WHEN A MULTIPLE DWELLING HAS CLASS 1 VIOLATIONS

936 TYH RM BRONX LLC v. Brujan, 2022 NY Slip Op 33642 - NY: Bronx County Court, Civil Court 2022:

"Respondent's argument is simple. From January 1, 2020 through March 1, 2022, a violation existed for "occupancy contrary to that allowed by" the certificate of occupancy. (see NYSCEF Doc. 13 at p. 10, referencing OATH/ECB Violation #35465505N; see also NYSCEF Doc. 18). According to the respondent, this non-conforming use means petitioner was not in compliance with Multiple Dwelling Law (MDL) § 301. MDL § 301(1) states, in relevant part,

No multiple dwelling shall be occupied in whole or in part until the issuance of a certificate by the department that said dwelling conforms in all respects to the requirements of this chapter, to the building code and rules and to all other applicable law, except that no such certificate shall be required in the case of: (a). Any class B multiple dwelling existing on April, eighteenth, nineteen hundred twenty-nine, for which a certificate occupancy was not required before such date and which no changes or alterations have been made except in compliance with this chapter...

MDL § 302, in turn, states that in a "dwelling or structure... occupied in whole or in part for human habitation in violation of" § 301, "[n]o rent shall be recovered by the owner...for said period, and no action or special proceeding shall be maintained therefor, or for possession of said premises for nonpayment of such rent."

Respondent argues dismissal is required because the rent demand seeks rent petitioner cannot collect in this proceeding.

Petitioner counters that respondent's argument is entirely incorrect because she relies on a misfiled certificate of occupancy to conclude the premises were somehow converted from (2) stories to the current (6) stories. Critically, however, petitioner's opposition concedes the OATH/ECB violation issued on January 3, 2020. (see NYSCEF Doc. 25 at par. 4). Petitioner argues that respondent misinterprets the MDL provisions. Petitioner states the violation is not for respondents' unit, and that the violation [which was in the cellar] did not affect any other legal unit. (id. at par. 6). Indeed, the summons indicates, and the parties agree, that the violation is for an illegal unit in the cellar.^[2]

On a motion to dismiss the complaint pursuant to CPLR § 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. (Leon v Martinez, 84 NY2d 83, 87 [1994]; Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704, 864 NYS2d 70 [2nd Dept 2008]). However, where evidentiary material is submitted and considered on a motion to dismiss a pleading pursuant to CPLR § 3211(a)(7), the question becomes whether the proponent of the pleading has a cause of action, not whether the proponent has stated one. (see Guggenheimer v Ginzburg, 43 NY2d 268, 275, 401 NYS2d 182 [1977]). Dismissal is inappropriate unless the movant can show that a purported fact is no fact at all. (see Cajigas v Clean Rite Centers, LLC, 187 AD3d 700, 701, 132 NYS3d 428 [2nd Dept 2020]).

The undisputed OATH/ECB violation requires dismissal of this case.^[3]

When a violation exists for occupancy at odds with the certificate of occupancy, the building, essentially, lacks a certificate of occupancy. (see 12 East 88th LLC v Fox, 72 Misc. 3d 1221(A), *4, 2021 NY Slip Op 50815(U) [Sup Ct, New York County 2021]). No rent may be collected during any period the dwelling's occupancy is at odds with the certificate of occupancy. (see MDL § 302; GVS Properties LLC v Vargas, 172 AD3d 466, 466, 100 NYS3d 230 [1st Dept 2019]; 742 Realty LLC v Zimmer, 46 Misc. 3d 1204(A), *1, 2014 NY Slip Op 51845(U) [Civ Ct, Kings County 2014]).

Petitioner's arguments must fail because rent is barred even if the tenant's unit is not the illegal unit. (see West 47th Holdings LLC v Eliyahu, 64 Misc. 3d 133(A), *1-2, 2019 NY Slip Op 51066(U) [App Term, 1st Dept 2019]; 49 Bleecker, Inc. v Gatien, 157 AD3d 619, 620, 69 NYS3d 863 [1st Dept 2018] ("The owner of a `dwelling or structure ... occupied in whole or in part for human habitation in violation of [§ 301]' may not recover rent for the period during which there is no certificate of occupancy for `such premises'); see also 1165 Fulton Ave. HDFC v Goings, 65 Misc. 3d 1210(A), 2019 NY Slip Op 51567(U) [Civ Ct, Bronx County 2019] (noting the change in how courts in this department apply MDL 302 after the Court of Appeals holding in Chazon LLC v Maugenest (19 NY3d 410, 948 NYS2d 571 [2012]). In Goings, the petitioner argued that the violation for use contrary to the certificate of occupancy involved a room in the basement that had no impact on the tenant's unit. (see 65 Misc. 3d 1210(A), *2). Dismissal was still required. Petitioner here makes the same argument, and the same outcome is required.

The rent demand in this proceeding is clearly defective because it seeks rent petitioner is barred from collecting. A rent demand, of course, must fairly afford the tenant actual notice of the alleged amount due and of the period for which such claim is made. (542 Holding Corp. v Prince Fashions Inc., 46 AD3d 309, 311, 848 NYS2d 37 [1st Dept 2007] citing Schwartz v Weiss—Newell, 87 Misc. 2d 558, 561, 386 NYS2d 191 [Civ Ct, New York County 1976]). A proper rent demand is a prerequisite to maintain a non-payment proceeding. (RPAPL § 711(2); see Vartarian v Brady, 184 Misc. 2d 333, 707 NYS2d 285 [Civ Ct, New York County 1999]; EOM 106-15 217th Corp. v Severine, 62 Misc. 3d 141(A) [App Term, 2nd Dept 2019]).

The rent demand seeks rent portions for twenty (20) different months. Petitioner may only collect rent for one (1) of those months (March 2022). Under these circumstances, the case must be dismissed. (see 3463 Third Avenue Realty LLC v Vasquez, 59 Misc. 3d 1224(A), *2, 2018 NY Slip Op 50674(U) [Civ Ct, Bronx County 2018]; see also CPLR 409(b) (requiring summary determination at any stage of the proceeding when no issues of fact are raised)).

CONCLUSION

Based on the foregoing, it is Ordered, judgment shall enter in respondents' favor dismissing the petition.^[4] This constitutes the Decision and Order of the court. It will be posted on NYSCEF.

SO ORDERED.

[1] On information and belief, the matter was not calendared due to a pending ERAP application.

[2] The summons speaks for itself. (see NYSCEF Doc. 25). It is not disputed. Petitioner acknowledges it had to correct the condition and pay a fine. Petitioner may not relitigate the summons/violation here.

[3] The violation is a "Class 1" violation. Class 1 violations are "immediately hazardous": "those where the violating condition(s) poses a threat that severely affects life, health, safety, property, the public interest, or a significant number of persons so as to warrant immediate corrective action..." (see What is an OATH Summons? — Buildings (nyc.gov) [last accessed on October 23, 2022]).

[4] Petitioner's motion is denied as moot."

COLLECTING RENT IN A MULTIPLE DWELLING WITH SERIOUS VIOLATIONS

Here, the violations were not on tenant's apartment yet they were serious violations in the building.

