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The "Altman" case...

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The "Altman" case...

Postby TenantNet » Wed Jan 04, 2017 6:28 am

First see the discussion at viewtopic.php?f=1&t=10760&p=52140
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Re: The "Altman" case...

Postby TenantNet » Wed Jan 04, 2017 6:32 am

The 'Altman' Conundrum (Continued)
Warren A. Estis and Jeffrey Turkel
New York Law Journal
January 3, 2017

In Altman v. 285 W. Fourth, LLC, 127 AD3d 654 (1st Dept 2015), the First Department held that to effectuate luxury deregulation of an apartment that became vacant between 1997 and 2011, the legal regulated rent had to be above the statutory deregulation threshold at the time the outgoing tenant vacated. The First Department held that it was not enough for the legal rent to be above the statutory threshold at the time the incoming tenant moved in.

In Aimco 322 E. 61st Street v. Brosius, 50 Misc3d 10 (App Term 1st Dept. 2015), Appellate Term calledAltman into question. In 233 E. 5th St. LLC v. Smith, decided on Dec. 8, 2016, Appellate Term reiterated its position.

This article will examine how the Appellate Division and the Appellate Term have arrived at differing interpretations of the same statutory scheme.

The Statute

Pursuant to the Rent Regulation Reform Act of 1993 (L 1993, ch 253), the Legislature amended the Rent Stabilization Law to add new Section 26-504.2. That section allowed for vacancy deregulation of apartments which rented for $2,000 or more per month between July 7, 1993 and Oct. 1, 1993, and which became vacant on after July 7, 1993. The New York City Council thereafter amended the statute to eliminate the various dates, such that an apartment could be vacancy deregulated if it rented for at least $2,000 per month and became vacant on or after April 1, 1994.

In 1997, the city council took a dramatic step. It amended the statute to provide that with respect to vacancies occurring on or after April 1, 1997, vacancy deregulation would only apply if the outgoing tenant actually paid a legal rent of $2,000 or more. Shortly thereafter, the New York State Legislature amended Section 26-504.2 pursuant to the Rent Regulation Reform Act of 1997 (L 1997, ch 116). The Legislature retained the city council's restrictive 1997 language, but added that the definition of "housing accommodations" shall not include "any housing accommodation which is or becomes vacant on or after the effective date of the Rent Regulation Reform Act with a legal regulated rent of $2,000 or more per month."

In June of 2011, the Legislature amended RSL Section 26-504.2 to read as follows:

'Housing Accommodations' shall not include: any housing accommodation which becomes vacant on or after April first, nineteen hundred ninety-seven and before the effective date of rent act of 2001 and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month; or for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 and before the effective date of the rent act of 2011, with a legal regulated rent of $2,000 or more per month (material added by L 2011, ch 97, pt B, §12 emphasized).


The statute, as amended, consisted of two distinct clauses, separated by the word "or." The first clause states that for any housing accommodation that became vacant between April 1, 1997 and June 24, 2011, vacancy deregulation will only be effective where the rent is $2,000 or more per month at the time the outgoing tenant vacates. The second clause creates a different rule, stating that for apartments that became vacant between June 18, 1997 and June 24, 2011, vacancy deregulation will only attach where the rent was $2,000 or more per month at the time the incoming tenant takes occupancy. The confusion was further exacerbated by the fact that with the exception of apartments that became vacant between April 1, 1997 and June 18, 1997, the two clauses covered the exact same 170.5 month period of time.

'Altman'

In Altman, the apartment in question was renting for $1,829 per month when the tenant vacated in 2005. Because the existing rent, when increased by the statutory vacancy allowance, exceeded $2,000 per month, the owner treated the apartment as luxury deregulated.

Supreme Court (Mills, J.), citing the second clause in Section 26-504.2, held that the apartment was exempt. In an opinion dated April 28, 2015, the First Department disagreed, relying on the first clause in Section 26-504.2:

The motion court erred in dismissing plaintiff's complaint, and declaring that the apartment is not subject to the rent stabilization law. Although defendant was entitled to a vacancy increase of 20 percent following the departure of the tenant of record, the increase could not effectuate a deregulation of the apartment since the rent at the time of the tenant's vacatur did not exceed $2,000 (internal citations omitted).


