Goldstein v. Lipetz

• Decision Date: 23 May 2017
• Citation: 53 N.Y.S.3d 296,150 A.D.3d 562
• Parties: Trust for the benefit of Shari Lynn GOLDSTEIN, Plaintiff–Appellant–Respondent, v. Linda LIPETZ, Defendant–Respondent–Appellant.
• Court: New York Supreme Court — Appellate Division

150 A.D.3d 562

53 N.Y.S.3d 296

Trust for the benefit of Shari Lynn GOLDSTEIN, Plaintiff–Appellant–Respondent,

v.Linda LIPETZ, Defendant–Respondent–Appellant.

Supreme Court, Appellate Division, First Department, New York.

May 23, 2017.

Kaufman Friedman Plotnicki & Grun, LLP, New York (Howard Grun of counsel), for appellant-respondent.

Law Offices of Fred L. Seeman, New York (Fred L. Seeman of counsel), for respondent-appellant.

TOM, J.P., FRIEDMAN, RICHTER, KAPNICK, GESMER, JJ.

Order, Supreme Court, New York County (Shlomo Hagler, J.), entered July 27, 2015, which denied plaintiff's motion for summary judgment on its first, second and third causes of action and for dismissal of defendant's affirmative defenses and counterclaim, and denied defendant's cross motion for summary judgment dismissing the complaint, modified, on the law, to grant plaintiff's motion, and to declare that plaintiff validly terminated the lease, and otherwise affirmed, without costs.

The law is clear that a rent-stabilized tenant who sublets her apartment at market rates to realize substantial profits not lawfully available to the landlord, and does so systematically, for a substantial length of time, places herself in jeopardy of having her lease terminated on that ground, with no right to cure (see Gruber v. Anastas, 100 A.D.3d 829, 954 N.Y.S.2d 568 [2d Dept.2012] ; 220 W. 93rd St., LLC v. Stavrolakes, 33 A.D.3d 491, 823 N.Y.S.2d 44 [1st Dept.2006], lv. denied 8 N.Y.3d 813, 836 N.Y.S.2d 553, 868 N.E.2d 236 [2007] ; Matter of 151–155 Atl. Ave. v. Pendry, 308 A.D.2d 543, 543–544, 764 N.Y.S.2d 852 [2d Dept.2003] ; BLF Realty Holding Corp. v. Kasher, 299 A.D.2d 87, 91, 747 N.Y.S.2d 457 [1st Dept.2002], lv. dismissed 100 N.Y.2d 535, 762 N.Y.S.2d 876, 793 N.E.2d 413 [2003] ; Continental Towers Ltd. Partnership v. Freuman, 128 Misc.2d 680, 494 N.Y.S.2d 595 [App.Term., 1st Dept.1985] ). The record before us establishes, as a matter of law, that this is precisely what defendant did with the rent-stabilized cooperative apartment she leased from plaintiff, the trust that holds the unit's appurtenant cooperative shares and its proprietary lease. Accordingly, plaintiff is entitled to summary judgment on its first cause of action (for a declaration that it validly terminated the lease), on its second cause of action (for ejectment), and as to liability on its third cause of action (for recovery of the fair value of the use and occupancy of the apartment since defendant was served with notice of the termination of the lease). We therefore modify the order appealed from to grant plaintiff's motion for such relief.

Defendant does not dispute that she sublet her apartment to 93 different customers recruited through the Airbnb website, for 338 days spread over a period of 18 months (the first stay began on March 1, 2011, and the last began on August 29, 2012), at nightly rates ($95 for one person, $120 for two) far in excess of her stabilized rent, which was $1,758.01 per month during the relevant period, equivalent to $57.80 per day.¹ Although a tenant is permitted by Rent Stabilization Code (RSC) (9 NYCRR) § 2525.6(b) to charge a 10% premium for an otherwise lawful sublet of a furnished rent-stabilized apartment, 110% of plaintiff's stabilized rent, on a per-diem basis, was only $63.58. Thus, the $95 per night that she charged single guests was approximately one and a half times the lawful per-diem charge for a sublet, and the $120 she charged couples was nearly twice (approximately 189%) the lawful charge.

The evidence in the record from the Airbnb website reveals that the blatancy of defendant's commercialization of her apartment was comparable to that of tenants who have been evicted for profiteering in prior cases (see 335–7 LLC v. Steele, 53 Misc.3d 150[A], 2016 N.Y. Slip Op. 51689[U], 2016 WL 6990049 [App.Term., 1st Dept.2016] ; 42nd & 10th Assoc., LLC v. Ikezi, 46 Misc.3d 1219[A], 2015 N.Y. Slip Op. 50124[U], 2015 WL 731616 [Civ.Ct., N.Y. County 2015], affd. 50 Misc.3d 130[A], 2015 N.Y. Slip Op. 51915[U] [App.Term., 1st Dept.2015] ; West 148 LLC v. Yonke , 11 Misc.3d 40, 41, 812 N.Y.S.2d 735 (App.Term., 1st Dept.2006), lv. denied 2006 N.Y. Slip Op. 73839[U] [1st Dept.2006] ; see also Brookford, LLC v. Penraat, 47 Misc.3d 723, 725, 8 N.Y.S.3d 859 [Sup.Ct., N.Y. County 2014] [granting interim injunction against tenant's Airbnb subletting] ). Defendant advertised her apartment on the Airbnb website as "5th Avenue Perfection," and described the accommodations as follows:

"Large well appointed private bedroom in great downtown location. (Greenwich Village West) Step out onto New York's 5th Ave from posh doorman building located in the best zip code in NYC. Just steps from Washington Sq Park your comfortable room is surprisingly quiet, but then 5th Ave ends at the park just a stones [sic] throw away so traffic is minimal. Flat screen TV [.] Share fully outfitted kitchen and spotless bathroom with 1 other ... owner (female)[.] Walk a few short blocks to 2 subway stations (West 4th St or 14th St/Union Sq)[.] Perfect for single or couple. Private Entrance ... Elegent [sic] Comfy[.]"

Defendant's listing on the Airbnb website also provided (1) links for making reservations, (2) "check-in" and "check-out" times, (3) the financial penalty for untimely cancellation, and (4) reviews from numerous past guests.

Turning her rent-stabilized apartment into a single-unit tourist hotel in this fashion enabled defendant to earn substantial profits, far in excess of the legally permissible 10% premium.² After Airbnb (to which the subtenants paid the rent) deducted its fees, the subletting generated total income of $33,592.00 for defendant. The stabilized rent she paid for the same 338 days (based on the aforementioned per-diem figure of $57.80) was only $19,536.40. Thus, defendant realized a 72% profit from her subletting—about seven times the 10% premium permitted for otherwise lawful sublets of furnished rent-stabilized apartments. Had defendant limited herself to the 10% premium permitted by the RSC, her aggregate revenue would have been $21,490.04—about $12,000 less than her actual revenue of $33,592.00. Taking into account the lawful 10% premium (and ignoring the fact that the apartment was shared), defendant overcharged her 93 subtenants, in aggregate, by approximately 56%.³

Initially, we are unanimous in rejecting defendant's primary argument on this appeal, in which she contends that the 93 transient, short-term, paying guests she hosted over a year and a half were "roommates" within the purview of Real Property Law § 235–f and RSC 2525.7. Contrary to the view of Supreme Court, the record establishes that defendant's "guests" were, as a matter of law, subtenants, and this matter is therefore governed by RSC 2525.6 (see Stavrolakes, 33 A.D.3d at 491, 823 N.Y.S.2d 44 [occupancy of a rent-controlled apartment "by numerous persons between 2001 and 2005—especially short-term transient students at illegal rents—was in the nature of subletting rather than taking in roommates"] ). Accordingly, defendant's first and fourth affirmative defenses, both based on her claim that her guests were " roommates," are unavailing.

As her third affirmative defense, defendant alleges that plaintiff is not entitled to relief because her subletting was "de minimis[,] short term and insubstantial," a contention that she has repeated in her motion papers and on this appeal. In this regard, defendant asserts in her appellate brief that her subletting was "insubstantial when viewed in the context of a forty (40) year tenancy." The dissent takes the position that defendant has raised a triable issue as to whether the subletting was of substantial duration. The implication of this analysis, in which whether the unlawful conduct was of sufficient duration to be considered material is determined by comparison to the total length of the tenancy, has the effect of rendering lawful for a longstanding tenant the exact same conduct that would be unlawful for a tenant who has a shorter history in his or her apartment. The dissent offers no support for its assumption that the relevant legal provisions were enacted with an intent to discriminate in this fashion between tenants based on the lengths of their tenancies. In our view, subletting of an apartment at an excessive rental rate for 338 days over a year and a half, or for 11 out of 18 months, has taken place on a sustained basis, not intermittently, and for a substantial period of time, and thus constitutes unlawful profiteering, regardless of the duration of the tenancy before the unlawful conduct began. Indeed, the Appellate Term recently affirmed the eviction of a tenant who had sublet her rent-stabilized apartment through Airbnb for "at least 120 nights in a 14 month period" (Steele, 53 Misc.3d 150[A], 2016 N.Y. Slip Op. 51689 [U], *1, 2016 WL 6990049 )—less than half the number of nights defendant sublet her apartment, over a roughly comparable period of time (see also Continental Towers, 128 Misc.2d at 681, 494 N.Y.S.2d 595 [the tenant was evicted for having entered into an arrangement to sublet his apartment at an excessive rate for six months, although the subtenant apparently vacated the premises before the term of the sublease had expired] ).⁴

Defendant also argues that her profiteering was "insubstantial" because her Airbnb income did not exceed her legal regulated rent plus 10% during several months of the subletting. We find the point unavailing. Defendant sublet her apartment on a daily basis and, perforce, she had less Airbnb revenue in months during which her apartment was sublet for fewer days. To determine defendant's profit from the subletting, her income from the subletting should be compared to the share of her rent attributable to the days she was actually hosting a subtenant in the apartment, not to her rent for the entire month during which the subletting occurred.

Although she has not pleaded this as an affirmative defense, and...