Altman v. 285 W. Fourth LLC

• Decision Date: 26 April 2018
• Docket Number: No. 44,44
• Citation: 99 N.E.3d 858,31 N.Y.3d 178,75 N.Y.S.3d 465
• Parties: Richard ALTMAN, Respondent, v. 285 WEST FOURTH LLC, Appellant.
• Court: New York Court of Appeals Court of Appeals

31 N.Y.3d 178

99 N.E.3d 858

75 N.Y.S.3d 465

Richard ALTMAN, Respondent,

v.285 WEST FOURTH LLC, Appellant.

No. 44

Court of Appeals of New York.

Decided April 26, 2018

Rosenberg & Estis, P.C., New York City (Jeffrey Turkel and Blaine Z. Schwadel of counsel), and Amsterdam & Lewinter, LLP, New York City (Mark L. Amsterdam, Mark Lewinter and Joseph P. Mitchell of counsel), for appellant.

Lawrence W. Rader, New York City, for respondent.

Belkin Burden Wenig & Goldman, LLP, New York City (Magda L. Cruz, Sherwin Belkin and Matthew S. Brett of counsel), for Rent Stabilization Association of New York City, Inc, and others, amici curiae.

Hogan Lovells US LLP, New York City (Pieter Van Tol, David R. Michaeli and Daryl L. Kleiman of counsel), for Urban Justice Center and others, amici curiae.

Ezra Kautz, Brooklyn, for Make the Road New York and another, amici curiae.

OPINION OF THE COURT

Chief Judge DiFIORE.

The issue on this appeal is whether the 20% vacancy increase should be included when calculating the legal regulated rent for purposes of determining whether the subject apartment has reached the $2,000 deregulation threshold in the Rent Stabilization Law. We conclude that the vacancy increase must be included in that calculation.

In November 2003, plaintiff Richard Altman entered into a sublease with Keno Rider, who had been the tenant of the subject apartment since 1993. Rider had a rent-stabilized lease with the prior landlord at a legal regulated rent of $1,829.49 per month. In December 2004, the prior landlord commenced a nonpayment proceeding against Altman and Rider. In March 2005, Altman and the prior landlord entered into a stipulation of settlement, under which the parties agreed that Rider would surrender all rights to the apartment and the landlord would deliver a new lease to Altman. Along with the new lease, Altman executed a "Deregulation Rider for First Unregulated Tenant." The deregulation rider stated that the apartment was not rent-stabilized "because the legal rent was or became $2000 or more on vacancy" after the statutory vacancy increase was added to the last regulated rent. In August 2005, the landlord removed the apartment from registration with the Division of Housing and Community Renewal (DHCR), based on "high rent vacancy."

Defendant 285 West Fourth LLC (the owner) subsequently purchased the premises and, in 2007, entered into a fair market renewal lease with Altman at a monthly rent of $2,600. At that time, the parties also executed an agreement acknowledging that the apartment was not subject to rent stabilization. Under the terms of the agreement, Altman agreed to refrain from challenging the nonregulated status of the apartment and further agreed that, if he did so, it would be "conclusively presumed" that he had entered the agreement with the intent to obtain its benefits by fraud in the inducement.

Beginning in 2008 and continuing until early 2014, the owner commenced a series of nonpayment proceedings against Altman. In his answers to the petitions for nonpayment, Altman did not challenge the apartment's deregulated status. Then, in June 2014, Altman brought this action seeking a declaration that the premises are subject to rent stabilization, an injunction requiring defendant to offer Altman a rent-stabilized lease, a determination of lawful rent and a money judgment for the rent overcharge. The owner answered and raised several affirmative defenses, as well as two counterclaims seeking sanctions and punitive damages. Altman moved to dismiss the owner's counterclaims and certain affirmative defenses, and the owner cross-moved for summary judgment dismissing the complaint.

Supreme Court granted the owner's cross motion for summary judgment dismissing the complaint ( 2014 N.Y. Slip Op. 32702[U], 2014 WL 5284727 ). The court declared that Altman was not entitled to the protection of rent stabilization because the apartment had become exempt in March 2005 pursuant to Rent Stabilization Law (Administrative Code of City of NY) § 26–504.2(a) when the legal regulated rent—including the 20% vacancy increase—exceeded $2,000. Supreme Court granted Altman's motion only to the extent of dismissing the owner's counterclaims for sanctions and punitive damages.

The Appellate Division modified by denying the owner's cross motion for summary judgment in its entirety, granting Altman summary judgment, and declaring that Altman's tenancy was entitled to the protection of rent stabilization and, as so modified, affirmed ( 127 A.D.3d 654, 8 N.Y.S.3d 295 [1st Dept. 2015] ). The Court held that, although the owner was entitled to a 20% rent increase for Altman's initial lease, that increase did not serve to deregulate the apartment because the rent was not over $2,000 at the time the prior tenant vacated the premises. The Court remanded the matter to Supreme Court for calculation of the rent overcharge due to Altman.

Supreme Court entered judgment in Altman's favor in the amount of $165,363.80, including treble damages and prejudgment interest, and set the legal rent at $1,829.49 until the owner registered the premises with DHCR as a rent-stabilized apartment. The Appellate Division affirmed ( 143 A.D.3d 415, 38 N.Y.S.3d 173 [1st Dept. 2016] ). We granted the owner leave to appeal ( 29 N.Y.3d 903, 57 N.Y.S.3d 706, 80 N.E.3d 399 [2017] ) and now reverse.

Under the Rent Stabilization Law, rent-stabilized apartments are subject to certain statutory rent increases, including a 20% increase for a two-year lease upon vacancy (Rent Stabilization Law § 26–511[c][5–a] ). In addition, Rent Stabilization Law § 26–504.2(a) provides for the deregulation of rent-stabilized apartments that reach a threshold legal regulated rent. Specifically, as relevant here, deregulation will apply to:

"any housing accommodation which becomes vacant on or after [April 1, 1997] and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal regulated 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

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