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Overcharging Roommates in Rent-Stab units

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Overcharging Roommates in Rent-Stab units

Postby TenantNet » Tue Jan 13, 2015 7:54 pm

From Residential Landlord Tenant Law in N.Y. § 2:44.
Andrew Scherer

§2:44. Restrictions on occupancy/roommates may be unlawful—Roommate can only be charged proportionate share of rent for rent stabilized apartments

Charging a roommate rent in excess of his or her proportionate share of the rent can be the basis of a cause of action for actual, but not treble, damages under the Rent Stabilization Code. See, e.g., Bryant v. Carey, 196 Misc. 2d 412, 765 N.Y.S.2d 146 (N.Y. City Civ. Ct. 2003).

Should the tenant refund the roommate the overcharge, however, that roommate may not be able to establish a prima facie case of profiteering. See, e.g., L.E.S.P.M.H.A., Inc. v. Nunez, 12/18/2002 N.Y.L.J. 23, col. 4 (Civ. Ct. N.Y. Co.).

Moreover, contributions toward costs other than rent such as utilities and furniture may be included in calculation of "proportionate share" of rent. See 719 West 180th St. LLC v. Gonzalez, 11/6/2002 N.Y.L.J. 20, col. 3 (Civ. Ct. N.Y. Co.).

Charging a roommate rent in excess of his or her proportionate share of the rent is not a ground to evict. First Hudson Capital, LLC v. Seaborn, 54 A.D.3d 251, 862 N.Y.S.2d 501 (1st Dep't 2008), appeal withdrawn, 11 N.Y.3d 784, 866 N.Y.S.2d 610, 896 N.E.2d 96 (2008) and appeal dismissed, 11 N.Y.3d 894, 873 N.Y.S.2d 270, 901 N.E.2d 764 (2008).
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Bryant v. Carey, 196 Misc. 2d 412 NY: County Ct, Civil Ct. 2

Postby TenantNet » Tue Jan 13, 2015 7:58 pm

Bryant v. Carey, 196 Misc. 2d 412 - NY: County Court, Civil Court 2003

196 Misc.2d 412 (2003)
765 N.Y.S.2d 146

SUSAN M. BRYANT, Plaintiff,
v.
KIMBERLY A. CAREY, Defendant.

Civil Court, New York County.
March 28, 2003.

Susan M. Bryant, plaintiff pro se.
Kimberly A. Carey, defendant pro se.

OPINION OF THE COURT

ANIL C. SINGH, J.

The sharing of rent regulated apartments is a fact of city life. This right is protected by statute (Real Property Law § 235-f). Tenants have been free to negotiate the terms of rent-sharing agreements, and in the absence of profiteering or unduly disparate bargaining power, courts respected such agreements. This landscape changed when the Division of Housing and Community Renewal (DHCR) promulgated section 2525.7 (b) of the Rent Stabilization Code (9 NYCRR [RSC]) making it a violation of the Rent Stabilization Code for a tenant to charge a roommate more than the latter's "proportionate share" of the apartment rent.

In this case, plaintiff Susan Bryant sues for a rent over-charge in the amount of $6,104.20 and treble damages on the ground that defendant Kimberly Carey breached section 2525.7 (b) by charging her more than the proportionate share of the rent. The court has been unable to find a reported case where a roommate has sought damages for violation of this provision.

The trial was held before me on March 20, 2003. Both parties are self-represented. Ms. Carey is the tenant of record of a rent-stabilized four bedroom apartment in Manhattan. Ms. Bryant was her roommate from December 1, 2000 to July 31, 2002, when she moved out. Ms. Bryant testified that in 2000 she met Ms. Carey, who was looking for a roommate, inspected the apartment and accepted the terms of the share. She agreed to pay $1,150 per month for what was designated "the big room" and was entitled to share the rest of the apartment, except for the bedroom occupied by defendant and another bedroom, denominated "the small room" which was rented to another roommate.

During her occupancy Ms. Bryant found out the actual rent of the apartment, $2,354.48, and at some point became aware of RSC § 2525.7 (b). On April 1, 2002 Ms. Bryant moved into the small room and paid $850 in rent and $35 for utilities. In July, 2002 Ms. Bryant moved out altogether and subsequently demanded a refund of all monies paid by her in excess of the proportionate share as defined by the statute. Ms. Carey refused to acknowledge her demand and this action ensued.

