization by virtue of "high rent decontrol under the then controlling guidelines", (see paragraphs "8" and "9" of the Affirmation in support of the cross-motion)1 Petitioner's counsel notes that it was respondent's current motion that brought the "scrivener's error" in the petition to petitioner's attention.

Petitioner notes that there is no prejudice to respondent in allowing amendment of the petition as respondent's counsel is fully aware that petitioner claims "high rent" deregulation. Petitioner's counsel points to the fact that respondent's counsel has been representing another tenant in the subject building [ People's Home v Landaverde, et al., Index 85837/18], and has seen the construction plans, and has engaged in conversations where the issues of decontrol were discussed, (see paragraph "21" of the affirmation in support of the cross-motion and paragraph "12" of the reply affirmation). In opposition, respondent's counsel asserts that the cross-motion should be denied for failing to annex a sworn statement by petitioner confirming the basis for the alleged deregulation, (see paragraph "3" of the affirmation in opposition to the cross-motion).

As to the issue of whether petitioner should be permitted to amend the petition to properly reflect the allegation of "high rent" deregulation, respondent has failed to present any meritorious defense to this request. The courts have established a liberal policy with respect to motions seeking amendment of pleadings pursuant to CPLR Section 3025(b). See McCaskey, Davies & Assocs., Inc. v. NY City Health & Hosps. Corp, 59 NY2d 755 (1983); see also Village of Forest Hills v. Lumberger, 128 AD2d 701 (2d Dep't 1987) (finding the failure to allege that the premises are subject to rent stabilization could be corrected by amendment and does not deprive the court of subject matter jurisdiction); Cortazzo v. Reynolds, 149 Misc 2d 210 (App. Term, 2d Dep't 1991) (holding that pleadings can be amended even with respect to misstatements regarding rent-regulated status); GSL Enterprises v. Williams, NYLJ 2/24/2000 (App. Term, 1st Dep't 2000), (finding that the tenant was not prejudiced by inadvertent incorrect allegation that the premises were subject to both rent control and rent stabilization and that the defect was curable); 631 Edgecombe LP v. Fajardo, 39 Misc 3d 143(A) (App. Term, 1st Dept. 2013); Corastor Holding Co., Inc. v. Mastny, 12 Misc 3d 13 (App. Term, 2d Dep't 2006).

Furthermore, in Paikoff v Harris, 185 Misc 2d 372, 375-76 (App. Term, 2nd Dep't, 1999), the court held:

"The Appellate Division, Second Department, has ruled that, in the absence of prejudice to a party, it is permissible to amend the pleadings in summary proceedings even with respect to misstatements of the rent -regulated status of the tenancy (cites omitted) In the instant case, tenants were clearly prepared to litigate the status of their tenancy and were not in the least prejudiced .Accordingly, the misstatement in the petition provides no basis for dismissal."

Under the facts of this case the court determines that no prejudice would result to respondent in allowing the amendment. Furthermore. Respondent's raising of the lack of a sworn statement by petitioner is misplaced, as the underlying petition was properly verified by counsel for petitioner pursuant to RPAPL § 741, which states in pertinent part:

"The petition shall be verified by the person authorized by section seven hundred twenty-one to maintain the proceeding: or by a legal representative, attorney or agent of such person pursuant to subdivision (d) of section thirty hundred twenty of the civil practice law and rules. An attorney of such person may verify the petition on information and belief notwithstanding the fact that such person is in the county where the attorney has his office", (emphasis supplied).

Accordingly, the court grants petitioner's cross-motion amending the petition to allege that the subject premises are not subject to rent stabilization due to "high rent" deregulation.

