NY - LANDLORD CAN'T COLLECT RENT IN SMALL CLAIMS COURT WITH ILLEGAL APARTMENT

Here I am assuming there was a prior summary proceeding in L&T Court, the landlord wanted the premises and entered into a stipulation for immediate surrender and hoped to collect rent in a plenary action.

NELSON-TAYLOR v. Brooks, 2025 NY Slip Op 50314 - NY: City Court, Queens Civil Court 2025:

"A small claims trial was conducted wherein the claimant landlord seeks rent owed in the amount of $9,375. There is really no dispute the defendants, tenants in a two-family dwelling, owe the rent sought. The defendants argue they are not required to pay the rent since the dwelling contained an illegal basement apartment which suspended the landlord's right to collect rent from any tenant. The landlord disputed that any illegal residence existed in the basement. The court heard testimony and has reviewed that testimony as well as all the evidence submitted.

On December 1, 2007 the parties entered into a one year lease for a unit located at 246-11 Memphis Avenue in Rosedale, New York. In September 2019 the tenants stopped paying rent and the landlord commenced a landlord-tenant action. The parties entered into a stipulation on February 3, 2020 and the defendants agreed to vacate the premises. The rental arrears, the subject of this action, were severed pursuant to the stipulation agreement. As noted, the defendants argue they cannot be required to pay any rent since the existence of an illegal apartment rendered the premises subject to the Multiple Dwelling Law. This designation required the landlord to obtain a new certificate of occupancy to conform to the change of use within the premises. Without such certificate of occupancy they assert they do not have to pay any rent. The claimant asserts the basement was not used as an additional dwelling and there is no basis for the defendants to withhold rent that is owed.

Conclusions of Law

A review of all the evidence demonstrates the defendants sufficiently established the basement apartment was used as an additional dwelling. The defendants presented testimony as well as supporting documentation in the form of photographs and documents that establish another individual resided in the basement. Thus, the defendants satisfied their burden regarding their defense of nonpayment of rent. However, that does not end the inquiry. The next question that must be addressed is whether an illegal apartment suspends the payment of rent by every tenant of the premises.

Multiple Dwelling Law §301(1) states that no multiple dwelling may be occupied without a valid certificate of occupancy. Further, Multiple Dwelling Law §302(1)(a) and (b) states that if a dwelling is occupied in whole or in part without a certificate of occupancy then "no rent shall be recovered by the owner of such premises for said period" (id). Therefore, if a building does not maintain a valid certificate of occupancy then no rent may be collected from any unit (Caldwell v. American Package Company Inc., 57 AD3d 15, 866 NYS2d 275 [2d Dept., 2008]). However, there is a disagreement whether rent can be collected from a legal apartment in a building that also maintained illegal units for which no certificate of occupancy existed. For example, in De La Cruz v. Miller, 2023 WL 5351006 [Supreme Court Kings County 2023] the court noted that "although the lack of a proper certificate of occupancy for a rent-controlled apartment precludes a landlord from recovering rent or use and occupancy for that apartment, it does not preclude a landlord from recovering rent or use and occupancy for apartments unaffected by the certificate of occupancy violations" (id). Again, in Santiago v. Perez, 1992 NYLJ LEXIS 8800 [Civil Court Queens County 1992] the court held that tenants of a legal unit could not avoid paying rent merely because an illegal unit existed if the tenants of the lawful unit were unaffected by the illegal possession. The court concluded it would be "inequitable" and akin to unjust enrichment to permit the tenants of a lawful unit to avoid rent merely because an apartment unit in the building was illegal. Recently, in Taubes v. Yorkshire House Associates LLC, 2024 WL 1117155 [Supreme Court New York County 2024] the court again held that the tenant of a lawful apartment was required to pay rent where that apartment was unaffected by any certificate of occupancy violations in other portions of the building (see, also, Chan v. Kormendi, 118 Misc 2d 1026, 462 NYS2d 943 [Civil Court Queens County 1983] finding that prohibiting a landlord from receiving rent from a legal apartment because an illegal basements exists is "inequitable" and "grossly injurious" and that "the penalty or sanction should fit the crime" [id]).

There are cases, indeed, the majority of cases, that hold the exact opposite, namely the failure to maintain a valid certificate of occupancy exempts every tenant from paying rent. Thus, in West 47th Holdings LLC v. Eliyahu, 64 Misc 3d 133(A), 116 NYS3d 843 [Supreme Court Appellate Term First Department 2019]) the landlord subdivided two apartments into four units which required a new certificate of occupancy. The court held that without that new certificate, any occupancy was in violation of Multiple Dwelling Law §301 and consequently no action for the nonpayment of rent was permissible. The court concluded this was true "even if tenant's apartment was not one of the newly created apartments" (id). Again, in 936 TYH RM Bronx LLC v. Brujan, 2022 WL 15524927 [Civil Court Bronx County 2022] an illegal unit existed in the cellar of the premises. The court held that no rent could be collected rent from any tenant "even if the tenant's unit is not the illegal unit" (id, see, also, 1165 Fulton Ave HDFC v. Goings, 65 Misc 3d 1210(A), 119 NYS3d 9 [Civil Court New York County 2019], GMT 3435 Realty LLC v. Hyman, 83 Misc 3d 1287(A), 216 NYS3d 508 [Civil Court Bronx County 2024], GVS Properties LLC v. Vargas, 59 Misc 3d 128(A), 100 NYS3d 609 [Appellate Term First Department 2018], 208 Nimrod Street LLC v. Irizarry, 42 Misc 3d 145(A), 988 NYS2d 526 [Appellate Division Second Department 2014], Kaloedas v. Garcia, 76 Misc 3d 482, 174 NYS3d 194 [City Court Yonkers 2022], 28 Poplar LLC v. Matos, 2023 NYLJ LEXIS 2023 [City Court Yonkers 2023] both interpreting identically worded Multiple Residence Law §302-a).

