Federal Home Loan Mortg. Corp. v. Franklin

Citation167 Misc.2d 800,635 N.Y.S.2d 1006
PartiesFEDERAL HOME LOAN MORTGAGE CORP., Petitioner, v. John FRANKLIN et al., Respondents. * Civil Court of the City of New York, Richmond County
Decision Date24 November 1995
CourtNew York City Court

Weisblum & Felice, New York City, for Petitioner.

Sanders, Sanders & Block, P.C., Mineola, for Respondents.

THOMAS P. ALIOTTA, Judge.

The respondents move for an order dismissing petitioner's Notice to Quit by raising various defenses, one of which is petitioner's failure to abide by HUD Section 8 notice provisions.

The Court finds the facts of this matter to be as follows:

The Franklins moved to 117 North Burgher Avenue, Staten Island, New York, in June 1992. At that time the building was owned by the Nesbitts. The Franklins and the Nesbitts entered into a Section 8 "Landlord-Tenant Lease Agreement" on June 18, 1992. That lease was to be effective from July 1, 1992 until February 28, 1995. That lease contained a successor's clause: "This lease shall be binding upon the landlord and upon his successors, heirs, executors and administrators."

The Franklins' rent was paid directly to the Nesbitts, in part by the New York City Housing Authority pursuant to a Housing Assistance Payment contract with the Nesbitts, and in part by the State Department of Social Services. The Franklins paid no money to the landlord themselves. On March 17, 1993 the First Federal Savings and Loan Association of Rochester initiated proceedings to foreclose on the mortgage held by the Nesbitts at 117 North Burgher Avenue. The Franklins were served with a copy of this foreclosure complaint on April 1, 1993.

First Federal Savings and Loan Association of Rochester was granted summary judgment on their foreclosure action on March 14, 1994. The Franklins did not appear in the foreclosure proceedings. Carol Franklin alleges that she went to the Courthouse on the day of the hearing, but was told that the proceeding was between the bank and the Nesbitts and she need not be concerned.

On July 14, 1994, the Hon. John Leone of the New York State Supreme Court, County of Richmond, entered a Judgment of Foreclosure and Sale which named the Franklins among other defendants. Judge Leone ordered that the property be sold at a public auction. The Court further stated that "the defendants in this action, and all persons claiming under them subsequent to the filing of the Notice of Pendency of this action, be and they are forever barred and foreclosed of all rights, title, claim, mean and equity of redemption in the said mortgaged premises and in each and every part and parcel thereof."

The property was sold on January 26, 1995 and subsequent to the sale at foreclosure the First Federal Savings and Loan Association of Rochester assigned its bid to petitioner Federal Home Loan Mortgage Corp. (hereinafter referred to as "Freddie Mac"). Caisi Management Company, the managing agent for Freddie Mac at the North Burgher Avenue property, gave the Franklins a letter dated February 1, 1995 addressed "Dear Tenant," which stated in relevant part:

Freddie Mac now owns your property as a result of a recent foreclosure sale. As a representative for Freddie Mac on this property, Caisi Management Company Inc. wants to inform you of some of your rights and options.

1. Freddie Mac is committed to provide you with clean, decent housing and, as their representative, we will do all that we can to see that your needs as

a tenant are met ...

2. YOU MAY HAVE THE OPTION TO REMAIN IN THE PROPERTY AS A TENANT.

You will, of course be required to:

Pay rent and sign a written tenancy agreement. The rent you will [be] asked to pay will be set pursuant to the procedures of the Rent Equity Board ...

The deed for the property was transferred to Freddie Mac on February 15, 1995.

The Franklin family made a motion to intervene in the Federal Class Action pending in the Southern District entitled German v. Federal Home Loan Mortgage Corporation et al., (899 F.Supp. 1155, 1158-1159). That class was certified to include " 'children under seven years old residing in buildings owned, managed, or operated by defendants' ... and when there is lead-based paint in or on the dwelling or common area." The gravamen of the Franklins' claims is to obtain defendants' compliance with orders to correct the lead paint violations and with any other requirements regarding hazardous conditions in their premises, to wit: the proper, safe, and full abatement of the lead paint, to reduce the children's exposure, and to ensure and monitor their recovery from past poisonings and protection from future poisonings.

The motion to intervene the Franklin family as plaintiffs in this class action was filed on June 27, 1995. Freddie Mac served a Notice to Quit on the Franklins on July 24, 1995. The Notice was dated July 12, 1995.