Altman, however, seemingly contradicted two prior decisions. In Jemrock Realty v. Krugman, 13 NY3d 924 (2010), the Court of Appeals held that rent increases taken before the new tenant moved in, such as increases for individual apartment improvements, could "bring the legal rent above the luxury decontrol threshold." In Roberts v. Tishman Speyer Props., 62 AD3d 71 (1st Dept. 2009), the First Department itself stated that vacancy deregulation attaches when "the tenant vacates the apartment and the legal rent, plus vacancy increase allowances and increases permitted for landlord improvements, is $2,000 or more."

'Curbeam'

The vacancy deregulation issue arose in Curbeam v. 245 W. 51st Street Realty, 2015 WL 9942151 (Sup. Ct. N.Y.Co.). In his July 17, 2015 decision, Justice Geoffrey Wright declined to follow Altman:

The plaintiff rests her argument on the holding of the Appellate Division in the matter ofAltman v. 245 W. Fourth, LLC, now three months old, which holds that the rent for the outgoing tenant must have reached $2,000.00, before the apartment can be deregulated. * * *

However, the Altman decision…is in inherent conflict with the Appellate Division's own decision in Roberts v. Tishman Speyer Properties, which, in pertinent part reads: 'The high rental luxury decontrol provisions of the RRRA, as amended in 1997, now exclude housing accommodations …when…the tenant vacates the apartment and the legal rent, plus vacancy increase allowances and increases permitted for landlord improvements, is $2,000 or more' (internal citations omitted).


'Aimco'

In Aimco, a vacancy occurred in 2001. Post-vacancy increases pushed the rent above the deregulation threshold, and the landlord treated the incoming tenant as deregulated. In its November 12, 2015 decision, Appellate Term determined that there were triable issues as to the extent of individual apartment improvements. Notwithstanding, the court distinguished Altman, citing, among other things, the seemingly inconsistent rulings in Jemrock and Roberts. Refusing to focus on the first clause in RSL §26-504.2, Appellate Term relied on the second clause, which allows for luxury deregulation where the unit "is or becomes vacant…with a legal regulated rent of $2,000 or more per month."

The Appellate Division and the Appellate Term were now at odds.

'233 East Fifth Street'

The issue next arose in 233 East 5th Street LLC v. Smith, a Civil Court case decided by Judge Jack Stoller on April 5, 2016. Stoller ruled for the tenant, citing Altman. Holding that "this Court does not lightly find that an Appellate Division decision was wrongly decided," Stoller ruled that the seemingly contradictory Roberts decision did not squarely consider the proper interpretation of the two overlapping clauses in RSL Section 26-504.2. With respect to Aimco, Stoller observed that the "Appellate Term is bound to follow the precedent set by the Appellate Division." Stoller added, "[t]he stubborn fact…is that the Appellate Division ruled the way that it did, and this Court is bound by the ruling of the Appellate Division."

Appellate Term, however, reversed, citing second clause in RSL Section 26-504.2, in addition toJemrock and Roberts. The court also relied upon an executive memorandum of the Governor in connection with the passage of the RRRA of 1997, which stated:

Also repealed is a provision recently added by the N.Y. City Council that only allows consideration of the apartment's rent level at the time of the vacancy. The City Council's amendment had the effect of preventing rent increases that ordinarily take place after a vacancy—such as vacancy allowances and increases attributable to apartment improvements—from being considered in determining whether the $2,000 threshold was reached.


The apparent split of authority will not be resolved until the issue comes before the Appellate Division. Notably, the First Department in Altman denied the landlord's motion for leave to appeal to the Court of Appeals.

Warren A. Estis is a founding member of Rosenberg & Estis. Jeffrey Turkel is a member of the firm.
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Re: The "Altman" case...