Considering these conflicting results a review of the statutory definitions that govern these facts will prove helpful. Pursuant to MDL §4(7) a multiple dwelling is defined as "a dwelling that is either rented, leased, let or hired out, to be occupied, or is occupied as the residence or home of three or more families living independently of each other" (id). Where the owner of a legal two-family dwelling converts a basement to a residential unit then the building is classified as a de facto multiple dwelling. Further, "an owner of a de facto multiple dwelling who fails to obtain a proper certificate of occupancy or comply with the registration requirements of the Multiple Dwelling Law cannot recover rent or use and occupancy" (Malden v. Wykoff S.P. LLC, 192 AD3d 1002, 146 NYS3d 143 [2d Dept., 2021], see, also, Shiela Properties Inc., v. A Real Good Plumber Inc., 59 AD3d 424, 874 NYS2d 145 [2d Dept., 2009]). A strained reading of those cases supports the argument that only the tenant of the illegally converted unit need not pay rent but the other tenants must, in fact, pay rent. The natural reading of those cases supports the tenant's argument that no tenant must pay rent if any unit does not conform to the certificate of occupancy. Moreover, Multiple Dwelling Law §301(1) and §302(1)(a) and (b) states that "no rent shall be recovered" for any "dwelling or structure" that is "occupied in whole or in part" without a certificate that "said dwelling conforms in all respects" to the Multiple Dwelling Law (id). That language further supports the assertion that no rent can be collected, even from units that are legal, if some illegality renders the certificate of occupancy invalid in any respect. Concerning arguments this result is unfair or unjust (Chan v. Kormendi, supra) or can perhaps be manipulated by an unscrupulous tenant of a legal apartment to avoid paying rent by facilitating the existence of an illegal apartment (see, The Barring of rent in the Absence of a Certificate of Occupancy-A Rule Still in Much Need of Clarification, by Nativ Winiarsky, New York Law Journal, September 6, 2023) such arguments must properly be raised to the Legislature (see, Chazon LLC v. Maugenest, 19 NY3d 410, 948 NYS3d 571 [2012]). This court cannot ignore the plain reading of the statutes and cases that have followed such plain readings in favor of cases, however reasonable from policy perspectives, that do not adhere to such plain readings of the statutes. This court is bound to conclude that since the dwelling in this case was a de facto multiple dwelling no tenant was required to pay rent. Therefore, the request for rent is consequently denied. Lastly, any request for attorney fees is denied."

FOR THIS HEALTH CRISIS - SMALL BUSINESSES HAVE RENT ISSUES

               If you are a small business owner, this health crisis and the shutdowns makes rent payments an issue. And many small businesses ask about the force majeure clause.

               Force majeure means "superior force" and can be a clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, plague, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure.

               For example, here is one force majeure clause I consulted on regarding an event contract:

“Neither Event Producer nor Organization shall be held liable or responsible if the failure to perform the services described herein arises out of causes beyond the control and without the fault or negligence of either Event Producer or Organization. Such causes may include but are not restricted to Acts of God or the public enemy, unlawful acts, acts of the city in either its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes. freight embargoes and unusually severe weather; but in every case the failure to perform must be beyond the control and without the fault or negligence of Event Producer or Organization. Force Majeure specifically excludes both financial inability to perform and economic conditions, and does not excuse an obligation to make any of the payments specified hereunder”

Certainly, the coronavirus would apply here as an epidemic or quarantine restriction. Such a clause is typical in event contracts. But let us deal with the issue at hand. You have a small business that is either severely curtailed or shut down due to the Governor’s orders. No income and the rent is due.

               Not all leases contain a force majeure clause. For example, The Association of the Bar of the City of the City of New York, Committee on Real Property Law, Model New York City Retail Lease does not contain such a clause. Instead, section 23.3 provides:

Neither Landlord nor Landlord’s managing agent, if any, shall be liable for any injury, damage or loss to Tenant, Tenant’s Property, Tenant’s Work, Tenant’s business or to any other person or property resulting from any cause, except to the extent caused by the negligence or willful misconduct of Landlord, Landlord’s managing agent, if any, or their respective employees, agents or contractors, subject to Section 13.4. 

And section 23.8 of the model form provides:

Tenant’s obligations shall not be waived, delayed or otherwise affected in any manner, and Landlord shall have no liability, if Landlord is unable to comply with, or is delayed in complying with, any of Landlord’s obligations under this lease by reason of any strike, labor trouble, accident, war, government action, Laws or other cause beyond Landlord’s control.

               But some leases do contain a force majeure clause. Commercial landlords and tenants should closely review their lease documents to determine (1) whether, and to what extent, the COVID-19 events, declarations and restrictions qualify as a force majeure performance excuse under the applicable lease, and (2) any applicable requirements for providing notice of nonperformance under that lease.

               The question I am being asked by both landlords and tenants is whether the force majeure provisions will excuse the timely payment of rent. Recently, in the NYLJ article, “Analyzing Force Majeure Clauses in Light of the Coronavirus Outbreak”, Justin T. Kelton.  NYLJ March 19, 2020, the author noted:

““Generally, a force majeure event is an event beyond the control of the parties that prevents performance under a contract and may excuse nonperformance.” Beardslee v. Inflection Energy, 25 N.Y.3d 150, 154 (2015) (citation omitted). Force majeure clauses excuse non-performance where the reasonable expectations of the parties have been frustrated due to circumstances beyond their control. See Kel Kim v. Cent. Mkts., 70 N.Y.2d 900, 902, (1987); United Equities v. First Natl. City Bank, 52 A.D.2d 154, 157 (1976), affd. 41 N.Y.2d 1032 (1977). Under New York law, force majeure clauses are “to be narrowly construed.” Reade v. Stoneybrook Realty, 63 A.D.3d 433, 434 (1st Dept. 2009).

Moreover, New York courts impose a significant hurdle on a party seeking to assert a defense of force majeure: “only if the force majeure clause specifically includes the event that actually prevents a party’s performance will that party be excused.” Reade, 63 A.D.3d at 434 (citing Kel Kim Corp. 70 N.Y.2d at 902-903). Where the parties to a written agreement do not include a force majeure clause, there is no basis for such a defense. See General Electric Company v. Metals Resources Group Ltd., 293 A.D.2d 417 (1st Dept. 2002) (“The force majeure doctrine is no more helpful to defendant. The parties integrated agreement contained no force majeure provision, much less one specifying the occurrence that defendant would now have treated as a force majeure, and, accordingly, there is no basis for a force majeure defense.”).