936 TYH RM BRONX LLC v. Brujan, 2022 NY Slip Op 33642 - NY: County Court, Civil Court 2022:

"Respondent's argument is simple. From January 1, 2020 through March 1, 2022, a violation existed for "occupancy contrary to that allowed by" the certificate of occupancy. (see NYSCEF Doc. 13 at p. 10, referencing OATH/ECB Violation #35465505N; see also NYSCEF Doc. 18). According to the respondent, this non-conforming use means petitioner was not in compliance with Multiple Dwelling Law (MDL) § 301. MDL § 301(1) states, in relevant part,

No multiple dwelling shall be occupied in whole or in part until the issuance of a certificate by the department that said dwelling conforms in all respects to the requirements of this chapter, to the building code and rules and to all other applicable law, except that no such certificate shall be required in the case of: (a). Any class B multiple dwelling existing on April, eighteenth, nineteen hundred twenty-nine, for which a certificate occupancy was not required before such date and which no changes or alterations have been made except in compliance with this chapter...

MDL § 302, in turn, states that in a "dwelling or structure... occupied in whole or in part for human habitation in violation of" § 301, "[n]o rent shall be recovered by the owner...for said period, and no action or special proceeding shall be maintained therefor, or for possession of said premises for nonpayment of such rent."

Respondent argues dismissal is required because the rent demand seeks rent petitioner cannot collect in this proceeding.

Petitioner counters that respondent's argument is entirely incorrect because she relies on a misfiled certificate of occupancy to conclude the premises were somehow converted from (2) stories to the current (6) stories. Critically, however, petitioner's opposition concedes the OATH/ECB violation issued on January 3, 2020. (see NYSCEF Doc. 25 at par. 4). Petitioner argues that respondent misinterprets the MDL provisions. Petitioner states the violation is not for respondents' unit, and that the violation [which was in the cellar] did not affect any other legal unit. (id. at par. 6). Indeed, the summons indicates, and the parties agree, that the violation is for an illegal unit in the cellar.^[2]

On a motion to dismiss the complaint pursuant to CPLR § 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. (Leon v Martinez, 84 NY2d 83, 87 [1994]; Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704, 864 NYS2d 70 [2nd Dept 2008]). However, where evidentiary material is submitted and considered on a motion to dismiss a pleading pursuant to CPLR § 3211(a)(7), the question becomes whether the proponent of the pleading has a cause of action, not whether the proponent has stated one. (see Guggenheimer v Ginzburg, 43 NY2d 268, 275, 401 NYS2d 182 [1977]). Dismissal is inappropriate unless the movant can show that a purported fact is no fact at all. (see Cajigas v Clean Rite Centers, LLC, 187 AD3d 700, 701, 132 NYS3d 428 [2nd Dept 2020]).

The undisputed OATH/ECB violation requires dismissal of this case.^[3]

When a violation exists for occupancy at odds with the certificate of occupancy, the building, essentially, lacks a certificate of occupancy. (see 12 East 88th LLC v Fox, 72 Misc. 3d 1221(A), *4, 2021 NY Slip Op 50815(U) [Sup Ct, New York County 2021]). No rent may be collected during any period the dwelling's occupancy is at odds with the certificate of occupancy. (see MDL § 302; GVS Properties LLC v Vargas, 172 AD3d 466, 466, 100 NYS3d 230 [1st Dept 2019]; 742 Realty LLC v Zimmer, 46 Misc. 3d 1204(A), *1, 2014 NY Slip Op 51845(U) [Civ Ct, Kings County 2014]).

Petitioner's arguments must fail because rent is barred even if the tenant's unit is not the illegal unit. (see West 47th Holdings LLC v Eliyahu, 64 Misc. 3d 133(A), *1-2, 2019 NY Slip Op 51066(U) [App Term, 1st Dept 2019]; 49 Bleecker, Inc. v Gatien, 157 AD3d 619, 620, 69 NYS3d 863 [1st Dept 2018] ("The owner of a `dwelling or structure ... occupied in whole or in part for human habitation in violation of [§ 301]' may not recover rent for the period during which there is no certificate of occupancy for `such premises'); see also 1165 Fulton Ave. HDFC v Goings, 65 Misc. 3d 1210(A), 2019 NY Slip Op 51567(U) [Civ Ct, Bronx County 2019] (noting the change in how courts in this department apply MDL 302 after the Court of Appeals holding in Chazon LLC v Maugenest (19 NY3d 410, 948 NYS2d 571 [2012]). In Goings, the petitioner argued that the violation for use contrary to the certificate of occupancy involved a room in the basement that had no impact on the tenant's unit. (see 65 Misc. 3d 1210(A), *2). Dismissal was still required. Petitioner here makes the same argument, and the same outcome is required.

The rent demand in this proceeding is clearly defective because it seeks rent petitioner is barred from collecting. A rent demand, of course, must fairly afford the tenant actual notice of the alleged amount due and of the period for which such claim is made. (542 Holding Corp. v Prince Fashions Inc., 46 AD3d 309, 311, 848 NYS2d 37 [1st Dept 2007] citing Schwartz v Weiss—Newell, 87 Misc. 2d 558, 561, 386 NYS2d 191 [Civ Ct, New York County 1976]). A proper rent demand is a prerequisite to maintain a non-payment proceeding. (RPAPL § 711(2); see Vartarian v Brady, 184 Misc. 2d 333, 707 NYS2d 285 [Civ Ct, New York County 1999]; EOM 106-15 217th Corp. v Severine, 62 Misc. 3d 141(A) [App Term, 2nd Dept 2019]).

The rent demand seeks rent portions for twenty (20) different months. Petitioner may only collect rent for one (1) of those months (March 2022). Under these circumstances, the case must be dismissed. (see 3463 Third Avenue Realty LLC v Vasquez, 59 Misc. 3d 1224(A), *2, 2018 NY Slip Op 50674(U) [Civ Ct, Bronx County 2018]; see also CPLR 409(b) (requiring summary determination at any stage of the proceeding when no issues of fact are raised)).

CONCLUSION

Based on the foregoing, it is Ordered, judgment shall enter in respondents' favor dismissing the petition.^[4] This constitutes the Decision and Order of the court. It will be posted on NYSCEF.

SO ORDERED.

[1] On information and belief, the matter was not calendared due to a pending ERAP application.

[2] The summons speaks for itself. (see NYSCEF Doc. 25). It is not disputed. Petitioner acknowledges it had to correct the condition and pay a fine. Petitioner may not relitigate the summons/violation here.

[3] The violation is a "Class 1" violation. Class 1 violations are "immediately hazardous": "those where the violating condition(s) poses a threat that severely affects life, health, safety, property, the public interest, or a significant number of persons so as to warrant immediate corrective action..." (see What is an OATH Summons? — Buildings (nyc.gov) [last accessed on October 23, 2022]).

[4] Petitioner's motion is denied as moot."

CHRONIC RENT DELINQUENCY

Spencer Scott Group LLC v. Nahas, Date filed: 2022-01-24, Court: Civil Court, Richmond, Judge: Judge Remy Smith, Case Number: LT-300023-20/RI:

"Chronic Rent Delinquency

Courts have found that the commencement of frequent non-payment proceedings in a short amount of time, due to a tenant’s unjustified failure to pay rent is a viable claim for eviction based on chronic non-payment of rent. See Adam’s Tower Ltd. Partnership v. Richter, 186 Misc.2d 620 (App. Term 1st Dept. 2000) (the court considered the tenant’s “‘long term, unjustified and persistent failure’ to pay rent as it became due” supported an eviction based upon the chronic non-payment of rent because there were nine non-payment proceedings in three years), citing Sharp v. Norwood, 223 A.D.2d 6 (A.D. 1st Dept. 1996); aff’d 89 N.Y.2d 1068 (1997)). See also, Definitions Personal Fitness v. 133 E. 58th St., 107 A.D.3d 617 (1st Dept. 2013) (ten non-payment proceeding in seven years); 2564 Co. v. D’Addario, 35 Misc.2d 176 (App. Term 1st Dept. 2000) (eleven non-payment proceedings in one and a half years).