Ms. Carey testified that she had been a tenant of this apartment for several years. She had decided to find roommates to share the rent of $2,354.48. She occupied one of the four bedrooms and rented two others, one, the larger, for $1,150 and $50 for utilities and one, the smaller, for $850 and $35 utilities. In late 2000, she advertised in the Village Voice and on the Internet. She received approximately 100 responses and chose plaintiff as her new roommate. All appeared to be well until this action was filed. She confirmed that both rental rooms were occupied during plaintiff's stay in the apartment except for one month. She claimed she paid the cable bill for the apartment herself.

Ms. Carey testified that she became aware of the proportionate rent regulation in May 2002. However, she did not change her practice because she did not believe she was profiteering from the rental. She stated that she had worked hard to create a comfortable well-furnished apartment with a television, VCR, kitchen appliances, dishes, pots and pans. In Ms. Carey's view plaintiff accepted the terms of the share offer, paid her share of the rent and benefitted from the full use of the apartment and its amenities. Accordingly, Ms. Bryant was not entitled to a reimbursement of her monies.

Under RSC § 2525.7 (b) the proportionate share is defined as the registered rent of the apartment divided evenly by the number of tenants and occupants living therein, excluding tenant's family members and the occupant's dependent children. This calculation makes no express provision for the situation in which the tenant supplies much of the furnishings of the apartment. It imposes an even share division, without reference to relative desirability of the individual accommodations. A tenant who charges a roommate more than her proportionate share is deemed to have violated the Rent Stabilization Code.

Courts have held that a landlord may bring an eviction action against a tenant who has allegedly violated this section. (Ram 1 v Mazzola, 2001 NY Slip Op 50073[U] [App Term, 1st Dept]; 719 W. 180th St. v Gonzalez, 193 Misc 2d 736 [Civ Ct, NY County 2002].) However, the section is silent as to whether DHCR intended to allow a roommate who has been overcharged to bring an action against the tenant.

Since the regulation is silent as to whether a cause of action exists, a three-prong test must be applied to determine whether a right of action may be implied: "(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme." (Sheehy v Big Flats Community Day, 73 NY2d 629, 633 [1989]; see also Pavlou v City of New York, 300 AD2d 120 [1st Dept 2002].) Here, all three elements are met. Plainly, the section was intended to protect roommates from profiteering tenants. Recognizing the right of a roommate to bring an action against a tenant that overcharges protects roommates and acts to deter tenants seeking to profit from rent stabilized tenancies. The right is consistent with the regulatory scheme. Tenants who have been overcharged by landlords have a cause of action (RSC § 2526.1). Subtenants also have the right to sue tenants for an overcharge (RSC § 2525.6). Furthermore, a landlord has a cause of action under this section. Therefore, it follows that a roommate—the party actually aggrieved by paying rent in excess of the proportionate share—can sue for damages.

Accordingly, I hold that a roommate has a cause of action under RSC § 2525.7 (b). I reject the defense that the parties' share agreement trumps the statute. DHCR promulgated section 2525.7 (b) to protect roommates from being overcharged and the contractual defense would eviscerate the statute.

As noted above, the proportionate rent provision does not take into account that the apartment may come with furnishings and other amenities. In contrast, section 2525.6 of the Rent Stabilization Code, which relates to the subletting and assignment of apartments, permits a tenant to charge a subtenant a 10% surcharge over the legal regulated rent when the apartment is sublet fully furnished. The Civil Court in 719 W. 180th St. v Gonzalez (supra) allowed such an allowance in determining the proportionate share of rent between roommates. That case is readily distinguishable from the case at bar. There the landlord brought an action to terminate the tenant's rent stabilized tenancy on the ground that the tenant had violated section 2525.7 (b) by charging her roommate in excess of the proportionate rent. The court found that the roommate was being charged her fair share of the apartment's expenses and opined that under the circumstances eviction would constitute a grave injustice. Here, the roommate is seeking reimbursement of the excess monies she paid in violation of the Rent Stabilization Code.