As is the case with all contractual provisions, New York courts interpreting a force majeure clause seek to effectuate the parties’ intent. “[W]hen the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.” Route 6 Outparcels v. Ruby Tuesday, 88 A.D.3d 1224, 1225 (3d Dept. 2011). Therefore, courts interpreting a force majeure provision seek to determine, inter alia, the intended breadth and scope, and whether the clause was designed to protect one party, or both. Id. (finding that clause was “expansive in scope” and “affords protection to both plaintiff and defendant”).”

               The most recent Court of Appeals case involving a lease was Beardslee v. INFLECTION, LLC, 25 NY 3d 150 - NY: Court of Appeals 2015, but the court was deciding the obligations under an oil and gas lease. The court first noted that the Force Majeure clause had to be construed in accordance with regular contract principles:

“Under New York contract jurisprudence, the intent of the parties controls and if an agreement is "complete, clear and unambiguous on its face[,] [it] must be enforced according to the plain meaning of its terms" (Greenfield v Philles Records, 98 NY2d 562, 569 [2002]). As this Court has indicated on numerous occasions, "[c]ourts may not `by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing'" (Riverside S. Planning Corp. v CRP/ Extell Riverside, L.P., 13 NY3d 398, 404 [2009], quoting Reiss v Financial Performance Corp., 97 NY2d 195, 199 [2001]). Moreover, the analysis should take into account that oil and gas leases "stand on an entirely different basis from any other leasehold agreements" (Conkling v Krandusky, 127 App Div 761, 766 [4th Dept 1908], citing Eaton v Allegany Gas Co. [Ltd.], 122 NY 416 [1890]). Such leases are "made in the context of a highly technical industry, which employs distinct terminology used by those in the business" (Wiser, 803 F Supp 2d at 117). For these reasons, an agreement for the production of oil and gas must be construed with reference to both the intention of the parties and the known practices within the industry (see generally 3 Howard R. Williams & Charles J. Meyers, Oil and Gas Law §§ 601, 603, 605 [2003 ed]; 1, 2 W.L. Summers, The Law of Oil and Gas, chs 7, 10, 11 [Perm ed 1959]).”

(emphasis supplied)

               In this case, the court was construing the effect of the leases term clause, also known as a habendum clause, which establishes the primary and definite period during which the energy companies may exercise the drilling rights granted by the leases. The energy company tenant argued that the term was extended under the force majeure clause because of the governor’s executive order delaying fracking permits. What is noteworthy is:

               1. The court did not address the question of whether the State's Moratorium amounted to a force majeure event.

               2. The court did hold that under any force majeure event, the force majeure clause did not modify the habendum clause and extend the primary terms of the lease:

“The habendum clause in the leases does not incorporate the force majeure clause by reference or contain any language expressly subjecting it to other lease terms (see Wiser, 803 F Supp 2d at 121 ["where . . . the language of the habendum clause clearly makes that provision `subject to' other provisions in the agreement. . . the life of the lease may be subject to modification"]; see also Sun Operating Ltd. Partnership v Holt, 984 SW2d 277, 286 [Tex App 1998]). Moreover, the language in the force majeure clause stating that "the time of such delay or interruption shall not be counted against Lessee" does not refer to the habendum clause with specificity. Thus, the habendum clause is not expressly modified or enlarged by the force majeure clause.”

In fact, the court stated:

“Our holding is consistent with out-of-state "oil" jurisdictions, in which courts, applying similar contract principles, have held that language identical or similar to the force majeure clause at issue here cannot extend the primary term set forth in the habendum clause (see Gulf Oil Corp. v Southland Royalty Co., 496 SW2d 547, 552 [Tex 1973]; see also San Mateo Community Coll. Dist. v Half Moon Bay Ltd. Partnership, 65 Cal App 4th 401, 412, 76 Cal Rptr 2d 287, 293 [1998]; Natural Gas Pipeline Co. of Am. v Zimmer, 447 F Supp 66, 70 [ND Tex 1977], affd 576 F2d 106 [5th Cir 1978]; cf. Sun Operating Ltd. Partnership v Holt, 984 SW2d 277, 282-283 [Tex App 1998]). And, as observed by our sister courts, had the energy companies intended for the habendum clause to be subject to other provisions of the contract, they could have expressly so indicated (see Kirker v Shell Oil Co., 104 Cal App 2d 497, 503, 231 P2d 905, 909 [1951]).”

            So, it appears that the mere presence of a force majeure clause does guarantee an excuse of performance – it is a question of contract interpretation utilizing the regular rules of contract interpretation such as (1)  unambiguous provisions of a contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous and (2) whether an agreement is ambiguous presents a question of law for the Court and ambiguity exists when specific language in the contract is susceptible of two reasonable interpretations. Other arguments that attorneys have discussed include contract principles of impracticality of performance, frustration of purpose as well as unconscionability. Thus the small business owner may have these questions:

               1. Question: Should a tenant be aggressive and start an action on the issue of rent?  A commercial lease was involved in LIDC I, LLC v. SUNRISE MALL, 46 Misc. 3d 885 - NY: Supreme Court 2014. The tenant sought to Yellowstone[1] the landlord’s default notice for non-payment stemming from delays in construction of three restaurants plaintiffs planned to open in defendant's shopping center as a result of the Town’s stop work order. The injunction was denied. The court stated that it found that “the Town's actions were sufficient to invoke the force-majeure clause as a result of governmental action…However, it also finds that rent is excepted under the leases' force-majeure clause, and nonpayment of rent is the stated default “ Thus, the court held that the tenant “have no operating businesses generating income, and have not pointed to any other independent source of funds, or that access to sufficient funds to cure the rent default is imminent. The court accordingly finds that they have failed to satisfy that prong of the required showings for a Yellowstone injunction that they are prepared and have the ability to cure the rent default. (Definitions Personal Fitness, Inc. v 133 E. 58th St. LLC.) The application for such an injunction is therefore denied.”

