BENROAL REALTY ASSOCIATES v. LOWE

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Supreme Court, Appellate Term, New York.

BENROAL REALTY ASSOCIATES, L.P., Respondent, v. Wayne LOWE, Monette Lowe, d/b/a Rest & Associates, Appellants.

Decided: June 27, 2005

Present:  RUDOLPH, P.J., McCABE and COVELLO, JJ. William D. Friedman, Hempstead, for appellants. Horing Welikson & Rosen, P.C., Williston Park (Niles C. Welikson of counsel), for respondent.

Appeal by tenants from a final judgment of the District Court, Nassau County (K. Gartner, J.;   J. Asarch, J.), entered January 8, 2003, after a nonjury trial, awarding landlord possession and the sum of $16,991.78.

Final judgment unanimously affirmed without costs.

 In this commercial summary holdover proceeding, the petition alleges that tenants took possession of the premises known as Lobby # 2 and Lobby # 3 at 135 Clinton Street, Hempstead, pursuant to a commercial lease commencing May 1, 1996 and ending April 30, 1998, and, after the lease's expiration, continued in possession as month-to-month tenants.   Landlord terminated the tenancy on October 31, 1999 by serving a 30-day notice.   Asserting, at trial, that landlord had consented to their residential use of the premises, tenants argued that they were protected under the Emergency Tenant Protection Act of 1974 (ETPA).   After trial, the court rejected tenants' claim that landlord had consented to their residential use and concluded that, in any event, landlord established that the premises were not designed or used as a housing accommodation and the tenancy was of a commercial nature.   Where, on a bench trial, the legal issues turn largely on the evaluation of the credibility of witnesses and on documentary evidence, “the decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court's conclusions could not be reached under any fair interpretation of the evidence” (George A. Fuller Co. v. Kensington-Johnson Corp., 234 A.D.2d 265, 266, 650 N.Y.S.2d 779 [1996];  see also Claridge Gardens v. Menotti, 160 A.D.2d 544, 544-545, 554 N.Y.S.2d 193 [1990];  Harrington v. Levitzke, 2 Misc.3d 139(A), 2004 N.Y. Slip Op. 50277[U], 2004 WL 829595 [App. Term, 2d & 11th Jud. Dists.] ), and applying this standard, we affirm.

 The court properly rejected tenants' argument that landlord's registration of the premises with the DHCR as residential for a portion of the tenancy's term estops landlord from denying the premises' rent-regulated status.   It is well settled that “coverage under a rent regulatory scheme is governed by statute and cannot be created by waiver or equitable estoppel” (Gregory v. Colonial DPC Corp. III, 234 A.D.2d 419, 651 N.Y.S.2d 150 [1996];  see also Ruiz v. Chwatt Assocs., 247 A.D.2d 308, 669 N.Y.S.2d 47 [1998];  Mayflower Assoc. v. Gray, N.Y.L.J., Mar. 1, 1994 [App. Term, 1st Dept.];  57 N.Y. Jur. 2d, Estoppel, Ratification, and Waiver § 4 [“Equitable estoppel cannot be applied to create a right that does not already exist, but merely prevents the denial of a right which is claimed to have arisen otherwise”] ).

 Nevertheless, notwithstanding the commercial nature of a lease, where a landlord “knew of or acquiesced in ․ tenant's residential use of [a premises]” (U.B.O. Realty Corp. v. Mollica, 257 A.D.2d 460, 683 N.Y.S.2d 532 [1999];  A Real Good Plumber v. Kelleher, 191 Misc.2d 94, 96, 740 N.Y.S.2d 745 [App. Term, 2d & 11th Jud. Dists. 2002] ), said premises “must be deemed” subject to the relevant regulatory scheme, here the ETPA (Ten Be Or Not Ten Be v. Dibbs, N.Y.L.J., June 12, 1985 [App. Term, 1st Dept.], affd. 117 A.D.2d 1028, 499 N.Y.S.2d 567 [1986];  see e.g. A Real Good Plumber v. Kelleher, 191 Misc.2d 94, 96, 740 N.Y.S.2d 745, supra ).   Thus, “a landlord cannot rent premises under a commercial lease with full knowledge that the tenant intends to convert the premises to solely residential use as his primary residence ․ and thereafter avoid the protections afforded to residential tenants under the ․ [ETPA]” (Metzendorf v. 130 W. 57 Co., 132 A.D.2d 262, 265, 522 N.Y.S.2d 533 [1987] ).   While not dispositive of the issue, the instant lease's restriction on the premises' use to an exclusively commercial purpose is a “factor to be considered in determining [such] issue [ ]” (Benroal Realty Assocs. v. Lowe, 2001 N.Y. Slip Op. 40016(U), 2001 WL 856196 [App. Term, 9th & 10th Jud. Dists.] ), and on this record, the court properly credited landlord's evidence that its registration of the premises as residential with the DHCR was inadvertent, and did not reflect landlord's intent to convert the commercial space to a residential or mixed-use premises subject to rent regulation (Ruiz v. Chwatt Assocs., 247 A.D.2d 308, 669 N.Y.S.2d 47, supra;  Park West Village Assocs. v. Leonard, N.Y.L.J., Dec. 6, 1995 [App. Term, 1st Dept.];   see Mesiti v. Upam Realty Corp., 185 A.D.2d 336, 586 N.Y.S.2d 307 [1992] [where a lease “unambiguously stated that the premises were to be used solely for commercial purposes ․ [even if] the [tenant] resided in a portion of the premises, this did not mean that the plaintiff leased a ‘housing accommodation’ subject to rent control”] ).   Landlord's commercial premises manager testified that he never consented to the premises' conversion to residential use and was never aware that the premises was used other than as contemplated by the lease.   Indeed, tenants admitted that Lobby # 2 and # 3 were not equipped for residential occupancy when they took possession (cf. U.B.O. Realty Corp. v. Mollica, 257 A.D.2d 460, 683 N.Y.S.2d 532, supra ) and that despite landlord's alleged assurances that residence-related improvements would be made, none were ever carried out.   Thus, as tenants' contrary proof rested on the credibility of their claim that a single, non-testifying and long-departed employee of landlord, whose authority to approve such a conversion landlord specifically denied, had verbally authorized tenants' residential occupancy, and because the court's rejection of the claim is supported by a fair interpretation of the record, it will not be disturbed on appeal.

The record also supports the court's determination that tenants did not utilize said premises residentially.   Tenant Wayne Lowe conceded that tenants acquired a private home in Hempstead, New York shortly before the instant lease commenced and that within months of the commencement of the lease's term, the co-tenant had vacated the instant premises for the new home.   Landlord introduced a number of documents, including business-related forms, evidencing tenants' use of the private home as their residential address during the term of the instant lease, and landlord's security employee testified that in the course of numerous evening inspections over a nearly two-year period, he never observed tenants to occupy the instant premises after business hours.   It is noteworthy that in rebuttal, tenants produced no witness who could testify that tenants spent even a single night at the premises and they introduced no evidence deemed of particular relevance to proof of residency, such as personal tax returns, checking accounts, and voter registration (e.g. Matter of Gracecor Realty Co. v. Hargrove, 90 N.Y.2d 350, 355-356, 660 N.Y.S.2d 704, 683 N.E.2d 326 [1997];  Matter of O'Quinn v. New York City Dept. of Hous. Preservation & Dev., 284 A.D.2d 211, 726 N.Y.S.2d 644 [2001] ).