Furthermore, the 10% surcharge found in RSC § 2525.6 is allowed where the tenant has sublet the apartment and given exclusive occupancy rights of a fully furnished apartment to the subtenant. Under section 2525.7 (b) the tenant retains possession except that she entered into a sharing agreement with a roommate. The tenant continues to have full use of the apartment and its furnishings. I conclude that the two sections are not in pari materia and decline to construe them together.

In this case, there are clearly three individuals involved: the tenant (defendant) and two roommates (including plaintiff). It is undisputed that the rent for the entire apartment for the period in question was $2,354.48. Dividing this amount by three, the share for each room should be $784.79. Plaintiff, during the 16 months she lived in the large room, paid $1,150, $365.21 over the proportionate share. While she lived in the smaller room for four months, she paid $850, $65.21 over the share. The actual number of months for which plaintiff is entitled to reimbursement is 14 for the large room, four for the small room. The statute did not become effective until January 1, 2001 and defendant testified without contradiction that the large room was vacant for one month during plaintiff's stay. Accordingly, the total overpayment comes to $5,373.78.[*]

At trial, much testimony and argument was devoted to the issue of whether or not defendant's departure from the terms of the statute was willful or not. Plaintiff has asked for treble damages. The statutory authority for these damages is not articulated. There is no express provision in section 2525.7 (b) that imposes treble damages on a tenant who overcharges a roommate. Two other sections of the Rent Stabilization Code allow treble damages. Section 2525.6 permits a subtenant who was willfully overcharged to recover treble damages from the tenant. Section 2526.1 (a) (1) imposes treble damages on an owner who willfully overcharges a tenant. However, these sections do not apply because Ms. Bryant was a roommate and not a subtenant or owner. The court will not read such a provision into section 2525.7 (b) by borrowing from other inapplicable sections of the Rent Stabilization Code.

Even if the sections were applicable, I find that defendant's behavior was not willful. While ignorance of the law is not a defense, it is clear that Ms. Carey, while charging Ms. Bryant more than her proportionate share, was not profiteering. Unlike the individuals who use their rented apartment to generate a stream of income for themselves, Ms. Carey was not accepting from her roommates, in toto, more rent than she was paying the landlord; it was an authentic rent share. I find that Ms. Carey acted in good faith upon the mistaken belief that the rent was being fairly allocated as Ms. Bryant was getting full use of the apartment and its amenities. Accordingly treble damages are denied.

Ordered that the Clerk of the Civil Court enter judgment in favor of the plaintiff and against the defendant in the sum of $5,373.78 with interest thereon at 9% from January 1, 2001, together with costs and disbursements as taxed by the Clerk.

[*] 14 months × $365.21 = $5,112.94 and 4 months × $65.21 = $260.84.
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First Hudson Capital, LLC v. Seaborn, Appellate Div.

Postby TenantNet » Tue Jan 13, 2015 8:01 pm

First Hudson Capital, LLC v. Seaborn, 54 AD 3d 251 - NY: Appellate Div., 1st Dept. 2008

54 A.D.3d 251 (2008)
862 N.Y.S.2d 501
FIRST HUDSON CAPITAL, LLC, Respondent,
v.
RON SEABORN, Appellant.

Appellate Division of the Supreme Court of the State of New York, First Department.

August 5, 2008.
Concur—Mazzarelli, J.P., Andrias and Sweeny, JJ.

Since it became effective December 20, 2000, Rent Stabilization Code (RSC) (9 NYCRR) § 2525.7 (b) makes it a violation to charge a roommate more than a proportional share of the rent. However, unlike RSC § 2525.6 (f), which permits an owner to terminate the tenancy of a tenant who charges his subtenant more than the legal regulated rent plus no more than 10 percent if the apartment is sublet fully furnished (see RSC § 2525.6 [b]), RSC § 2525.7 (b) does not provide for termination of the lease. Prior to enactment of RSC § 2525.7, it was the firm rule in this Department that "[t]here is no cause of action for rent profiteering with respect to a roommate" (Handwerker v Ensley, 261 AD2d 190, 191 [1999]). Such position was in accord with our holding in 520 E. 81st St. Assoc. v Roughton-Hester (157 AD2d 199, 202 [1990]) that a landlord may not evict a tenant for "profiteering" with respect to the rent charged a roommate. In so ruling, this Court stated: "Unlike the section pertaining to sublets, the paragraph in which the Legislature introduced the Roommate Law stresses the need to permit such living arrangements to continue and does not mention the elimination of speculation and profiteering as a purpose underlying the enactment of the statute (Seaview-Atlas Mfg. Co. v Fonville, [NYLJ, Apr. 19, 1989, at 23, col 4], supra). We conclude that this omission was deliberate and decline to impose the restrictions against profiteering in sublet situations to living arrangements involving roommates (see, Sullivan v Brevard Assoc., 66 NY2d 489) . . . In sum, neither the lease nor any law governing rent-stabilized apartments permit a landlord to evict a tenant for earning a profit from the rent charged a roommate (Schneller v Moed, 128 Misc 2d 885)" (id. at 203-204). Our reading of the statute and the underlying legislative intent could not have been clearer, and that decision is still good law and binding upon us under principles of stare decisis.