Here, there is no evidence that petitioner previously commenced nonpayment rent proceeding(s) before commencing this holdover. Given the lack of a history of nonpayment proceedings against respondents, chronic rent delinquency cannot be the basis for commencement of this holdover. Although there is no magic number of proceedings required to maintain a chronic rent delinquency, there must be a history of more than one. See also Sharp v. Norwood, 223 A.D.2d 6 (A.D. 1st Dept. 1996) (In a chronic non-payment of rent holdover proceeding, “there is no ‘magic number’ of prior proceedings required, as each case is sui generis.); 25th Realty Associates v. Griggs, 150 A.D.2d 155 (1st Dept. 1989) (a single non-payment proceeding cannot be the basis of a chronic delinquent holdover)."

PIERCING THE CORPORATE VEIL

WEST HOUSTON PROP., LLC v. NEW YORK PILATES NYC, LLC, 2021 NY Slip Op 32150 - NY: Supreme Court October 21, 2021:

"The plaintiff landlord in this breach of contract action seeks to recover unpaid rent under a commercial lease agreement with defendant New York Pilates NYC, LLC (Pilates NYC). The plaintiff also seeks to recover against all other defendants on a corporate veil-piercing theory and under the New York State Debtor and Creditor Law (Debtor and Creditor Law). The defendants now move pursuant to CPLR 3211(a)(7) to dismiss the second, third, fourth, and fifth causes of action of the complaint. The plaintiff opposes the motion. For the following reasons, the motion is granted.

When assessing the adequacy of a pleading in the context of a motion to dismiss under CPLR 3211(a)(7), the court's role is "to determine whether [the] pleadings state a cause of action." 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 151-152 (2002). To determine whether a claim adequately states a cause of action, the court must "liberally construe" it, accept the facts alleged in it as true, accord it "the benefit of every possible favorable inference" (id. at 152: see Romanello v Intesa Sanpaolo, S.p.A., 22 NY3d 881 [2013]; Simkin v Blank, 19 NY3d 46 [2012]), and determine only whether the facts, as alleged, fit within any cognizable legal theory. See Hurrell-Harring v State of New York, 15 NY3d 8 (2010); Leon v Martinez, 84 NY2d 83 (1994). "The motion must be denied if from the pleading's four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp. v Jennifer Realty Co., supra, at 152 (internal quotation marks omitted); see Leon v Martinez, supra; Guggenheimer v Ginzburg, 43 NY2d 268 (1977).

The complaint avers that the plaintiff and Pilates NYC entered into a commercial lease dated March 22, 2018, for a term ending on March 31, 2028. The lease obligated Pilates NYC to pay rent, additional rent, and other fees to the plaintiff on or before the first day of each month of the lease term. However, Pilates NYC failed to make payments in the sum of $258,078.84 from March 1, 2020, through November 1, 2020. The first cause of action, sounding in breach of contract, seeks to recover unpaid rent as against Pilates NYC. The second cause of action seeks to recover unpaid rent as against all defendants other than Pilates NYC by piercing the corporate veil. The third and fourth causes of action seek to recover unpaid rent as against all defendants by voiding any conveyances and/or transfers of the assets of defendant Pilates NYC to the other defendants under Debtor and Creditor Law §§ 274, 275, and 276. The fifth cause of action, sounding in unjust enrichment, likewise seeks to recover unpaid rent as against all defendants.

Ordinarily, a corporation exists independently of its owners, as a separate legal entity, and its owners are not liable for the actions of the corporation. See Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135 (1993). The doctrine of piercing the corporate veil is a limitation to this rule, "typically employed by a third party seeking to go behind the corporate existence in order to circumvent the limited liability of the owners and to hold them liable for some underlying corporate obligation." Id. "Piercing the corporate veil requires a showing that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury." Ciavarella v Zagaglia, 132 AD3d 608, 608-609 (1st Dept. 2015) (quotation and citation omitted); see also Fantazia Int'l Corp. v CPL Furs New York, Inc., 67 AD3d 511 (1st Dept. 2009). "[U]ndercapitalization of a corporation and the corporation's owner's personal use of corporate funds, which results in the corporation's being unable to pay a judgment, constitute wrongdoing and injury sufficient to satisfy the second prong of [Matter of Morris v New York State Dept. of Taxation & Fin., supra.]" Ciavarella v Zagaglia, supra at 609. However, a simple breach of contract, without more, does not constitute a fraud or wrong warranting the piercing of the corporate veil. See Skanska USA Bldg., Inc. v Atalntic Yards B2 Owner LLC, 146 AD3d 1 (1st Dept. 2016); Bonacasa Realty Co., LLC v Salvatore, 109 AD3d 946 (2nd Dept. 2013); Treeline Mineola, LLC v. Berg, 21 AD3d 1028 (2nd Dept. 2005).

The complaint's second cause of action alleges, "[u]pon information and belief," (1) that all the other defendants dominated and controlled defendant Pilates NYC "so that Pilates NYC had no separate mind, will or existence of its own" and was the "mere alter ego of all of the other defendants." Further, the complaint states that Pilates NYC "did not comply with the standard company formalities required of a limited liability company," that the property of Pilates NYC was "used by the individual and company defendants as if it were their own," and that all defendants "shared, commingled and intermingled the same property including the name and goodwill of the business, the same employees and customers and the same offices and trade fixtures, furniture and equipment and the same website, customer lists, appointment schedules etc."

The foregoing allegations are insufficient to state a cause of action for alter ego liability. To begin, they are "wholly conclusory and consist of no more than a recitation of the elements of the claim, `upon information and belief.'" 501 Fifth Ave. Co. LLC v Alvona LLC, 110 AD3d 494, 494 (1st Dept. 2013); see Board of Managers of Gansevoort Condominium v 325 West 13th, LLC, 121 AD3d 554 (1st Dept. 2014). Moreover, the complaint, even as supplemented by the plaintiff's submissions in opposition to the instant motion, "is devoid of any allegations as to how [all other defendants] used their domination of [Pilates NYC] to commit a wrong against the plaintiff[]." TMCC, Inc. v Jennifer Convertibles, Inc., 176 AD3d 1135, 1136 (2nd Dept. 2019); see Cornwall Management Ltd. v Kambolin, 140 AD3d 507 (1st Dept. 2016). The plaintiff has offered no specific facts as to what the other defendants did and how they allegedly controlled Pilates NYC, or as to the other defendants' actual personal gain and possession of money or assets in which the plaintiff had an interest. See Suverant LLC v Brainchild, Inc., 191 AD3d 513 (1st Dept. 2021); Arben Corp. v Durastone, LLC, 186 AD3d 599 (2nd Dept. 2020). Instead, the plaintiff relies on the bare observation that the Pilates NYC website and social media platforms show it has studios in several locations and offers members the ability to use one or all of its locations. "[T]he failure to allege any fraud or unjust conduct is fatal" to the second cause of action, especially where Pilates NYC performed for two years under the subject lease and, after missing payment for nine months, has apparently continued to perform under the lease. 501 Fifth Ave. Co. LLC v Alvona LLC, supra at 494. Accordingly, the second cause of action is dismissed.