Turning to the respondent's motion in chief. The motion is founded upon respondent's assertion that, as a matter of law, petitioner could not deregulate the subject premises under high rent deregulation in 2017 through application of a vacancy increase and Individual Apartment Increases ("IAI's"). Respondent asserts that under the Rent Act of 2015 high rent deregulation only occurs when an apartment is vacated after reaching the threshold rent of $2700.00, plus any applicable one-year renewal increases  23 . Respondent relies on § 26-504.2 of the Rent Stabilization law of 1969 which in part exempts housing accommodations:

"with a legal regulated rent of two thousand five hundred dollars or more per month at any timeon or after the effective date of the rent act of 2011, which is or becomes vacant on or after such effective date, but prior to the effective date of the rent act of 2015", (emphasis supplied);

"or, any housing accommodation with a legal rent that was two thousand seven hundred dollars or more per month at any time on or after the effective date of the rent act of 2015, which becomes vacant after the effective date of the rent act of 2015", (emphasis supplied).

Respondent argues that the legislature, as demonstrated by the failure to include the words "is or" in the Rent Act of 2015, unlike earlier acts, effectively removed the ability of landlords to use vacancy increases and/or IAI's to push a vacant unit above the threshold rent of two thousand seven hundred dollars threshold, as increased,

The leading case in this area is Altman v 285 W. Fourth LLC, 31 NY3d 178 (2018). There the court upheld the landlord's right to deregulate an apartment through a pre-2011 vacancy increase which resulted in a rent exceeding the then applicable threshold rent of $2,000. The tenant in Altman, like respondent herein, argued that the apartment had to be above the threshold when vacated and not as a result increases undertaken after the vacancy. In allowing vacancy deregulation the court in Altman specifically noted that Rent Act of 1997, which governed the facts of that case, included two separate and distinct separate and distinct factual scenarios leading to "high rent" deregulation. Those two parts specifically excluded from rent regulation:

" any housing accommodation which becomes vacant on or after April first nineteen hundred ninety-seven and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal rent was two thousand dollars or more per month or for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation act of 1997 and before the effective date of the rent act of 2011", (emphasis supplied).

The court in Altman reasoned that these two separate and distinct clauses under which high rent deregulation could occur pre 2011 applied separately to vacant apartments where the threshold rent had already been met ("becomes vacant") and those where vacancy increases and/or IAI's where applied after the vacancy to reach a rent beyond the threshold rent, ("is or becomes vacant"). As stated by the Court therein:

"The Appellate Division relied on the first clause, which plainly states that the relevant consideration for deregulation purposes is the legal regulated rent 'at the time the tenant vacated' the apartment. By contrast, the second clause provides that the key consideration when there is a vacancy is the legal rent, without reference to the rent at the time of the tenant's vacatur. Given the second clause is an alternative to the first (preceded by "or"), it must mean something different from the first clause-i.e. something other than the legal regulated rent at the time the tenant vacated the apartment. Thus, it is reasonable to read the plain language of the second clause to refer to the legal regulated rent (including the available statutory increases) applicable to the apartment after the tenant's vacancy.4 "

See also Aimco 322 East 61st Street, LLC v Brosius, 50 Misc 3d 10, (App Term, 1st Dep't, 2015) involving a pre-2011 deregulation resulting from IAI's that raised the rent above the two thousand dollars threshold. As noted therein:

"In this regard, we note that Rent Stabilization Law (RSL) (Administrative Code of NY) § 26-504.2(a) contains two statutory bases for high rent deregulation, the second of which is if the housing accommodation "is or becomes vacant" with a legal rent of two thousand or more per month."

See also 233 E. 5th St. LLC v Smith, 54 Misc 3d 79, (App Term, 1st Dep't, 2016); Matter of COB 3420 Broadway, LLC v Towns, 156 AD3d 577, (1st Dep't, 2017).