Nevertheless the dissent attempts to discount this Court's holding in Roughton-Hester on the ground that it was issued a decade before the enactment of RSC § 2525.7 and "hardly provides a definitive answer as to whether the subsequently-enacted RSC § 2525.7 supports an eviction remedy." However, a fundamental principle of statutory construction is that "[i]n arriving at the legislative intent, the language of an amendment may be construed in the light of previous decisions construing the original act, it being presumed that the Legislature had such judicial construction in mind when adopting the amendment" (McKinney's Cons. Laws of NY, Book 1, Statutes § 191, at 353-354). Nothing could make the legislative mandate clearer than when a court finds that a statute does not have an eviction provision and the Legislature later amends that statute but still omits such a provision. While the Rent Stabilization Code was amended since our decision in Roughton-Hester to prohibit overcharging a roommate, our rationale in limiting evictions for overcharging a roommate to cases where there is specific regulatory authority for such a cause of action "is equally applicable here, if not more so" (see Giachino Enters. L.P. v Inokuchi, 7 Misc 3d 738, 742 [2005]). Moreover, the dissent's suggestion that we affirm the Appellate Term's application of "the rule it has developed through its own common-law jurisprudence since enactment of that provision," not only is legally unsupported, but defies logic in that neither the Appellate Term nor this Court may develop its own "common-law jurisprudence" in an area as thoroughly legislated and highly regulated as the rent stabilization laws in New York City by ignoring the plain language of a statute, its clear legislative intent, and binding case law precedent of this Court applying the statute.

Although this Court subsequently indicated that rent profiteering involving roommates might entitle a landlord to maintain a holdover proceeding against the stabilized tenant (BLF Realty Holding Corp. v Kasher, 299 AD2d 87, 91 [2002], lv dismissed 100 NY2d 535 [2003], citing RAM 1 LLC v Mazzola, 2001 NY Slip Op 50073[U] [App Term, 1st Dept 2001]), as noted by the Appellate Term in 270 Riverside Dr., Inc. v Braun (4 Misc 3d 77 [2004]), that case is both legally and factually distinguishable in that it addressed the interplay between the Loft Law and the Rent Stabilization Law as it concerned a tenant who subdivided and sublet his loft space.

Moreover, the Appellate Term for the Ninth and Tenth Judicial Districts has subsequently noted that "DHCR [the agency charged with enforcement of the Rent Stabilization Code] has taken the position that [section] 2505.8 (b) [of the Emergency Tenant Protection Regulations] and its counterpart in the Rent Stabilization Code (9 NYCRR 2525.7 [b]) were intended to vest a roommate with the right to file a complaint against the tenant and not to create a new cause of action for eviction (see Note, Regulating Roommate Relations: Protection or Attack Against New York City's Tenants, 10 Journal of Law and Policy, 539, 547, 585, n 36 [2002])" (SBR Assoc., LLC v Diederich, 2003 NY Slip Op 51057[U] [2003]).

While the 20-year tenant, who originally moved into commercial space and invested thousands of dollars in improvements in order to gain rent stabilized status, concededly advertised for roommates in the Village Voice and charged them more than their proportional share of the rent, this is not a case like West 148 LLC v Yonke, (11 Misc 3d 40 [2006], lv denied 2006 NY Slip Op 73839[U] [1st Dept 2006]), where the tenant rented a portion of the stabilized apartment at double the regulated rent to a series of guests or "roommates" and described the apartment, in both an Internet listing for "Affordable Hotels" and on her business card, as the "Chez Sylvie Bed and Breakfast" (id. at 41). It is closer to 54 Greene St. Realty Corp. v Shook (8 AD3d 168 [2004], lv denied 4 NY3d 704 [2005]), where the tenant erroneously, but not unreasonably, believed that he was entitled to some compensation for the improvements he made to the former loft space. In any event, to the extent that those cases presuppose a cause of action for eviction by the landlord, they should not be followed.