With respect to the third and fourth causes of action, the court initially notes that the complaint, though filed on December 22, 2020, cites to outdated sections of the Debtor and Creditor Law that existed prior to the enactment of amendments effective on April 4, 2020. While the plaintiff cites to Debtor and Creditor Law § 276 under the third cause of action of the complaint, it appears that the plaintiff actually intended to state a claim pursuant to current Debtor and Creditor Law § 273(a)(1), which provides that "[a] transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation ... with actual intent to hinder, delay or defraud any creditor of the debtor." Where a plaintiff seeks to void a transfer pursuant to this provision, fraudulent intent must be pleaded with particularity. See CPLR 3016(b); RTN Networks LLC v Telco Group, Inc., 126 AD3d 477 (1St Dept. 2015) (addressing analogous provision of prior version of Debtor and Creditor Law); see also Carlyle LLC v Quik Park 1633 Garage LLC, 160 AD3d 476 (1st Dept. 2018) (addressing analogous provision of prior version of Debtor and Creditor Law).

The third cause of action avers "[u]pon information and belief" that Pilates NYC "with the intent and purpose to hinder, delay and defraud its creditors and in particular the plaintiff, caused the transfer and conveyance of its assets, including but not limited to customers, the name and good will of the business, accounts receivables, membership fees, trade fixtures, equipment and furniture, without any consideration being paid or such assets," and that such transfer rendered Pilates NYC insolvent. Again, the plaintiff's allegations are wholly conclusory and merely recite the elements of an intentional fraudulent conveyance claim. They fail to plead with particularity the defendants' intent to defraud and, inasmuch as they are pleaded upon information and belief, fail to reveal the basis for the plaintiff's claims. See Brennan v 3250 Rawlins Avenue Partners, LLC, 171 AD3d 603 (1st Dept. 2019); RTN Networks LLC v Telco Group, Inc., supra. The third cause of action is dismissed.

While the plaintiff cites to Debtor and Creditor Law §§ 274 and 275 under the fourth cause of action of the complaint, it appears that the plaintiff intended to state a claim pursuant to current Debtor and Creditor Law § 273(a)(2). That statute provides that a transfer made or obligation incurred by a debtor is voidable as to a present or future creditor if the debtor made the transfer or incurred the obligation ... without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.

Since Debtor and Creditor Law § 273(a)(2) is not based in actual fraud, the heightened pleading requirements of CPLR 3016(b) do not apply.

Nonetheless, the fourth cause of action fails even under ordinary pleading standards. The complaint contains a perfunctory recitation of the elements of a constructive fraud claim pursuant to Debtor and Creditor Law § 273(a)(2) but does not plead a single fact identifying any conveyance from Pilates NYC to another defendant. Nor does the plaintiff identify the source of his belief that Pilates NYC transferred its assets without fair consideration. For these reasons, the fourth cause of action is subject to dismissal. See RTN Networks, LLC v Telco Group, Inc., supra (addressing analogous provisions of prior version of Debtor and Creditor Law).

Finally, the fifth cause of action, sounding in unjust enrichment, must be dismissed as against Pilates NYC because there is a valid lease governing the subject matter between the plaintiff and Pilates NYC. See Suverant LLC v Brainchild, Inc., supra. Additionally, the fifth cause of action must be dismissed as against all remaining defendants because the complaint contains no allegations of a "relationship between the parties that could have caused reliance or inducement" that is not "too attenuated." Georgia Malone & Co., Inc. v Rieder, 19 NY3d 511, 517 (2012)."

COVID AND THE COMMERCIAL NON-PAYING TENANT AND THE GUARANTOR

1140 BROADWAY LLC v. BOLD FOOD, LLC, 2020 NY Slip Op 34017 - NY: Supreme Court December 4, 2020:

".....As an initial matter, the Court grants plaintiff's motion as to liability and rejects defendants' reliance on the doctrines of impossibility and frustration of purpose. The Court empathizes with the many business that have been adversely affected by the ongoing pandemic; here, both the landlord and the tenant have undoubtedly faced significant hardship.

The doctrine of frustration of purpose requires that "the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense"(Crown IT Services, Inc. v Koval-Olsen, 11 AD3d 263, 265, 782 NYS2d 708 [1st Dept 2004]). "[T]his doctrine is a narrow one which does not apply unless the frustration is substantial"(id.). Here, the lease was for office space in a building and the tenant's business was devastated by a pandemic. That does not fit into the narrow doctrine of frustration of purpose. Simply put, defendants could no longer afford the rent because restaurants no longer needed the management help that the tenant provides.

This is not a case where the office space leased was destroyed or where a tenant rented a unique space for a specific purpose that can no longer serve that function (such as a factory that was condemned after the lease was signed or a agreeing to rent costumes for a specific play to be performed at a specific theater on specific dates but the theater burned down before the first rental date). To be clear, the Court takes no position on what circumstances might permit the implication of a frustration of purpose doctrine under a generic office lease. The Court merely concludes that it does not apply here, where the tenant rented office space, the tenant's industry experienced a precipitous downfall and the tenant to no longer be able pay the rent.

Similarly, the Court finds that the impossibility doctrine does not compel the Court to deny the motion. "Impossibility excuses a party's performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. Moreover, the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract" (Kel Kim Corp. v Cent. Markets, Inc., 70 NY2d 900, 902, 524 NYS2d 384 [1987]).

It is critical to point out that the tenant merely provided restaurants with consulting services. It was not shut down by any public health directives. In other words, the tenant was one step removed from the governor's public health orders relating to restaurants because their business assists restaurants.^[1] It appears that restaurants no longer needed assistance with human resources, payroll or accounting, not because of anything plaintiff did (or failed to do). Sometimes that happens in business—an industry changes overnight.

And although restaurants were required to scale back certain operations (such as indoor dining) because of the pandemic, they were not fully shut down. Many food establishments decided to shut down because of the financial consequences from both the pandemic and the public health orders, but that does not mean there was a "destruction of the subject matter" contemplated in the contract at issue here, which was for office space on the twelfth floor of an office building. The Court is unable to find that the doctrine of impossibility has any application here.

The undisputed fact is that the lease was for office space in a building and the tenant stopped making payments. Nothing in the lease provides a remedy for a situation like this. The landlord never agreed to make paying the rent contingent on the tenant being able to afford it. The Court declines to step in and unilaterally modify the parties' contract and tell the landlord that it should not be able to enforce the agreement it signed with a tenant.

And the parties included a safeguard: this landlord agreed to a good guy guaranty, thus lessening the guarantor's risk if the tenant went out of business so long as certain obligations were satisfied. The guarantor is only responsible for rent for the time the tenant is actually in possession and had the power to return the premises to the landlord. Here, the tenant waited five months to return the premises to the landlord — yet the tenant and guarantor ask this Court to absolve them of their obligations. The Court declines to ignore a clear contractual provision designed to address the situation at issue here—where the tenant stops paying the rent and retains possession of the premises.

......"

FOR NEW YORKERS - COVID RENT RELIEF

 

Starting yesterday, July 16, 2020, New York Homes and Community Renewal is accepting applications for rental assistance for a two-week period. After all applications are received, assistance will be distributed to eligible families based on economic and social need. While risk of homelessness will be considered in distributing the subsidies, tenants do NOT need to be behind on their rent or at risk of eviction to qualify.