Postby TenantNet » Wed Jan 04, 2017 1:47 pm

The Altman Conundrum
Warren A. Estis and Jeffrey Turkel
New York Law Journal
January 6, 2016

In Altman v. 285 West Fourth, 127 AD3d 654 (1st Dept 2015), the First Department held (at least under the facts of that case) that in order to effectuate vacancy luxury deregulation, the legal regulated rent had to be above the statutory deregulation threshold at the time the outgoing tenant vacated. According to the First Department, the fact that the legal rent was above the statutory threshold at the time the incoming tenant moved in was of no moment.

Thereafter, the Appellate Term, First Department, called Altman into question in Aimco 322 East 61st Street v. Brosius, 2015 WL 7039052 (App Term 1st Dept). In addition, in Dixon v. 105 West 75th Street, 2015 WL 4744404 (Sup Ct NY Co), Justice Manuel J. Mendez held that Altman does not apply in circumstances where the landlord combines two apartments to create an apartment that did not previously exist, and then collected a rent over the deregulation threshold.

This article will examine the relevant history of the statute in question, as well as the Altman, Aimco and Dixon decisions.

The Statute

Pursuant to the Rent Regulation Reform Act of 1993 (L 1993, ch 253), the Legislature added §26-504.2 to the Rent Stabilization Law. That section provided that apartments which rented for $2,000 or more per month between July 7, 1993 and Oct. 1, 1993, and which became vacant on or after July 7, 1993, would be deregulated upon vacancy. The New York City Council thereafter amended the statute to eliminate all of these dates, such that an apartment could be vacancy deregulated if it became vacant on or after April 1, 1994, and if it rented for at least $2,000 per month.1

In 1997, the New York City Council amended the statute to provide that for vacancies occurring on or after April 1, 1997, vacancy deregulation would only apply if the outgoing tenant actually paid a legal rent of $2,000 or more.2 Just weeks later, the New York State Legislature further amended §26-504.2 pursuant to the Rent Regulation Reform Act of 1997 (L 1997, ch 116). The Legislature retained the City Council's restrictive 1997 language, but added that the definition of "housing accommodations" shall not include "any housing accommodation which is or becomes vacant on or after the effective date of the Rent Regulation Reform Act with a legal regulated rent of $2,000 or more per month."

By 2011, courts had long since held that vacancy deregulation would take effect as long as the legal regulated rent was above the deregulation threshold when the new tenant moved in. See, e.g., Jemrock v. Krugman, 13 NY3d 924 (2010) ("[t]his case turns on the factual issue of whether the landlord's expenditures for 'improvements' were at least equal to the amount [approximately $30,000] necessary to bring the legal rent above the luxury decontrol threshold"). Even in Roberts v. Tishman Speyer, 62 AD3d 71 (1st Dept 2009), the Appellate Division observed that vacancy deregulation shall take effect where "the tenant vacates the apartment and the legal rent, plus vacancy increase allowances and increases permitted for landlord improvements, is $2,000 or more." Obviously, vacancy allowances and individual apartment improvements are added to the rent after the outgoing tenant vacates.

In June of 2011, the Legislature amended RSL §26-504.2 to read as follows:

Housing accommodations' shall not include: any housing accommodation which becomes vacant on or after April first, nineteen hundred ninety-seven and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month; or, for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 and before the effective date of the rent act of 2011, with a legal regulated rent of two thousand dollars or more per month (material added by L. 2011, ch 97, pt B, §12 underscored).

RSL §26-504.2, as amended in 2011, consists of two distinct clauses, separated by the word "or." The first clause, as amended, states that for any housing accommodation that became vacant between April 1, 1997 and June 24, 2011 (the effective date of the Rent Act of 2011), vacancy deregulation will only be effective where, at the time the outgoing tenant vacates, "the legal regulated rent was two thousand dollars or more per month." Simple enough.