The Franklins filed a motion for Preliminary Injunction with the Federal Court on August 2, 1995. The Franklins' motion for a Preliminary Injunction sought to enjoin Freddie Mac from evicting the Franklins pending resolution of the class action or the relocation of the Franklins to some other suitable dwelling unit and to require the defendants to relocate plaintiffs pending abatement of the lead paint in their apartment and to abate the lead paint in the Franklins' apartment.

Since Freddie Mac relocated the Franklins and began the lead abatement in the Franklins' apartment without court order, that portion of the request for a preliminary injunction became moot. In the Hon. Robert Sweet's Order the Court recognized that the issue it was addressing was "only the relief sought with regard to the eviction proceedings." (899 F.Supp. at 1161, supra.) Judge Sweet held that the eviction proceedings should take place in State Court.

He further held that "the question for this Court is whether Freddie Mac must meet the Notice provision and cause standards imposed by Section 8 or whether Freddie Mac may proceed in the absence of any constraints imposed by Section 8." (Supra, at 1162.)

Judge Sweet goes on to analyze this issue of law in his Order (supra, at 1162-1166) as follows:

"In general, when a tenant's lease is subordinate to a mortgage and the title to the property is transferred pursuant to a foreclosure proceeding that names the tenants as defendants, and the property is sold, with proper notice given, the tenants lose their rights to continued tenancy. See, United Security Corp. v. Suchman, 307 N.Y. 48, 52-54 (1954); Lincoln First Bank, N.A. v. Polishuck, [Polishuk ], 86 A.D.2d 652, 652 (2d Dep't.1982). The lease between the Franklins and the Nesbitts, the standard Section 8 lease, contained a subordination clause. The Franklins were named defendants in the relevant state court proceedings and thus they have no continued rights as tenants under New York law. See Id.

"Exceptions to the non-rights of such tenants are provided to tenants living in rent control units in New York City by local law. See New York City Administrative Code Sec. 26-408; Da Costa v. Hamilton Republican Club, 65 N.Y.S.2d 500, 503 (N.Y.Co.1946); Pisani v. Cominger, 36 A.D.2d 593 (1'st Dept 1971); De Santis v. White Rose Associates, 578 N.Y.S.2d 363, 366 (N.Y.Co.1991). Section 26-408 reads, in pertinent part that:

" 'No tenant, as long as he or she continues to pay the rent to which the landlord is entitled, shall be removed from any housing accommodation which is subject to rent control under this chapter by action to evict ... notwithstanding the fact that the tenant has no lease or that his or her lease ... has expired or otherwise terminated ...'

"New York City Administrative Code, Sec. 26-408(a).

"While the rent control laws in New York and Section 8 were both developed, in part, to address the lack of decent, affordable housing for low income persons, the Court has been provided with no authority for the proposition that New York law protects the continued housing interests of tenants in federally subsidized housing, such as Section 8, in these circumstances. While it would be consistent with the protections offered to rent control tenants, it is not clear that such protection exist under New York law.

"Plaintiffs offer that Section 8 itself provides special protection for tenants that remain in units after new owners have secured the property pursuant to a foreclosure sale. No direct authority for this proposition has been provided. Plaintiffs have cited several cases that stand for the proposition that a lease between a Section 8 tenant and a landlord is no longer for a fixed period of time, but instead that it is 'automatically renewed upon the expiration date.' Maia v. Castro, 139 Misc.2d 312, 527 N.Y.S.2d 154, 156 (Dist. Ct. Nassau Co. 1988); see Mitchell v. U.S. Dept. of Housing and Urban Development, 569 F.Supp. 701, 706-708 (N.D.Cal.1983). This finding is based squarely on provisions of the regulations and the language of the lease. In addition, landlords cannot terminate Section 8 leases except for cause as spelled out in 24 C.F.R. 882.215(c), of the regulations implementing Section 8. In relevant part, Section 882.215 reads:

" '(a) Term of Lease.

" '(1) The term of the Lease shall begin on a date stated in the Lease, and shall continue until:

" '(i) A termination of the Lease by the Owner in accordance with paragraph (c) of this section,

" '(ii) A termination of the Lease by the Family in accordance with the Lease or by mutual agreement during the term of the Lease, or

" '(iii) A termination of the Contract by the PHA.

. . . . .

" '(c) Termination of Tenancy (for Leases entered into on or after October 1, 1981). * * *

" '(1) Serious or repeated violation of the terms and conditions of the Lease;

" '(ii) Violation of Federal, State, or local law which imposes obligations on the tenant in connection with the occupancy or use of the dwelling unit and surrounding premises; or

" '(iii) Other good cause.

. . . . .

" '(4) The Owner may evict the tenant from the unit only by instituting...

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