To qualify for help, applicants must meet the following requirements:

• New York must be the applicant's primary residence.
• For residents of Long Island, the applicant's household income must have been below the following levels before March 1, 2020 and at the time of application:
• 1-person household: $65,050
• 2-person household: $74,350
• 3 person household: $83,650
• 4 person household: $92,900
• For other counties or larger families, please see HCR's website.
• The household must have paid more than 30% of its gross monthly income for rent before March 1, 2020 and now.
• The household must have lost income between April 1, 2020 to July 31, 2020.
Qualifying households are eligible for up to four (4)-months of rent subsidies equal to the increase in their "rent burden." Rent burden is based on the percentage of the applicant's income they pay towards rent each month. The payments are made directly to the applicant's landlord and do not need to be re-paid.

Visit HCR's website for more information or to apply: https://hcr.ny.gov/RRP

RENT OVERCHARGES UNDER THE JUNE ACT ADDRESSED BY COURT OF APPEALS

While we were in the beginning throes of the health crisis and tenants began to wonder how they will pay their rent, a reminder that 2 weeks ago, the New York Court of Appeals struck down the retroactive application of the rent overcharge provisions of the June 2019 Housing Stability and Tenant Protection Act on constitutional grounds. The full opinion (4-3) and the dissent can be found here:

MATTER OF REGINA METROPOLITAN CO., LLC v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL 2020 NY Slip Op 2127 - NY: Court of Appeals, April 2, 2020

WHEN ARE CHRONIC LATE PAYMENTS A SUBSTANTIAL DEFAULT

A rent regulated apartment in New York is a valuable asset mainly because of the rights of renewal and limits on rent increases. But this asset can be lost due to constant late payments.

Lincoln 64 Flats LLC v. Stranahan,  Date filed: 2019-02-25 Court: Civil Court, Kings, Judge: Judge Marc Finkelstein, Case Number: 71779/18:

"The standard to sustain a chronic late payment eviction proceeding is as follows:

A history of repeated nonpayment proceedings brought to collect chronically late rental payments supports an eviction proceeding on the ground that the tenant has violated a ‘substantial obligation’ of the tenancy (see, Sharp v. Norwood, 89 NY2d 1068; 9 NYCRR 2524, 3 [a]).

Adam’s Tower, Ltd. Partnership v. Richter, 186 Misc 2d 620 (App Term, 1st Dept).

In order to prevail in a chronic nonpayment of rent case commenced as a violation of a substantial obligation of the tenancy, petitioner must prove that “it was required to commence frequent nonpayment proceedings in a relatively short period of time.” 601 West Realty LLC v. Chapa, 2003 NY Slip Op 51253(U) (Civ Ct, NY County). See e.g., Adam’s Tower, supra (nine nonpayment proceedings in three years); Pamela Equities Corp. v. Coverton, NYLJ, July 18, 1990, p 18, col 1 (App Term, 1st Dept) [seven nonpayment proceedings in two years]; Chelsea 19 Assoc v. Minetti, NYLJ, October 27, 1986, p 13, col 6 (App Term, 1st Dept) [five nonpayment proceedings in two years]; 2564 Co. v. D’Addario, 35 Misc 2d 176 (App Term, 1st Dept 1961) [eleven nonpayment proceedings in one and a half years]; 25th Realty Associates v. Griggs, 150 AD2d 155 (1st Dept 1989) [eleven nonpayment proceedings in six years]. See also, PWV Acquisition, LLC v. Maddox, 2005 NY Slip Op 50955(U) (App Term, 1st Dept).

However, when evaluating whether a landlord has established a prima facie case of unjustified rent defaults on the part of the tenant, those nonpayment proceedings that were “not pursued” should not be “charged against” the tenant. 31-67 Astoria Corp v. Cabezas, 2017 N.Y. Misc. LEXIS 1160, 2017 NY Slip OP 50432(U) (App Term, 2d Dept 2017). See also, Chama Holding Corp v. Taylor, 2012 N.Y. Misc. LEXIS 4347, 2012 NY Slip OP 22255 (App Term, 1st Dept 2012). Here, the case summary sheet for Index No. 85101/15, annexed as Exhibit I, clearly indicates that this proceeding was not pursued by the landlord. The petition was filed on August 24, 2015 and nothing at all occurred in the case until July 13, 2018 when it was administratively dismissed. Therefore the 2015 proceeding is not charged against respondent. As to the remaining two 2017 proceedings respondent argues they should not be charged against respondent because although petitioner admittedly obtained a default possessory judgment and a warrant of eviction in both cases, petitioner did not pursue the cases thereafter. This argument is not correct. The court finds that a landlord not taking action to further proceed to eviction after obtaining a default judgment and warrant of eviction is not what 31-67 Astoria Corp and Chama Holding Corp mean in holding that a case not pursued by a landlord is not to be charged against the tenant. As opposed to the 2015 proceeding, petitioner did pursue the 2017 proceedings to the point of judgment and warrant.

However, what is left are only two nonpayment proceedings to support petitioner’s claim of chronic rent delinquency. The court finds that under the standard set forth in Adam’s Tower. Ltd. Partnership v. Richter, supra, only two nonpayment proceedings during respondent’s nine year tenancy do not constitute “a history of repeated nonpayment proceedings brought to collect chronically late rental payments so as to support an eviction proceeding on the ground that the tenant has violated a substantial obligation of the tenancy.” Other decisions holding that the commencement of two remaining nonpayment proceedings fails to establish a pattern of unjustified rent defaults on the tenant’s part to constitute a violation of a substantial obligation of the tenancy include: Chama holding Corp v. Taylor, supra; Hudson St. Equities v. Circhi, 2005 N.Y. Misc. LEXIS 2410, 2005 NY Slip Op 51764(U) (App Term, 1t Dept 2005); Eva Stern 500 Llc v. Streat, 2018 NYLJ LEXIS 2765 (Civ Ct, Kings County); 3424 Dekalb Assocs v. Pabon, 2019 NYLJ LEXIS 383 (Civ Ct, Bronx County)."

PAYING RENT LATE FOR HABITUAL BREACH OF WARRANTABILITY

The tenants here did not owe any rent, only late fees--charged 31 of 34 times they paid rent late. And they did this intentionally to prod the landlord to get work done as the wood floor sagged, the bathroom was never properly fixed after the ceiling collapsed, and there was water damage and mold.

156 E. 37th St. LLC v. Eichner, NYLJ 2/20/19, Date filed: 2019-02-06, Court: Civil Court, New York, Judge: Judge Jack Stoller, Case Number: 63915/2018:

"New York State implies into every residential lease a warranty that the demised premises are habitable, RPL §235-b(1), and any purported modification of this warranty is void as a matter of public policy. RPL §235-b(2). “The only meaningful weapon a tenant has against a landlord for refusing to maintain the premises in a habitable condition is to withhold rent.” Semans Family Ltd. Pshp. v. Kennedy, 177 Misc 2d 345, 348 (Civ. Ct. NY Co. 1998), citing 520 E. 86th St., Inc. v. Leventritt, 127 Misc 2d 566, 570 (Civ. Ct. NY Co. 1985)(Saxe, J.). See Ansonia Assocs. v. Ansonia Residents’ Asso., 78 AD2d 211, 220 (1st Dept. 1980)(referring, in dicta, to a “right” to withhold rent), Whitby Operating Corp. v. Schleissner, 117 Misc 2d 794, 800 (S. Ct. NY Co. 1982).1 Respondents proved the persistence of ongoing conditions in the subject premises in need of repair, which Petitioner’s own rebuttal witness essentially corroborated, and Respondents proved, particularly by their unrebutted letters in evidence, that they intended to prompt Petitioner to repair the conditions by withholding rent, even if they eventually paid the monthly rent before Petitioner could commence a nonpayment proceeding.