The second clause, as amended, creates a different rule, stating that vacancy deregulation will be effectuated where the apartment "is or becomes vacant…with a legal regulated rent of two thousand dollars or more per month." Thus, the $2,000 monthly rent need not be in effect at the time the outgoing tenant vacates. The problem is that the second clause governs vacancies that occur between "the effective date of the rent regulation reform act of 1997" (June 18, 1997) and June 24, 2011. Thus, with the exception of apartments that become vacant between April 1, 1997 and June 18, 1997, the two clauses cover the exact same period of time. Put another way, of the 170.5 months covered by clause one, roughly 168 of those months are also covered by clause two.

'Altman'

In Altman, the apartment in question was renting for $1,829 per month at the time the tenant (Keno Rider) vacated on or about March 18, 2005. At that time, Rider's subtenant, Richard Altman, entered into a deregulated vacancy lease for the apartment, based on the fact that the prior rent of $1,829, when increased by the statutory vacancy allowance, exceeded $2,000 per month.

In a declaratory judgment action commenced by Altman, Supreme Court (Mills, J.), citing the second clause in RSL §26-504.2, declared Altman's apartment to be exempt from stabilization:

In this case, there is no dispute that, at the time Rider surrendered his rights to the apartment, his rent was $1,829.49. Plaintiff also admits that Equity Properties 'was entitled to increase the last rent paid by Rider by 20% when it entered into a new lease with plaintiff.' Accordingly, Rider's rent of $1,829.49 plus a 20% statutory vacancy increase, exempted the apartment from the RSL. (Internal citations omitted).3

On appeal, the First Department disagreed, relying on the first clause in RSL §26-504.2:

The motion court erred in dismissing plaintiff's complaint, and declaring that the apartment is not subject to the Rent Stabilization Law (see Administrative Code of City of N.Y. §26-504.2[a]). Although defendant was entitled to a vacancy increase of 20% following the departure of the tenant of record, the increase could not effectuate a deregulation of the apartment since the rent at the time of the tenant's vacatur did not exceed $2,000 (see Rent Stabilization Code [9 NYCRR] §§26-504.2, 26-511[c][5-a])…4

On Sept. 8, 2015, the First Department denied the landlord's motion for reargument and/or leave to appeal in Altman.

'Aimco'

In Aimco, a vacancy occurred in 2001. Because post-vacancy increases pushed the legal rent above $2,000, the landlord treated the incoming tenant as deregulated. The Appellate Term, First Department, initially held that the question of the stabilization status of the apartment could not be summarily determined:

The record raises but does not resolve several material triable issues, including whether the apartment at issue was exempt from rent stabilization because of a high rent vacancy that occurred in 2001, and whether the landlord's expenditures for apartment improvements in the year prior to the high rent vacancy justified the increase in the rent over the $2,000 threshold then in effect.

Appellate Term, focusing on the second clause in RSL §26-504.2, distinguished Altman:

In this regard, we note that Rent Stabilization Law…§26-504.2(a) contains two statutory bases for high rent deregulation, the second of which is if the housing accommodation 'is or becomes vacant…with a legal regulated rent of two thousand dollars or more per month' (emphasis added). In addition, increases in rent for postvacancy improvements count 'to bring the legal rent above the luxury decontrol threshold' (Jemrock Realty v. Krugman,...; see Roberts v. Tishman Speyer,... [high rent deregulation when 'the tenant vacates the apartment and the legal rent, plus vacancy increase allowances and increases permitted for landlord improvements, is $2,000 or more'], affd. 13 NY3d 270, 281 [2009] ['postvacancy improvements…count toward the $2,000 per month rent threshold [L 97, ch 116]' for high rent deregulation]; cf. Altman v. 285 W. Fourth St.,...[relying solely on RSL §26-504.2[a]'s first statutory basis for high rent deregulation, that is, 'at the time the tenant vacated…the legal regulated rent was two thousand dollars or more per month']).