               2. Question: Should a tenant be wait until a non-payment is proceeding?  There is a moratorium on evictions that for now extends to mid-June. And under the June 2019 Act, commercial tenants may have the benefits of the new provisions regarding notice and payment up to judgment. But see 41 E. 11th ST., LLC v. WSIP REALTY CORP., 2020 NY Slip Op 20017 - NY: City Court, Civil Court 2020:

“Certainly there are provisions of the act that implicate both residential and commercial tenancies (see eg RPAPL § 711(2) which changed rent demand from five days to 14 days), however, there is no reason for the courts to widen the scope of this specific provision aimed at residential tenancies to commercial tenancies that involve sophisticated parties in business transactions. The reluctance of courts to assert themselves in such transactions was recently reaffirmed by the Court of Appeals when the court declined to rule a provision in a commercial lease waiving the right to a declaratory judgment as unenforceable. The court held

"In keeping with New York's status as the preeminent commercial center in the United States, if not the world, our courts have long deemed the enforcement of commercial contracts according to the terms adopted by the parties to be a pillar of the common law. Thus, "[f]reedom of contract prevails in an arm's length transaction between sophisticated parties. . ., and in the absence of countervailing public policy concerns there is no reason to relieve them of the consequences of their bargain" (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 695 [1995])."

159 MP Corp. v. Redbridge Bedford, LLC, 33 NY3d 353, 359, reargument denied, 33 NY3d 1136 (2019). The court concluded that "(e)ntities like those party to this appeal are well-situated to manage their affairs during negotiations, and to conclude otherwise would patronize sophisticated parties and destabilize their contractual relationships...".

Given the fact that RPL § 235-e refers specifically to residential tenancies and not to commercial tenancies, given the clear intent of the Housing Stability and Tenant Protection Act of 2019 to extend protections to residential tenants and the general policy of this state to allow commercial transactions without undue interference, the court finds that RPL § 235-e(d) is not applicable to commercial tenancies and respondent's first and only affirmative defense is dismissed.”

               3. Question: What do other attorneys recommend? Here are some thoughts and opinions I received that came from various list serves, etc.:

               A.  “1. Do I Have Any Rights To Stop Paying Rent? The truth is, every lease is different. Your lease may have specific provisions for circumstantial deferred rent or rent abatement during times of material business interruption. Many companies have business interruption insurance for this reason, but to date this Coronavirus pandemic is not being covered as such by most insurance carriers. If you do have these provisions in your lease, you should speak to your landlord about exercising these rights.  If you don’t, we would recommend the following.  1. ask your landlord for 3-6 months of rent abatement now that will then be tacked on to the end of your lease. 2 ask your landlord for 3-6 months of rent abatement, with higher rent in the months following so they are made whole over a period of time. 

               2. How Do I Communicate With My Landlord? Do you Help with that? Now is the time to communicate with your landlord. Landlords are humans, too—yes they have to work within their cash flow confines too, but they understand this pandemic as much as anyone else and value communication and cooperation. Step one is to review and understand your current lease and what rights you have within that. Step two is to strategize on how to communicate with your landlord. Step three is to open a dialogue with your Landlord and come to a solution that benefits you now when you need it most. 

               3. Should I talk to an attorney? Do you have a recommendation? Before you plan and communicate with your landlord, you want to make sure you really understand your rights within your lease, and your rights as a tenant given the multiple Executive Orders and policy changes around rent payments and Landlord / Tenant relationships. Many real estate attorneys we have spoken to are happy to do a legal review off the clock at no cost to you in the hope.

                              B. And other suggestions:

“1.          The only possible solution I could think of other than deferring payments would to advise that there is a moratorium on evictions but say that you are serving predicate notice(s) anyway. I think it would be important not to acknowledge that the landlord is holding off out of good will, because that could vitiate the predicate notice. 

2.            In 2008 and 2009, a lot of landlords were working with tenants, so I suspect something similar, but most of that happened within the context of nonpayment proceedings. Giving people rent credits now seems a little premature.  The courts and eviction proceedings might be up and running by May 2020. So if you need to start a case in May just to work out a payment plan, that makes more sense for landlords. A commercial tenant asking for a 3 month concession when restaurants/bars have been closed for a week seems a bit opportunistic to me.  

3.            "Force majeure"

4.            What the tenant offered to your client is very fair.  What I have been telling clients to do (and which I have done with the one property I manage) is to defer the rent until life begins to return to normal and then have a frank discussion with the tenant about extending the lease or allowing the tenant to pay the deferred rent over the balance of the lease term or possibly forgiving it under the right circumstances. From a practical standpoint, it pays the landlord to be accommodating and perhaps build some good will.  For all intents and purposes the landlord would not be able to default of evict the tenant for a longtime so it pays to be nice.“


ADDITION TO ABOVE:

See the dissent in Belgium v. Mateo Prods., Inc., 138 AD 3d 479 - NY: Appellate Div., 1st Dept. 2016:

“KLT moved for summary judgment dismissing plaintiff's breach of contract claim based on the contract's force majeure clause, which it raised as an affirmative defense. The clause states: "If ARTIST is unable to perform in the event of sickness or accident then this will be considered `Force Majure' [sic] by ARTIST and ARTIST shall not be subject to any liability ... Monies will be returned for any nonperformance that is not covered under the scope of force `Force Majure' [sic]."

"The purpose of a force majeure clause is to limit damages in a case where the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond the control of the parties" (United Equities Co. v First Natl. City Bank, 52 AD2d 154, 157 [1st Dept 1976], affd 41 NY2d 1032 [1977]). "[W]hen the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure" (Route 6 Outparcels, LLC v Ruby Tuesday, Inc., 88 AD3d 1224, 1225 [3d Dept 2011] [internal quotation marks omitted]).

On its motion for summary judgment, KLT bore the burden of establishing its force majeure defense (see Latha Rest. Corp. v Tower Ins. Co., 285 AD2d 437 [1st Dept 2001]; see also Phillips Puerto Rico Core, Inc. v Tradax Petroleum Ltd., 782 F2d 314, 319 [2d Cir 1985]). As the majority finds, KLT did not sustain its burden in that it failed to submit any objective evidence to substantiate Akon's self-serving claim that he was unable to perform due to sickness, such as the hospital records of his alleged visit to an emergency room where he claimed he was given antibiotics and painkillers, even though those records were exclusively within the control of Akon and KLT, which is solely owned by Akon.