A warranty of habitability defense implicates a “clear public policy interest.” Windy Acres Farm, Inc. v. Penepent, 40 Misc 3d 63, 64-65 (App. Term 2nd Dept. 2013). To the extent that terms of a landlord/tenant relationship impair the ability of a tenant to withhold rent, then, such terms impermissibly modify the statutory warranty of habitability, as follows:

The New York City Housing Authority may not administratively penalize a tenant who withholds rent to enforce the warranty of habitability. Law v. Franco, 180 Misc 2d 737 (S. Ct. Bronx Co. 1999);

While a landlord otherwise has a cause of action for a judgment against a tenant when a tenant’s nonpayment of rent compels the landlord to commence an excessive number of nonpayment proceedings, Adams Tower L.P. v. Richter, 186 Misc 2d 620, 621-22 (App. Term 1st Dept. 2000), bona fide habitability defenses that caused a tenant to withhold rent preclude an eviction on that ground. Chama Holding Corp. v. Taylor, 37 Misc 3d 70, 71 (App. Term 1st Dept. 2012), Hudson St. Equities v. Circhi, 9 Misc 3d 138(A)(App. Term 1st Dept. 2005), citing Bennett v. Mantis, N.Y.L.J., Sept. 13, 2000, at 22:1 (App. Term 1st Dept.), 31-67 Astoria Corp. v. Cabezas, 55 Misc 3d 132(A) (App. Term 2nd Dept. 2017), Time Equities Assocs. LLC v. McKenith, 2019 NY Slip Op. 50123(U), 4 (Civ. Ct. NY Co.), Wonforo Assocs. v. Maloof, 2002 NY Slip Op. 50316(U), 11 (Civ. Ct. NY Co.);

A conditional limitation providing for the forfeiture of a tenancy upon nonpayment of rent is void as against public policy as it deprives tenants of their right to interpose a breach of warranty of habitability claim. Windy Acres Farm, Inc., supra, 40 Misc 3d at 64-65, Reinozo v. Eskander, 2017 N.Y.L.J. LEXIS 2151, *4 (Civ. Ct. Queens Co.);

A landlord may not invoke a lease rider forfeiting a rent credit on nonpayment where the tenant has asserted a good-faith claim of breach of the warranty of habitability. 1461 Amsterdam Ave. LLC v. Carrasquillo, 2015 NY Slip Op. 30831(U), 3 (Civ. Ct. NY Co.);

A landlord may not maintain a holdover eviction proceeding on no alleged cause against an unregulated tenant in retaliation for the tenant withholding the rent to enforce the tenant’s “rights under the warranty of habitability….” Barr v. Huggins, 41 Misc 3d 605, 613 (Civ. Ct. Bronx Co. 2013).

A late fee clause in a lease does not per se offend public policy, and may give rise to a cause of action for a money judgment in a summary proceeding, Brusco v. Miller, 167 Misc 2d 54, 55-56 (App. Term 1st Dept. 1995), as Petitioner seeks herein. However, as applied in this matter, the late fee would penalize Respondents as Respondents withheld rent over repairs. Petitioner’s application of the late fees to these particular facts would therefore impermissibly modify the warranty of habitability just as readily as a conditional limitation or a lease rider forfeiting a rent credit would. Accordingly, the Court finds that the late fee clause, as applied herein, is unenforceable as a matter of public policy.

A separate ground for rendering purported late fees unenforceable is that 5 percent per month, or 60 percent per year, amounts to an excessive and usurious charge. Cleo Realty Assocs., L.P. v. Papagiannakis, 151 AD3d 418, 419 (1st Dept. 2017).

Finally, although Petitioner charged a monthly rent at a so-called “holdover rate” after the expiration of Respondents’ most recent lease and before Respondents vacated, the lease in evidence does not entitle Petitioner to that relief.

Without the late fees and the holdover rate, Respondents do not owe anything to Petitioner. The Court therefore dismisses this proceeding with prejudice."

MAKING A PROPER RENT DEMAND

Although a non-payment is a summary proceeding, the paper work should not be prepared in a summary fashion.

EOM 106-15 217th Corp. v. Severine, NYLY January 23, 2019, Date filed: 2019-01-11 Court: Appellate Term, Second Department, 2nd, 11th & 13th Judicial Districts,  Case Number: 2017-1172QC:

"A proper rent demand is a statutory prerequisite to a nonpayment proceeding (RPAPL 711 [2]) and an element of a landlord’s prima facie case (see Community Hous. Innovations, Inc. v. Franklin, 14 Misc 3d 131[A], 2007 NY Slip Op 50050[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2007]). A rent notice must “set forth the approximate good faith amount of rent owed” (Dendy v. McAlpine, 27 Misc 3d 138[A], 2010 NY Slip Op 50890[U], *2 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]; see 542 Holding Corp. v. Prince Fashions, Inc., 46 AD3d 309, 311 [2007]) and “fairly apprise the tenant of the periods for which rent is allegedly due and in what amounts” (Pantigo Professional Ctr., LLC v. Stankevich, 60 Misc 3d 133[A], 2018 NY Slip Op 51039[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2018]; see 10 Midwood LLC v. Hyacinth, 2003 NY Slip Op 50789[U], *1 [App Term, 2d Dept, 2d & 11th Jud Dists 2003]). Moreover, it is well settled that, in asserting the amount of rent owed for each period, a landlord must apply the payments that it accepted to the months for which they were earmarked (see Greenbrier Garden Apts. v. Eustache, 50 Misc 3d 142[A], 2016 NY Slip Op 50210[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2016]; 270 E. 95 Props., LLC v. Kent, 49 Misc 3d at 35; 134-38 Maple St. Realty Corp. v. Medina, 3 Misc 3d 134[A], 2004 NY Slip Op 50469[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2004]; L&T E. 22 Realty Co. v. Earle, 192 Misc 2d 75, 76-77 [App Term, 2d Dept, 2d & 11th Jud Dists 2002]).

Here, the predicate rent notice, which sought rent arrears for May 2016 through September 2016, did not satisfy these requirements. While landlord admittedly had received the payments that were earmarked for May and June 2016, it failed to apply those payments to the respective periods for which they had been intended. Furthermore, landlord-although having admittedly received the payment earmarked for September 2016 rent approximately three days before the rent notice was created and 14 days before the notice was served-omitted this payment from the rent notice. In light of the magnitude of the inaccuracies in the amounts sought in the rent notice, we find that tenant may have been prejudiced in his ability to respond to the demand, formulate defenses, and avoid litigation or eviction (see Inland Diversfied Real Estate Serv., LLC v. Keiko NY, Inc., 51 Misc 3d 139[A], 2016 NY Slip Op 50613[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2016]; cf. 10 Midwood LLC v. Hyacinth, 2003 NY Slip Op 50789[U], at *1). Given that the rent notice was defective and that it cannot be amended (see Chinatown Apts. v. Chu Cho Lam, 51 NY2d 786, 787[1980]; 125 Ct. St., LLC v. Sher, 58 Misc 3d 150[A], 2018 NY Slip Op 50092[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2018]), the Civil Court properly granted the motion to dismiss the petition."