There is no gainsaying the fact that the Rent Act of 2015, under which petitioner deregulated the subject premises, fails to contain the two different clauses referred to in Altman. In applying the maxim "inclusio unius est exckusio alterius" (the inclusion of one is to the exclusion of the other), it follows that the legislature, in the Rent Act of 2015, did not intend to allow deregulation of a vacant apartment below the threshold rent, through the vacancy and/or IAI's increases if the vacancy occurred after the effective date of the Act  5 . See also Hershey-Webb, "Key Change in Rent Law Was Overlooked", NYLJ, July 6, 2015 at 6, col 4; Bailey and Treiman, "Rent Law of 2015: Deregulation, decontrol, renewals and you -The New Rent Threshold Needs Two Tenants to Decontrol", Real Estate Weekly, August 10, 2015. It follows, therefore, and this court holds, that petitioner could not deregulate the vacant subject premises in 2017 by raising the rent above the threshold through a vacancy increase and IAI's.

As such the court holds that respondent-tenant Kenna Kindig is a rent stabilized tenant. The court therefore grants that portion of respondent's motion seeking dismissal of the petition pursuant to CPLR § 3211(a)(7) upon the failure of the petition to state a cause of action, in that, the petition, as amended, fails to properly set forth respondent's regulatory status, see RPAPL § 741(4) which specifically requires a petition to "state the facts upon which the special proceeding is based".

As to the balance of respondent's motion seeking summary judgment on respondent's purported counterclaims such relief is denied without prejudice to asserting in any future proceeding or action. Notably, no "counterclaims" were asserted in respondent's answer which only raises rent overcharge and attorney's fees, each as "Affirmative Defenses"6 . In fact, the only place that the word "counterclaim" appears at all is in the "Wherefore" clause.

Furthermore, even if this court were to interpret the affirmative defenses as counterclaims, which it does not, no affidavit of the tenant with personal knowledge of the facts is submitted to establish overcharge, supported by admissible evidence. Moreover, the respondent's attorney cannot establish the existence of the lease (exhibit "A" to the motion) as he has no personal knowledge of the transaction and which the court additionally notes is unsigned. Therefore, in the absence of an admissible lease provision establishing a reciprocal right to legal fees no such award can be made. This constitutes the Decision and Order of the Court.

SO- ORDERED

DATED

September 26, 2019

____________________

KENNETH T. BARANY

J.H.C

FOOTNOTES

1.   Respondent's counsel attaches a page from "NYCityMap" asserting that the subject building was built in 1931. Had this been an issue, the court would not have accepted this as evidence, in place of a certified copy of the records of the Department of Buildings. The court in the past has discovered errors in this website e.g. listing one building as two.

2.   The Rent Act of 2015 requires that the initial threshold rent of $2700.00 be increased each year by the percentage increase of the one-year renewal increase promulgated each year by the Rent Guidelines Board.

3.   It is clear that there are issues with respect to the rent itself separate from the deregulation issue; particularly under the newly enacted Housing Stability Tenant Protection Act of 2019, ("HSTPA") which expands the scope of the court's inquiry issues of rent overcharge. The DHCR rent registration print out, (exhibit "B" to respondent's motion) shows that "high rent" deregulation allegedly occurred through a series of vacancy leases from 2010 (legal rent registered at $1,000.00 for James Bella Fiore ) to 2018 when a combination of vacancy and improvements purportedly led to the rent passing the threshold then in effect, (see § 26-504.2(b) of the Rent Stabilization Law of 1969, as amended). That DHCR printout. however, also shows no registrations from 1984 through 2003 and from 2005 to 2007.

4.   The court in Altman also pointed to the legislative intent of the Rent Regulation Reform Act of 1997 which intended to counteract Local Law No. 13, the recently enacted by the City of New York. Local Law 13 imposed restrictions preventing vacancy bonuses and owner improvements from being considered in reaching the $2,000 threshold, (see Bill Jacket L 1997, ch 1116 and Governor's Mem approving L 1997 ch 116).

5.   It is quite possible that this was the initial step taken by the legislature toward complete elimination of "high rent" deregulation under the HSTPA.

6.   There is a reference in the First Affirmative Defense to treble damages but any such request should have been plead directly as a counterclaim.

Kenneth T. Barany, J.