Saxe and Gonzalez, JJ., dissent in a memorandum by Saxe, J., as follows:

The question presented on this appeal is whether Rent Stabilization Code (9 NYCRR) § 2525.7 (b), which prohibits a tenant in a rent-stabilized apartment from charging a roommate more than his or her proportionate share of the legal rent, permits a landlord to evict the tenant when a violation of this provision is established. I would affirm the holding of Appellate Term, First Department, which applied the rule it has developed through its own common-law jurisprudence since enactment of that provision—that the remedy of eviction is permitted where the evidence demonstrates intentional commercial profiteering from roommates by the tenant of record. That is precisely what happened here.

I further observe at the outset that the majority's discussion contains a fundamental inconsistency. On one hand, it supports its conclusion that eviction is improper here by equating respondent's conduct with the benign roommate overcharge in 54 Greene St. Realty Corp. v Shook (8 AD3d 168 [2004], lv denied 4 NY3d 704 [2005]), and distinguishing it from the egregious commercial exploitation justifying the tenant's eviction for a violation of RSC § 2525.7 in West 148 LLC v Yonke (11 Misc 3d 40 [App Term, 1st Dept 2006], lv denied 2006 NY Slip Op 73839[U] [2006]). On the other hand, the majority follows that discussion with the offhand comment that "to the extent that those cases presuppose a cause of action for eviction by the landlord, they should not be followed." This Court cannot properly direct that. Yonke not be followed while at the same time using Yonke to determine whether the facts here are similar enough to render its holding applicable to the present case.

The provision of the Rent Stabilization Code applicable to overcharging roommates, 9 NYCRR 2525.7 (b), was enacted in 2000. Unlike the section's counterpart regarding overcharging subtenants, 9 NYCRR 2525.6, which authorizes both an award of treble damages to the overcharged subtenant (RSC § 2525.6 [b]) and the termination of the lease of the prime tenant (RSC § 2525.6 [f]), the enactment regarding overcharging roommates contains no specific provision for how it may be enforced, or by whom.

Although RSC § 2525.7 contains no enforcement provision, it cannot seriously be suggested that it was intended to stand merely as an empty prohibition with no means of enforcement. Since enactment of the provision, Appellate Term, First Department has considered the issue in several cases and has concluded that RSC § 2525.7 supports a judgment of eviction in appropriate roommate-profiteering cases (see e.g. Roxborough Apts. Corp. v Becker, 11 Misc 3d 99 [App Term, 1st Dept 2006]; West 148 LLC v Yonke, 11 Misc 3d 40 [2006], supra; RAM 1 LLC v Mazzola, 2001 NY Slip Op 50073[U] [App Term, 1st Dept 2001], lv denied 2002 NY App Div LEXIS 6531 [2002]). Indeed, in two of those cases this Court has denied leave to appeal, which, although not a determination on the merits, indicates that we perceived no grave error in the rule enunciated in those cases (see Matter of Marchant v Mead-Morrison Mfg. Co., 252 NY 284, 298 [1929]).

However, this Court has not directly ruled on the issue of whether RSC § 2525.7 supports a judgment of eviction for roommate-profiteering. Our decision in 520 E. 81st St. Assoc. v Roughton-Hester (157 AD2d 199 [1990]), was issued a decade before the enactment of RSC § 2525.7, so our conclusion there, that a landlord may not evict a tenant for profiteering with respect to the rent charged to a roommate, while relevant to the interpretation of the statute, hardly provides a definitive answer as to whether the subsequently-enacted RSC § 2525.7 supports an eviction remedy. Yet, the majority treats that 1990 decision, issued 10 years before enactment of the provision, as controlling, trotting out a worn and tired proposition from McKinney's Statutes, a compendium of aphorisms where even a casual researcher can find some support for nearly any proposition, however dubious, sought to be advanced.