Nevertheless, the majority finds that plaintiff did not satisfy its burden of proof on its cross motion because it failed to establish that Akon was able to perform or that he was not unable to perform due to sickness. On the record before us, I cannot agree. As shown below, plaintiff's submissions established its prima facie entitlement to summary judgment and Akon failed to produce any objective evidence supporting his force majeure defense, including the aforementioned medical records relating to the alleged treatment of the condition that purportedly rendered him too sick to perform.”


ANOTHER ADDITION:

Some attorneys have suggested some language in current agreements:

One attorney was faced with this clause in a service agreement:

“I hereby, on behalf of myself and ___________________________________________________(“Contractor”) make the following representations and warranties to _______________________________ and the Owner of the Premises: that throughout the duration of any work conducted at the Premises by the Contractor and its subcontractors:

1.            Neither I, nor anyone else to be or hereafter engaged at the Premises thru the Contractor or employed by the Contractor, have been in any of the following countries within the last 14 days:  China, S Korea, Japan, Italy, Iran, and any other country or area of the United States reported by the Centers for Disease Control (https;//ww.cdc.gov/coronavirus/2019-ncov/index.html) as having "widespread sustained" or "sustained community" spread of the coronavirus like New Rochelle.

2.            Neither I, nor anyone else to be engaged at the Premises thru the Contractor or employed by the Contractor, have had close contact with anyone who has been in one of the countries or locations listed above within the last 14 days;

3.            Neither I, nor anyone else to be engaged at the Premises thru the Contractor or employed by the Contractor, have been directed to quarantine, isolate, or self-monitor at home for COVID--19 by any doctor, hospital or health agency;

4.            Neither I, nor anyone else to be engaged at the Premises thru the Contractor or employed by the Contractor, have been diagnosed with or have had close contact with anyone diagnosed with COVID-19, and

5.            Neither I, nor anyone else to be engaged at the Premises thru the Contractor, have or had flu-like symptoms now or within the past 14-days.

Contractor acknowledges and agrees to (i) immediately notify Property Manager of any change in circumstance that should render any of the above representations and warranties untrue or false in any respect during the course of the work conducted by the Contractor at the Premises, and (ii) that Contractor  shall restrict and remove any person  engaged at the Premises thru the Contractor or employed by the Contractor from the Premise who shall cause the Contractor to violate the above representations.”

One attorney has suggested the following for sale of land:

“Seller and Purchaser agree that the Coronavirus (COVID-19) pandemic is impacting real estate transactions, transaction related service providers and consumers. There is a possibility that transaction related service providers such as lenders, title/abstract companies, appraisers, home inspectors and attorneys may be providing limited or no services as a result of COVID-19 issues. COVID-19 issues may include, but are not limited to: emergencies declared by the government, travel restrictions, mandatory closures or reduction of staff at transaction related service providers, quarantine, exposure to or contraction of COVID-19.

If a COVID-19 issue should arise making compliance with the terms of the Contract impossible or improbable as a result of such COVID-19 issue, the Seller and Purchaser agree to the following modifications of the Contract:

1. Seller and Purchaser agree to extend all deadlines in the Contract by ____ Days after the end of the COVID-19 issue (Extension Date). Should the COVID-19 issue continue _____ Days after the closing date set forth in the Contract, Seller and/or Purchaser has the right to terminate the Contract. Such termination must be made in writing to the other party and other individuals/entities requiring notice using the same method(s) of notice as contained in the Contract.

2. OPTIONAL ☐ If checked: Purchaser and Seller agree, notwithstanding that Purchaser may have removed their financing contingency, that if Purchaser is unable to fund their loan and close due to Purchaser’s loss of income from a COVID-19 issue, then Seller and/or Purchaser has the right to terminate the Contract. Such termination must be made in writing to the other party and other individuals/entities requiring notice using the same method(s) of notice as contained in the Contract.

3. In the event that the Contract is terminated under Paragraph 1 or 2, the Deposit shall be returned to the Purchaser.

4. Other: _____________________________________________________________________________________________ ____________________________________________________________________________________________________

All other terms and conditions of the Contract remain in full force and effect. Dated: _______________________________________”

---

[1] The court noted: “A Yellowstone injunction is intended to maintain the status quo so that a commercial tenant, threatened by a termination of its lease, can protect its leasehold investment by obtaining a stay tolling the cure period and avoid a forfeiture of its lease. (Graubard Mollen Horowitz Pomeranz & Shapiro v 600 Third Ave. Assoc., 93 NY2d 508 [1999]; Barsyl Supermarkets, Inc. v Avenue P Assoc., LLC, 86 AD3d 545 [2d Dept 2011].) In order to qualify for the injunction, the tenant must demonstrate that (1) it holds a commercial lease, (2) it received a notice of default, a notice to cure, or a threat of termination of the lease, (3) it made its request for the injunction prior to both termination of the lease and the period to cure, and (4) it is prepared and has the ability to cure the alleged default by any means short of vacating the premises. (Graubard; Barsyl Supermarkets, Inc.; see also Trump on the Ocean, LLC v Ash, 81 AD3d 713 [2d Dept 2011].)

The required showings are less stringent that what is required for a preliminary injunction (Trump on the Ocean), and a demonstration of probable success on the merits is not a prerequisite for relief. (WPA/Partners v Port Imperial Ferry Corp., 307 AD2d 234, 237 [1st Dept 2003].) However, all the required showings must be made, including the ability to cure a rent default, if that is the basis of the landlord's action against the tenant, or the injunction will be denied. (Definitions Personal Fitness, Inc. v 133 E. 58th St. LLC., 107 AD3d 617 [1st Dept 2013].)”