AND MORE ON ILLEGAL APARTMENTS

This was decided on July 12, 2018 - Hayes v. Ramsey, 2018 NY Slip Op 51114 - NY: Appellate Term, 2nd Dept. 2018:

"Insofar as is relevant to this appeal, plaintiff commenced this small claims action to recover, among other things, the sum of $300, representing her security deposit, and $1,200, representing eight weeks of rent which she had paid to defendant for the time in which she had lived in the apartment. Defendant counterclaimed to recover the total sum of $2,680, representing alleged rent arrears and cable bills, but, at trial, she stated that she was withdrawing her counterclaim. Following a nonjury trial, the District Court awarded plaintiff the principal sum of $1,500 and dismissed defendant's counterclaim.

In a small claims action, our review is limited to a determination of whether "substantial justice has . . . been done between the parties according to the rules and principles of substantive law" (UDCA 1807; see UDCA 1804; Ross v Friedman, 269 AD2d 584 [2000]; Williams v Roper, 269 AD2d 125, 126 [2000]). The determination of a trier of fact as to issues of credibility is given substantial deference, as a trial court's opportunity to observe and evaluate the testimony and demeanor of the witnesses affords it a better perspective from which to assess their credibility (see Vizzari v State of New York, 184 AD2d 564 [1992]; Kincade v Kincade, 178 AD2d 510, 511 [1991]). This deference applies with greater force to judgments rendered in the Small Claims Part of the court (see Williams v Roper, 269 AD2d at 126).

A security deposit is presumed to remain the property of the tenant (see General Obligations Law § 7-103 [1]) and must be returned at the conclusion of the tenancy (see Cruz v Diamond, 6 Misc 3d 134[A], 2005 NY Slip Op 50187[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2005]). However, at the trial, plaintiff gave her current address as the premises which she rented from defendant. Consequently, it was error for the District Court to include the $300 security deposit in its award in favor of plaintiff, as plaintiff failed to establish that her tenancy had ended.

The District Court also erred when it included in its award to plaintiff the sum of $1,200, apparently representing eight weeks of rent. The fact that an apartment is rented without a permit does not preclude the recovery of rent, absent a statutory bar to such recovery (see Madden v Juillet, 46 Misc 3d 146[A], 2015 NY Slip Op 50214[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2015]; Sinclair v Ramnarace, 36 Misc 3d 150[A], 2012 NY Slip Op 51671[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2012]; Corbin v Briley, 192 Misc 2d 503, 504 [App Term, 2d Dept, 9th & 10th Jud Dists 2002]). We note that, even where there is a statutory proscription against the recovery of rent by a landlord (see e.g. Multiple Dwelling Law § 325 [2]), rent that was voluntarily paid is not recoverable by a tenant, despite the premises' illegal status (see Candela v Fried, 3 Misc 3d 136[A], 2004 NY Slip Op 50508[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2004] [rents voluntarily paid for period of noncompliance cannot be recovered]; see also Ovalles v Mayer Garage Corp., 8 Misc 3d 137[A], 2005 NY Slip Op 51261[U], *1 [App Term, 1st Dept, 2005] [a tenant cannot "recoup rents already paid"]).

Defendant's contention on appeal that the District Court should have found in her favor on her counterclaim lacks merit as, at trial, she stated that she was withdrawing her counterclaim.
In view of the foregoing, we are of the opinion that the judgment failed to provide the parties with substantial justice according to the rules and principles of substantive law (see UDCA 1804, 1807; Ross v Friedman, 269 AD2d 584; Williams v Roper, 269 AD2d 125, 126)."

ILLEGAL APARTMENTS IN NON-MULTIPLE DWELLINGS

In this case, the Multiple Dwelling Law did not apply yet the apartment lacked a certificate of occupancy. Madden v. Juillet, 2015 NY Slip Op 50214 - NY: Appellate Term, 2nd Dept. 2015:

"In this small claims action, Margaret A. Madden (plaintiff) appeals, on the ground of inadequacy, from a judgment of the District Court, which, after a nonjury trial, awarded her the principal sum of $875 against defendant, the former tenant of the lower level of plaintiff's house, but failed to award plaintiff $1,200 that she had sought for the attorney's fees she had allegedly incurred in bringing a prior nonpayment proceeding against defendant. Defendant cross-appeals from the judgment, arguing that she does not owe the $800 which was awarded to plaintiff for April 2012 rent because the premises was an illegal basement apartment and because plaintiff breached the warranty of habitability.

In our view, the District Court properly declined to award plaintiff the attorney's fees she sought, as plaintiff failed to prove that she had paid the fees. In any event, in view of the mixed outcome of the prior nonpayment proceeding—plaintiff had sued defendant for $2,400 and had been awarded only $800—it cannot be said that plaintiff was the prevailing party in that proceeding (see e.g. Mosesson v 288/98 W. End Terrace Corp., 294 AD2d 283 [2002]).

Contrary to defendant's contention, the absence of a certificate of occupancy for the lower-level apartment does not bar the recovery of rent (see Sinclair v Ramnarace, 36 Misc 3d 150[A], 2012 NY Slip Op 51671[U] [App Term, 9th & 10th Jud Dists 2012]; Pickering v Chappe, 29 Misc 3d 6 [App Term, 2d, 11th & 13th Jud Dists 2010]; Schweighofer v Straub, 23 Misc 3d 132[A], 2009 NY Slip Op 50730[U] [App Term, 9th & 10th Jud Dists 2009]; Corbin v Briley, 192 Misc 2d 503 [App Term, 9th & 10th Jud Dists 2002]; Tuzel v Reilert, NYLJ, Dec. 3, 1996 [App Term, 9th & 10th Jud Dists])."

NOTE: This was an appeal from a plenary action and not a special proceeding landlord/tenant action.

CAN A LANDLORD EXEMPT RENT REGULATION COVERAGE BY CONVERSION OF UNITS

U 31st ST., LLC v. Montalvo, 2017 NY Slip Op 51435 - NY: Appellate Term, 1st Dept. 2017:

"Landlord's possessory claim, based on allegations that tenant's unregulated lease agreement expired by its terms, is not susceptible to summary disposition. The record presents triable issues of fact as to whether the building in which tenant's apartment was located had at least six residential units on July 1, 1974, or thereafter, and, thus, was subject to rent stabilization (see Rent Stabilization Law [Administrative Code of City of NY] § 26-504[a]; Rent Stabilization Code [9 NYCRR] § 2520.11[d]; Matter of Loventhal Mgt. v New York State Div. of Hous. & Community Renewal, 183 AD2d 415 [1992];see generally Sharabi v Morales, 23 AD3d 544 [2005]).

Pertinent records on file with City agencies, including a 1926 certificate of occupancy and "I-Cards," show that the subject building consisted of six residential units. While landlord and the motion court relied heavily upon a "Maximum Base Rent Building Profile and Owner's Order," issued by the Office of Rent Control, indicating that the building contained five residential units as of January 1, 1972, we do not view this document as dispositive as a matter of law, especially given that an amended certificate of occupancy showing less than six residential units was not issued until 1982 and no alteration permit was filed prior to 1980. Thus, it is unclear if the reduction from six units to five, which occurred at some undetermined time between 1926 and 1972, was the result of a legal conversion (see Matter of Loventhal Mgt. v New York State Div. of Hous. & Community Renewal, 183 AD2d at 415 [illegal renovation cannot be used by landlord as a basis to exempt the premises from coverage under the Rent Stabilization Law]). In the circumstances, the issue of whether the building contained six residential units on or after July 1, 1974, must be resolved at trial."