In order to arrive at our own conclusion as to whether Appellate Term has correctly held that an eviction remedy may be read into RSC § 2525.7, I therefore turn to consider rulings issued by this Court since enactment of the provision. Our ruling in BLF Realty Holding Corp. v Kasher (299 AD2d 87, 91 [2002], lv dismissed 100 NY2d 535 [2003]), is instructive, since we stated there that: "Rent Stabilization Code § 2525.7 (b) also prohibits a stabilized tenant from charging a roommate in excess of the roommate's proportional share of the stabilized rent. Rent profiteering in the latter circumstance may also entitle a landlord to maintain a holdover proceeding against the stabilized tenant" (emphasis added). Kasher did not concern the interpretation of RSC § 2525.7 (b), and the above statement therefore constitutes dicta. However, in addition, this Court's decision in 54 Greene St. Realty Corp. v Shook (8 AD3d 168 [2004], supra), provides further, albeit indirect, support for the proposition that RSC § 2525.7 authorizes eviction as an available remedy where roommates are overcharged and there is a finding of an intent to profiteer. While rejecting the remedy of eviction in that matter, we did so based on the nonegregious nature of the conduct; "the IAS court properly refused to eject the tenant and his roommate since the amount of overcharge was small and there was no evidence of bad faith or an intent to profiteer" (54 Greene St. Realty Corp., 8 AD3d at 168 [emphasis added]). The holding implicitly acknowledges that eviction would be an available remedy in cases involving more egregious profiteering by the tenant. Notably, in Kasher we also cited with approval RAM 1 LLC v Mazzola (2001 NY Slip Op 50073[U] [2001], supra), in which Appellate Term, First Department held that RSC § 2525.7 supports a possessory cause of action for a roommate overcharge.

Finally, mention must be made of the majority's odd notion that a common-law court may not develop its own "`common-law jurisprudence' in an area as thoroughly legislated and highly regulated as the rent stabilization laws of New York City." Without belaboring this point, it is incorrect. Statutes are interpreted by common law courts in their decisions, becoming part of the body of our common law. "[C]odes and statutes do not render the judge superfluous, nor his work perfunctory and mechanical. There are gaps to be filled" (Cardozo, The Nature of the Judicial Process, at 14 [1921]). The law of rent stabilization is no exception. Its provisions, its nuances, its silences and its legislative history, among other things, are and always will be subject to the scrutiny and interpretive powers of common law judges doing what they are empowered to do—decide cases.

I add that there is a significant policy rationale for permitting eviction of a rent-stabilized tenant who profiteered from roommates. When a tenant sublets, the landlord is entitled to demand an array of information, including a copy of the sublease, whereas the landlord has no right to any such information with respect to a roommate beyond the name of the new occupant (Real Property Law § 235-f [5]). With so little oversight over roommate arrangements, the possibility of profiteering from roommates will be better kept in check where tenants have reason to know that forming such an arrangement in violation of the Rent Stabilization Code may result in the serious penalty of eviction rather than merely having to pay back rent overcharges.

I therefore reject the suggestion that eviction of tenants for overcharging roommates is never permitted because the regulation does not specifically authorize such a cause of action. Rather, I would adopt the rule stated by the Appellate Term, First Department, and implied in this Court's previously discussed cases: RSC § 2525.7 must be read to permit a cause of action to evict a rent-stabilized tenant who overcharges roommates, where the overcharges have been found to constitute the commercial exploitation of the tenant's rent-stabilized apartment through the use of intentional profiteering.

I would further adopt the finding of the Civil Court and Appellate Term that respondent's conduct amounted to intentional profiteering, rising to the level of commercial exploitation of his rent-stabilized apartment. The conduct of respondent here, as found by the trial court, was not of the benign nature demonstrated in 54 Greene St. Realty Corp. v Shook (8 AD3d 168 [2004], supra). It was far closer to that in West 148 LLC v Yonke (11 Misc 3d 40 [2006], supra), which affirmed the eviction of the tenant of record where the tenant had rented a portion of her rent-stabilized apartment to a series of guests she termed "roommates," each of whom she charged nearly double the stabilized rent; the tenant had listed her apartment on the internet under "Affordable Hotels" and printed up business cards reading "Chez Sylvie Bed and Breakfast" (id. at 41), so the finding that she had commercially exploited her rent-stabilized apartment was well supported.