NOTE AS OF MARCH 30, 2020: This discussion was recently sent to me: Re: impossibility of performance:

Contract Law:  The COVID-19 Shutdown and the Impossibility of Performance Defense

As we are all painfully aware, Governor Cuomo has issued an Executive Order directing that all “non-essential” businesses statewide terminate their in-office personnel functions.  In addition to the public health and policy issues that arise from this Order, a myriad of legal questions also follow.  While there are no concrete answers to many of these questions given the unprecedented nature of the COVID-19 pandemic, it is helpful to look to caselaw to anticipate how these issues may play out in the business disputes that are sure to emerge from this situation.  One such issue is the applicability of the defense of impossibility of performance that may be asserted against a party seeking to enforce its contractual rights against another party that has failed to perform its obligations. 

General contract law in New York (and most places) provides “that once a party to a contract has made a promise to perform, it must follow through or be liable for damages, even when unforeseen circumstances make that performance burdensome.”[i]  The defense of impossibility of performance has been typically applied very narrowly in light of the view that a contract, when distilled down, is really just an arm’s length allocation of risks between the parties.[ii]  As a result, the Court of Appeals has recognized that this defense should only be available in “extreme circumstances” and “only when the destruction of the subject matter of a contract or the means of performance makes performance objectively impossible.”[iii]  In addition, the event that produced the impossibility must not have been something that could have been foreseen or guarded against in the contract.[iv]

In a general sense, the COVID-19 pandemic was not foreseeable to parties that entered into contractual agreements through most of 2019.  However, can the same be said about contracts that were entered into after the first case of COVID-19 was reported in China around December 31, 2019 or after the first case was reported in the United States around January 21, 2020?[v]  These questions will undoubtedly have to be answered by the courts as businesses become unable to perform their contractual obligations as a result of the COVID-19 pandemic and the ensuing governmentally-ordered restrictions.

One case resulting from a governmental act occurred in Orange County, New York when the purchaser in a sale of real property contract attempted to rescind the contract after the relevant jurisdiction enacted a moratorium on subdivision approvals and then enacted a revised zoning code that prohibited the type of subdivision contemplated in the agreement.[vi]  The Appellate Division, Second Department affirmed the trial court’s dismissal of the action and held that it was not unforeseeable that the town would change its zoning code in a manner rendering the planned subdivision impossible.[vii]  The court partially relied on its holding in an earlier case that found that sophisticated developers should either anticipate such a change or guard against it in the terms of the underlying contract.[viii]

Similarly, when a prospective purchaser attempted to use the impossibility of performance defense based on the loss of nearly of all of his personal assets as a result of the Bernie Madoff scandal, the court found that the default should not be excused and that the seller was entitled to retain the purchaser’s down payment as liquidated damages for the breach.[ix]

In a case concerning an executive order, the Appellate Division, First Department dealt with a company that had purchased insurance against an air traffic controller’s strike that would disrupt its necessary distribution chain.[x]  The policy provided that there would be no liability to the carrier unless the strike continued for seven days.[xi]  When a strike eventually occurred, it was unforeseeably terminated by declaration of President Reagan firing all of the air traffic controllers three days after the strike began.[xii]  Although the court found that there have been circumstances where governmental acts have truly made performance impossible, and that there was no way that the company could have reasonably anticipated that the President would end the strike by firing all of the air traffic controllers, the facts here did not constitute a sufficient impossibility of performance defense.[xiii]  Instead, the court relied on a strict interpretation of the contractual provision as written: three is less than seven.[xiv]

This is not to say that there is not law to support the use of the defense when an action truly renders performance impossible.  The Appellate Division, First Department also dealt with a transportation company that had contracted with the City of New York to furnish, among other things, tugboat services for sanitation barges.[xv]  Subsequently, there was a portwide strike and there was no practical way for the company to provide the contracted for tugboat services to the City.[xvi]  As a result, the court found that the transportation company may not be liable to the City for its failure to provide the services as result of the impossibility of its performance and it reversed the trial court’s grant of summary judgment in favor of the City.[xvii]

Finally, in a case arising from the tragedy that took place on September 11, 2001, a court held that the untimely cancellation of an African safari could be excused by the impossibility of performance defense based on a claim that timely communicating the cancellation from Staten Island was impossible in the immediate aftermath of the terrorist attacks.[xviii]

Ultimately, the underlying facts leading to the assertion of an impossibility of performance defense will be determinative as to its potential success.  It seems clear that the financial consequences of the COVID-19 pandemic will not, standing alone, be enough to excuse performance.  However, if the performance is truly rendered impossible by the closure of a business that cannot operate as a result of the Governor’s stay-at-home order, then it may be possible that contractual performance will be excused, or, at the very least, the time to perform tolled until performance is no longer impossible. 

---

[i]  See Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 [1987].

[ii]  See id.

[iii] See id.

[iv]  See id. (citing, inter alia, 407 E. 61^st Garage v. Savoy Fifth Ave. Corp., 23 N.Y.2d 275 [1968]).

[v] See <https://www.nytimes.com/article/coronavirus-timeline.html>

[vi] See RW Holdings, LLC v. Mayer, 131 A.D.3d 1228, 1229 [2d Dep’t 2015].

[vii] See id.at 1230.

[viii] See id. (citing Pleasant Hill Developers, Inc. v. Foxwoods Enters., LLC, 65 A.D.3d 1203, 1206 [2d Dep’t 2009]).

[ix] See Sassower v. Blumenfeld, 24 Misc.3d 843, 845-46 [Sup. Ct. Nassau County 2009]. 

[x] See Metpath Inc. v. Birmingham Fire Ins. Co. of Penn., 86 A.D.2d 407, 408 [1st Dep’t 1982].

[xi] Id. at 409-410.

[xii] Id. at 408.

[xiii] See id. at 411-413. 

[xiv] See id. at 413-414.

[xv] See City of N.Y. v. Local 333, Marine Division Int’l Longshoreman’s Assoc., 79 A.D.2d 410, 411 [1st Dep’t 1981].

[xvi] Id. at 413. 

[xvii] See id. at 414.

[xviii] See Bush v. ProTravel Int’l, Inc., 192 Misc.2d 743, 7753-754 [Sup. Ct. Richmond County 2002].

2]."