WHEN LANDLORD DOES NOT GIVE A WRITTEN RENT RECEIPT

NY Real Prop L § 235-e imposes a duty  upon a landlord to provide tenant with a written receipt when a personal check is not used for payment:

"(a) Upon the receipt of rent for residential premises in the form of cash or any instrument other than the personal check of the tenant, it shall be the duty of the landlord to provide the payor with a written receipt containing the following:

1. The date;
2. The amount;
3. The identity of the premises and period for which paid; and
4. The signature and title of the person receiving the rent."

But what if a landlord fails or refuses to give a written receipt. The statute provides no penalty and this was addressed in Robinson v. Robles, 28 Misc. 3d 868 - NY: City Court 2010:

"The Attorney General considered the absence of "a specific penalty for a landlord's breach of the created duty" in the statute to be a defect, but urged that the problem be remedied later.[18] Unfortunately, after the passage of almost 30 years and two amendments expanding the scope of Real Property Law § 235-e,[19] we are still without statutory sanctions for a landlord's failure to provide a written receipt.[20] During that time, this statutory vacuum has been filled by court decisions imposing various judicial remedies.[21]

One court has held that failure to comply with the statute "may be considered in weighing the testimony of the landlord... and where the landlord has clearly violated Real Property Law § 235-e, the doubt should be resolved in favor of the tenant."[22] Another found that "where the only evidence before the court is the contradictory statements given under oath by the respective parties, and where the landlord has clearly violated section 235-e of the Real Property Law, the doubt should be resolved in favor of the tenant."[23] A third judge has ruled that a "rebuttable presumption in favor of the tenant as to payment of rent is an appropriate judicial response to a violation of Real Property Law Section 235-e by the landlord."[24] One judge awarded back rent finding there had been substantial compliance with the statute as the landlord gave the tenant monthly statements and the tenant did not deny owing rent or contradict the landlord's testimony.[25] Although none of these remedies have yet to be considered by an appellate court, the issue was recently briefed before the Appellate Division, First Department. The court seems to have implicitly acknowledged the statutory violation while the judges found it unnecessary to consider any remedy for the landlord's "misconduct"[26] due to the tenant's conflicting testimony.

........

The legislature should finally provide for a statutory remedy and insure consistency in application of its provisions statewide by establishing a six-month statute of limitations on actions for past-due rent in cases where the landlord has failed to provide appropriate written rent receipts[38] by adding the following language to Real Property Law § 235-e: "(c) Any action for residential rent under this or any other provision of law wherein the landlord has failed to provide the written receipts required above must be commenced within six months of the alleged default." This amendment would serve as an incentive to provide such proof of payment since landlords who fully comply with Real Property Law § 235-e would be able to avail themselves of the full six-year statute of limitations.[39]"

COMMERCIAL LEASE ACCELERATION CLAUSE

172 VAN DUZER v. GLOBE ALUMNI, 24 NY 3d 528 - NY: Court of Appeals 2014:

"To the extent defendants suggest that a landowner should be subject to a duty to mitigate, we previously rejected this argument in Holy Props. v Cole Prods. (87 NY2d 130 [1995]). In that case the Court stated that once a tenant abandons the property prior to expiration of the lease, a "landlord [is] within its rights under New York law to do nothing and collect the full rent due under the lease" (id. at 134, citing Becar v Flues, 64 NY 518 [1876], Underhill v Collins, 132 NY 269 [1892], and Matter of Hevenor, 144 NY 271 [1895]). The Court adhered to this established approach, and stated that parties in business transactions depend on the certainty of settled rules, "in real property more than any other area of the law, where established precedents are not lightly to be set aside" (Holy Props., 87 NY2d at 134). We see no reason to reverse course in defendants' case, in particular where, as in Holy Props., the parties here freely agreed to bind defendants to pay rent after termination of the landlord-tenant relationship (id. at 134, citing International Publs. v Matchabelli, 260 NY 451, 454 [1933], Mann v Munch Brewery, 225 NY 189, 194 [1919], and Hall v Gould, 13 NY 127, 133-134 [1855]).

Defendants argue, in the alternative, that the liquidated damages as future rent provided for under the acceleration clause are grossly disproportionate to Van Duzer's actual losses, and therefore constitute an unenforceable penalty. Defendants are correct that an acceleration clause is subject to judicial scrutiny based on a challenge that it is nothing more than a means by which to exact a penalty otherwise proscribed by the law.

As a general matter parties are free to agree to a liquidated damages clause "provided that the clause is neither unconscionable nor contrary to public policy" (Truck Rent-A-Ctr. v Puritan Farms 2nd, 41 NY2d 420, 424 [1977], citing Mosler Safe Co. v Maiden Lane Safe Deposit Co., 199 NY 479, 485 [1910]). Liquidated damages that constitute a penalty, however, violate public policy, and are unenforceable (Truck Rent-A-Ctr., 41 NY2d at 424, citing City of Rye v Public Serv. Mut. Ins. Co., 34 NY2d 470, 472-473 [1974]). A provision which requires damages "grossly disproportionate to the amount of actual damages provides for [a] penalty and is unenforceable" (Truck Rent-A-Ctr., 41 NY2d at 424).
Whether a provision in an agreement is "an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances" (JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 379 [2005], citing Mosler Safe Co., 199 NY at 485; Leasing Serv. Corp. v Justice, 673 F2d 70, 74 [2d Cir 1982]). "The burden is on the party seeking to avoid liquidated damages . . . to show that the stated liquidated damages are, in fact, a penalty" (JMD Holding Corp., 4 NY3d at 380, citing P. J. Carlin Constr. Co. v City of New York, 59 AD2d 847 [1st Dept 1977]; Wechsler v Hunt Health Sys., Ltd., 330 F Supp 2d 383, 413 [SD NY 2004]). Where a party establishes a penalty, the proper recovery is the amount of actual damages established by the party (JMD Holding Corp., 4 NY3d at 380 ["`If the (liquidated damages) clause is rejected as being a penalty, the recovery is limited to actual damages proven'"], quoting Brecher v Laikin, 430 F Supp 103, 106 [SD NY 1977]).

Defendants claim that because the acceleration clause permits Van Duzer to hold possession and immediately collect all rent due, the damages are grossly disproportionate to the landowner's actual damages. They contend this is a windfall that allows Van Duzer to double dip—get the full rent now and hold the property. On its face this argument is compelling because arguably the ability to obtain all future rent due in one lump sum, undiscounted to present-day value, and also enjoy uninterrupted possession of the property provides the landowner with more than the compensation attendant to the losses flowing from the breach—even though such compensation is the recognized purpose of a liquidated damages provision (Truck Rent-A-Ctr., 41 NY2d at 423; see JMD Holding Corp., 4 NY3d at 382; Benderson v Poss, 142 AD2d 937, 938 [4th Dept 1988]; Gotlieb v Taco Bell Corp., 871 F Supp 147, 155 [ED NY 1994]). Although the acceleration clause in Fifty States was held enforceable, that case is distinguishable from the instant case because there the landlord did not get to keep the property."