The present case parallels Yonke in many ways. Respondent sometimes collected rent virtually covering his entire stabilized rent, and sometimes, when he had two roommates simultaneously, he collected almost twice his stabilized rent. Moreover, respondent's credibility was seriously undermined by his testimony regarding the overcharge refund he purportedly paid to one roommate, Nigel Borel. Although respondent initially testified to having refunded Borel $1,350 by check on December 1, 2004, Borel then called that refund into question with his own testimony that respondent had instructed him that he would write Borel a check for $1,350, but that Borel would have to pay respondent cash in that amount, in order to make it appear that Borel had paid less rent than he actually did. Borel's bank statement showed a withdrawal of cash in the amount of $1,350 on December 9, 2004, which cash he testified he gave to respondent. Borel further testified that respondent set up this transaction after first indicating, in late November, that Borel would have to vacate the premises because the landlord was in the process of making a case against respondent. When respondent was subsequently recalled to the stand, he admitted that when he gave Borel that check, he asked for the same amount back in cash, but he explained that he needed a loan, and that Borel had agreed to the loan. Moreover, he said he refunded Borel the $1,350 by mailing him a check to his place of business on June 2, 2005.

The Civil Court's rejection of respondent's credibility, and its resultant rejection of his defense that his violation of the roommate overcharge provision was minor and unwitting, was well supported by the testimony, and Appellate Term's characterization of respondent's actions as commercial exploitation of his stabilized apartment was an accurate assessment, warranting the resulting judgment.

There is no question that in appropriate circumstances a tenant who overcharged roommates should be given an opportunity to cure the violation (see Roxborough Apts. Corp. v Becker, 11 Misc 3d at 100); however, I agree with the trial court's determination that even if respondent's violation was considered curable, he did not succeed in establishing any true intent to undertake such a cure in good faith. Rather, respondent's conduct was on the order of that established in Yonke, such as would clearly justify the ordered eviction. Accordingly, I dissent. [See 15 Misc 3d 40.]
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Re: Overcharging Roommates in Rent-Stab units

Postby TenantNet » Tue Jan 13, 2015 8:02 pm

First Hudson Capital, LLC v. Seaborn, 11 NY 3d 894 - NY: Court of Appeals 2008

11 N.Y.3d 894 (2008)
FIRST HUDSON CAPITAL, LLC
v.
SEABORN.

Court of Appeals of the State of New York.

December 31, 2008.
Appeal dismissed pursuant to rules of practice of court of appeal or on consent.
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Re: Overcharging Roommates in Rent-Stab units

Postby TenantNet » Tue Jan 13, 2015 8:05 pm

FOR RENT; A Good Deed, and an Eviction Notice
By DENNIS HEVESI
Published: July 4, 2004

DOLORES KAPEN'S suggestion that her roommate inquire about renting the apartment next door seems like proof that no good deed goes unpunished.

Mrs. Kapen, 84, has lived in her rent-stabilized two-bedroom apartment in a co-op building at 18 West 70th Street since 1969. And since the early 80's, after her children moved out, she has rented that extra room to a series of roommates.

Then, in December 2000, the New York State Division of Housing and Community Renewal revised the Rent Stabilization Code, limiting the amount a rent-stabilized tenant can charge a roommate to a proportionate share of the rent.

Mrs. Kapen's monthly rent is $806. Under what is called a Senior Citizens Rent Increase Exemption, however, she pays only $585, with her landlord receiving a tax abatement. Mrs. Kapen's monthly income, mostly from Social Security, is $659. The young man renting that bedroom paid her $550 a month.

But he needed more space. And figuring she would have little difficulty finding a new roommate, Mrs. Kapen told him about the sublet available next door. ''I said, 'Why don't you look into that one?' and I gave him the landlord's number,'' she said. ''The landlord asked, 'How much do you pay Mrs. Kapen?' And he told him.''

In November 2001, the co-op's sponsor, Lepow Associates, began eviction proceedings. ''Our client's contention,'' said Mitchell H. Kossoff, a senior partner at Kossoff Alper & Unger, which represents Lepow Associates, ''is that Mrs. Kapen took advantage of the artificially low rent afforded by rent stabilization by subletting 50 percent or less of her apartment to a series of individuals over a prolonged period at rents which sometimes equaled those sums she was obligated to pay to the landlord.''