COLLECTING RENT ON AN ILLEGAL APARTMENT

LISPENARD STUDIO CORP. v. Loeb, 2016 NY Slip Op 30945 - NY: City Court, Civil Court 2016:

"A substantial body of law supports the proposition that MDL §302 rent forfeiture provisions do not apply if the tenant was complicit in the existence and maintenance of an illegal apartment, Zane v. Kellner, 240 A.D.2d 208, 209 (1st Dept. 1997), 58 E. 130th St. LLC v. Mouton, 25 Misc. 3d 509, 511 (Civ. Ct. N.Y. Co. 2009), citing, Zafra v. Sawchuk, N.Y.L.J., Jan. 9, 1995, at 27:2 (App. Term 1st Dept), if the tenants knew that their occupancy was illegal, Zane, supra, 240 A.D.2d at 209, Eli Haddad Corp. v. Cal Redmond Studio, 102 A.D.2d 730 (1st Dept. 1984), Lipkis v. Pikus, 99 Misc.2d 518, 520 (App. Term 1st Dept. 1979), aff'd, 72 A.D.2d 697 (1st Dept 1979), appeal dismissed, 51 N.Y.2d 874 (1980), Dodds v. 1926 Third Ave. Realty Corp., 2011 N.Y. Misc. LEXIS 3921 (S. Ct. N.Y. Co. 2011), if the tenants somehow prevented the legalization, Chatsworth 72nd Street Corp. v. Rigai, 71 Misc. 2d 647, 651 (Civ. Ct. N.Y. Co. 1972), aff'd, 74 Misc.2d 298 (App. Term 1st Dept.), aff'd, 43 A.D.2d 685 (1st Dept. 1973), aff'd on the opinion of the Civil Court of the City of New York, 35 N.Y.2d 984, 895 (1975), First Edition Composite, Inc. v. Wilkson, 177 A.D.2d 297, 299 (1st Dept. 1991), Hornfeld v. Gaare, 130 A.D.2d 398, 400 (1st Dept. 1987), Amdar v. Armenti, N.Y.L.J. June 23, 1994 at 28:4 (App. Term 1st Dept.), or if the subject premises do not pose a threat to the tenant's health and safety. Zane, supra, 240 A.D.2d at 209, Dogwood Residential, LLC v. Stable 49, Ltd., 2016 N.Y. Misc. LEXIS 1362 (S. Ct. N.Y. Co. 2016), citing Beneficial Cap. Corp. v. Richardson, No. 92 Civ. 3785, 1995 US Dist LEXIS 7354 (S.D.N.Y. 1995).

This authority relies upon an "abandon[ment of] a literal application of MDL §302 in favor of allowing equity to control in order to avoid a tenant's unjust enrichment," as one Court put it. B.S.L. One Owners Corp. v. Rubenstein, 159 Misc.2d 903, 908 (Civ. Ct. Richmond Co. 1994). However, a recent Court of Appeals case rejects the abandonment of a literal application of MDL §302. Chazon, LLC v. Maugenest, 19 N.Y.3d 410, 415-16 (2012)("[i]n the absence of compliance, the law's command is quite clear . . . [judicially-carved-out exceptions to MDL §302] may make sense from a practical point of view. But we find nothing . . . to explain how they can be reconciled with the text of the statute. They simply cannot. . . . If that is an undesirable result, the problem is one to be addressed by the Legislature"). The Court's strict application of MDL §302 appears to render the rest of the authority standing for a different result without effect. Accord, 742 Realty LLC v. Zimmer, 46 Misc.3d 1204(A) (Civ. Ct. N.Y. Co. 2014), citing Caldwell v. American Package Company, Inc., 57 AD3d 15, 26, 866 N.Y.S.2d 275 (2nd Dept. 2008).

Petitioner argues that Phillips & Huyler Assocs. v. Flynn, 225 A.D.2d 475 (1st Dept. 1996) compels a different result, insofar as it holds that application of MDL §302 could unjustly enrich a tenant. However, not only does this ruling pre-date Chazon, LLC, supra, 19 N.Y.3d at 410, not only does this ruling come from a Court lower than the Court in Chazon, LLC, supra, 19 N.Y.3d at 410, but this ruling favors the position of a commercial landlord, not a residential landlord. MDL §302 evinces a limited application to residential tenants. 455 Second Ave. LLC v. NY Sch. of Dog Grooming, Inc., 37 Misc.3d 933, 936 (Civ. Ct. N.Y. Co. 2012).

Another argument against application of MDL §302 to this proceeding is that the parties have contracted that Respondents were the parties responsible for legalizing their occupancy of the subject premises. Contracts between cooperatives and shareholders valid, Kenneth D. Laub & Co. v. Bear Stearns Cos., 262 A.D.2d 36 (1st Dept. 1999), and indeed, include elements of self-determination not found in leases for apartments in privately-owned buildings, as shareholders devise by policy themselves through a board of directors elected by them. 930 Fifth Corp. v. King, 71 Misc.2d 359, 364 (App. Term 1st 1972).^[3] However, the default proposition is that a cooperative, rather than an individual shareholder, bears responsibility for obtaining a residential certificate of occupancy. O'Flaherty v. Schwimmer, 158 Misc.2d 420, 424-425 (S. Ct. N.Y. Co. 1993)(Tom, J.), unanimously affirmed for the reasons stated, 208 A.D.2d 425 (1st Dept. 1994). The proposition that the parties can shift this responsibility rests upon the premise that a tenant's rights as defined by MDL §302 are waivable when, in fact, authority holds that they are not waivable. Dawkins v. Ruff, 10 Misc.3d 88, 89 (App. Term 2nd Dept. 2005), BFN Realty Assocs. v. Cora, 8 Misc.3d 139(A) (App. Term 2nd Dept. 2005), Willoughby Assocs. v. Dance-Lonesome, 2003 N.Y. Misc. LEXIS 822 (App. Term 2nd Dept. 2003).

Petitioner argues that Respondents' hands are "unclean" such as to preclude the relief Respondents seek, relief that Petitioner characterizes as equitable. Petitioner's reasoning is backwards. It is Petitioner that is seeking an equitable relief from the dictates of MDL §302. See B.S.L. One Owners Corp., supra, 159 Misc.2d at 903. The Court of Appeals rejected an "equitable" approach to MDL §302 insofar as it found the statute inconsistent with concerns of unjust enrichment. Chazon, LLC, supra, 19 N.Y.3d at 416.