'Dixon'

A different but related issue arose in Dixon, supra. It has long been settled that where a landlord combines two apartments into an apartment that did not previously exist, the landlord is entitled to collect a first rent. See, 300 West 49th Street Assoc. v. New York State Division of Housing and Community Renewal, 212 AD2d 250 (1st Dept 1995). In Dixon, the landlord combined two vacant, adjoining apartments in 2004, and rented the combined apartment as deregulated based on a rent in excess of $2,000. Benjamin Dixon, who moved into the combined apartment in 2013, commenced a declaratory judgment action asserting, inter alia, that the apartment was rent stabilized. Dixon cited Altman in support of this claim. The Supreme Court rejected Dixon's argument, stating:

The court in Altman dealt with the issue of vacancy increases following the departure of the tenant of record, and the prohibition of rent stabilization deregulation for rent under $2,000 at the time of the tenant's departure.

Section 2520.11(r)(10) of the Rent Stabilization Code states that 'where an owner substantially alters the outer dimensions of a vacant housing accommodation, which qualifies for a first rent equal to or exceeding the applicable amount qualifying for deregulation, as provided in this subdivision, exemption pursuant to this subdivision shall apply.' Once 'the perimeter walls of the apartment have been substantially moved and changed and where the previous apartment, essentially, ceases to exist,' the apartment is no longer rent stabilized 'thereby rendering its rental history meaningless,' and entitling the owner to 'first rent' within the meaning of Section 2520.11(r)(10).

***

Here, the documentation submitted by the owners showed that the apartment was converted from a one floor apartment to a duplex apartment which included additional living space, installation of an internal staircase and additional roof-top penthouse. This created a new unit obliterating the existing apartment thereby rendering its rental history meaningless. This court did not misapprehend any relevant facts or misapply controlling principles of law holding that the owners were entitled to deregulation of the apartment's rent stabilized status.

Thus, the Supreme Court ruled that Altman does not apply to newly created apartments.

It remains to be seen whether lower courts will follow Altman or Aimco.

ENDNOTES:
1. Loc. L. 1994, No. 4.
2. Loc. L. 1997, No. 13.
3. Altman v. 285 West Fourth LLC, 2014 WL 5284727 (Sup Ct NY Co).
4. 127 AD3d at 655.

Warren A. Estis is a founding member of Rosenberg & Estis. Jeffrey Turkel is a member at the firm.


Read more: http://www.newyorklawjournal.com/printe ... z3wTdd98Rk
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Information from TenantNet is from experienced non-attorney tenant
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Re: The "Altman" case...

Postby TenantNet » Thu Jan 05, 2017 1:05 pm

This was just posted this morning, Jan. 5, 2017. For any discussion, please post in the NYC Rent Regulated Apartments section of the forum. Any posts here will be deleted.

The landlord in this case made a motion for Leave to Appeal to the NYS Court of Appeals (NY's highest court). The App. Division denied that motion below. The only thing left for the landlord to do is to make a Application directly to the Court of Appeals for leave to appeal. This doesn't happen all that often, so it doesn't look good for the landlord here.


At a Term of the Appellate Division of the Supreme
Court held in and for the First Judicial Department in
the County of New York on January 5, 2017.

PRESENT - Hon. Peter Tom,
Justice Presiding,
John W. Sweeny, Jr.
Richard T. Andrias
Troy K. Webber, Justices.

------------------------------------X
Richard Altman,
Plaintiff-Respondent,
-against-
285 West Fourth LLC,
M-5565
Defendant-Appellant, Index No. 155942/14
Rent Stabilization Association of
N.Y.C., Inc., Community Housing
Improvement Program, Inc. and Real
Estate Board of New York,
Amici Curiae.
------------------------------------X

Defendant-appellant having moved for leave to appeal to the
Court of Appeals from the decision and order of this Court,
entered on October 4, 2016 (Appeal No. 1792), and for a stay of
enforcement of the judgment, and related relief,
Now, upon reading and filing the papers with respect to the
motion, and due deliberation having been had thereon,
It is ordered that the motion is denied.
The Tenant Network(tm) for Residential Tenants
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