Chazon, LLC, supra, 19 N.Y.3d at 410, applies MDL §302 to a landlord who has not complied with the legalization schedules set pursuant to MDL §281 et seq., commonly known as the Loft Law. A broad remedial purpose of the Loft Law was to confer rent-stabilized status on legalized interim multiple dwellings. Tan Holding Corp. v. Wallace, 187 Misc.2d 687, 688 (App. Term 1st Dept. 2001), Walsh v. Salva Realty Corp., 2009 N.Y. Misc. LEXIS 6056, 7-8 (S. Ct. N.Y. Co. 2009). As cooperatives cannot be subject to the Rent Stabilization Law, 9 N.Y.C.R.R. §2520.11(1), Loft Law coverage does not apply to owner-occupied cooperatives such as the subject premises, Tri-Land Properties, Inc. v. 115 West 28th St. Corp., 267 A.D.2d 142 (1st Dept. 1999), raising a question about the factual distinction between this matter and the facts of Chazon, LLC, supra, 19 N.Y.3d at 410. However, the Court in Chazon, LLC, supra, 19 N.Y.3d at 410 interpreted MDL §302 on its plain language, employing a canon of interpretation that does not depend on the particular facts of the case. Nothing in the text of MDL §302 restricts such an interpretation solely to a landlord of a property subject to the Loft Law and, indeed, MDL §302 pre-dates the Loft Law."

WHEN YOU HAVE FALLEN BEHIND ON RENT

In NYC, there a variety of government agencies and nonprofit organizations that provide support to those who have fallen behind on rent.

See https://www1.nyc.gov/site/dhs/prevention/rent-issues.page

NYC SENIORS AND NYC RESIDENTS WITH DISABILITIES: DID YOU KNOW?..

  

Tenants who qualify for the NYC Rent Freeze Program for Seniors (SCRIE) and Tenants that qualify for the NYC Rent Freeze Program for Tenants with Disabilities (DRIE) can have their rent frozen and be exempt from future rent increases. For more information you can download "A GUIDE FOR TENANTS - Senior Citizens (62 and over) and People with Disabilities". "

HOMELESS IN NASSAU

Some information I found from various websites when I recently counseled a tenant who was not only facing eviction but lacked any financial means to obtain new premises. This list is not meant to be all inclusive but for those faced with eviction and in need of immediate housing assistance, please note the following:

1. "If a person is experiencing a housing crisis in Nassau County, he or she should go to the Nassau County Department of Social Services (DSS), at 60 Charles Lindbergh Blvd. in Uniondale, Monday thru Friday, between the hours of 8:00 am – 4:00 pm. A DSS emergency services unit worker will assess the individual’s needs. The person may have to wait some time before they receive their referral for an emergency housing placement. Shelter placements and assistance with emergency housing needs are provided at the Department of Social Services (DSS) under the auspices of the Nassau County Office of Housing and Community Development (OHCD). Eligible individuals and families can, on an emergency, temporary basis be assisted with shelter and other items of need to help them meet their emergency and move as quickly as possible to a stable self-sufficient role in the community. If a family or individual is threatened with eviction or foreclosure, assistance may be available to save the current housing. These programs are: Emergency Assistance to Families, Emergency Assistance to Adults and Emergency Safety Net Assistance. These programs were designed to meet one-time non-recurrent emergency situations. These benefits do have specific eligibility requirements, and each case receives the attention of a worker with specialized knowledge in this area. Applications for eligibility should be made as soon as the potential problem becomes known. Following approval of eligibility by DSS, OHCD will proceed with providing for emergency housing assistance."

2. "The INN’s emergency shelters provide housing and supportive services for guests experiencing the trauma of homelessness. The INN has three emergency shelters in Nassau County—two family shelters and one shelter for single men. The INN shelters are open all year long and staffed 24 hours a day, 7 days a week. Additional services provided to the shelters include educational workshops for the guests on activities of daily living, parenting, employment, nutrition, etc. The INN also has a housing specialist to assists families in locating and securing appropriate and affordable housing. For further information please contact The INN's main office, at (516) 486-8506"

3. "Bethany House provides safe, supportive, emergency housing for women and their dependent children, and a comprehensive range of additional programs and resources. Each shelter has a social worker to assist guests with crisis intervention and prevention, goal identification and achievement, and overcoming barriers that led to homelessness. The social worker also assists the guests in identifying and developing support systems and services to prevent the future of homelessness. Support staff helps guests to adjust to communal living; ensure a safe, stable, dignified environment; and provide information and referrals. Bethany House, 102 Whitehouse Avenue, Roosevelt, NY 11575 (516) 868-6866"

4. "Other programs that provide a temporary place to stay (usually three days to two weeks), generally in dormitory-style facilities with very little privacy, for people who have no permanent housing. Also included are programs that provide motel vouchers for people who are homeless.

See http://211longisland.communityos.org/taxonomy/taxonomy_overview.taf?taxonomy_id=525848"

RENT CONTROL/STABILIZED LEASES IN BANKRUPTCY

A link to an interesting discussion from Shenwick & Associates:

http://www.icebase.com/r.pl?P67HxqNVCmmHoLPL_f762b287d48c661d

AFFORDABLE HOUSING - WITH RENTALS

Yesterday, at Landlord/Tenant court, it became clear to me that tenants and homeowners face the same issue - what is affordable housing?

The National Low Income Housing Coalition has a calculator to determine your own personal Housing Wage, the wage you would need to earn in order to pay no more than 30% of your income on the rent- the accepted standard of affordability.

NLIHC - Housing Wage Calculator

Example, Tenant has combined family income of $48,000 a year and rents a home at $2,000 a month. According to the calculator, Tenant should have a combined family income of $80,000 a year. Whether it is health, job loss, increased expenses, whatever reason, Tenant is behind in rent for 4 months ($8,000) and a non-payment proceeding is commenced. How can Tenant continue to pay $2,000 a month rent and pay off the $8,000 balance on a combined family income of $4,000 a month?