Mrs. Kapen's lawyer, Jacqueline Burger of Legal Services for New York, which represents poor people in civil cases, contended that her client ''was not overcharging because she provided other services.''

Mrs. Kapen said: ''I paid the whole renter's insurance. I paid to clean the place; the soaps, anything that broke, a bulb. So I wasn't making money.''

Mr. Kossoff countered that such claims are ''fairly commonplace when tenants are tasked with the burden of proving that they are not engaging in impermissible profiteering.''

The position of the state housing division is that only a roommate can claim an overcharge. But in two court rulings -- Ram 1 v. Mazzola and the BLF Realty Holding Corporation v. Kasher -- landlords have been allowed to seek eviction of tenants for overcharging roommates. In the first case, the roommate paid $2,200 when the rent was $1,847. In the other, a loft tenant was charging three times the $551 rent.

Courts have since carved out exceptions. In 719 West 180th Street v. Gonzalez, the court ruled that the tenant could charge more than the proportionate share to cover additional services. And in L.E.S.P.M.H.A. Inc. v. Nunez, and 365 West End v. Kristaponis, the courts found that overcharging a roommate is a curable violation, meaning that if the tenant refunds the overcharge the tenant cannot be evicted.

Even if one assumed that her client was overcharging, Ms. Burger contended: ''The landlord should not be able to evict, because there was no harm to the landlord. The purpose of rent stabilization is to preserve affordable housing. If she's evicted, he will be able to sell this apartment.''

However, Mr. Kossoff said: ''It's true that if she is ousted the landlord stands to make more money. But I'm not going to apologize for that because renting and selling real estate in New York is a business.''

''My client is not unmindful that Mrs. Kapen is on in years,'' Mr. Kossoff continued, ''and I don't think this woman has enough to pay the rent herself without engaging in this type of activity. As a result, we offered to relocate her to premises she can afford -- on 88th between Fifth and Madison, not a bad address.''

Mrs. Kapen turned down the offer. And, after preliminary court proceedings, the parties have resumed negotiations. The young man has since moved out -- not to the apartment next door -- and a new roommate has moved in.

''I haven't done anything wrong,'' Mrs. Kapen said. ''My friends are here. This is my home; I want it to be that forever.''

''I haven't had a good night's sleep since this started,'' she added. ''My blood pressure went up, so I'm on two pills now instead of just one. I keep thinking and hoping and wondering and wanting it to go away.''

Drawing (Drawing by Stephen Schildbach)
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719 WEST 180TH STREET LLC v. GONZALEZ

Postby TenantNet » Tue Jan 13, 2015 8:12 pm

719 WEST 180TH STREET LLC v. GONZALEZ

Civil Court, City of New York,New York County.

719 WEST 180TH STREET LLC, Petitioner, v. Modesta GONZALEZ, Respondent.
Decided: October 23, 2002

Feldman & Delio, LLP, New York City (Stacy Feldman and Michael David Nachtome of counsel), for petitioner. Northern Manhattan Improvement Corporation, New York City (Kenneth Rosenfeld and Lourdes Rodriguez Mo of counsel), for respondent.

This summary holdover proceeding is based upon a claim that the respondent, a rent stabilized tenant, charged her roommate more than the roommate's “proportionate share” of the rent in violation of Section 2525.7(b) of the Rent Stabilization Code. The matter came before me for trial on September 30, 2002.

Certain facts are not in dispute.   Respondent Modesto Gonzalez, has lived in the subject two bedroom apartment for eight years.   During that time her daughters, who once shared the apartment with her, grew up and established their own homes.   From May 2001 through December 2001, Ms. Gonzalez shared the apartment with Bienvenida Minaya.   The two women had acquaintances in common, and the apartment-sharing was arranged by Ms. Minaya's son, who lived near by.

Ms. Gonzalez provided Ms. Minaya with a bedroom of her own, fully furnished with a queen sized bed, two dressers, and a mirror.   Ms. Gonzalez also provided pillows, bed linens, and towels.   In addition to exclusive use of one bedroom, Ms. Minaya had shared use of the apartment's living room, kitchen and bathroom.   Ms. Gonzalez retained exclusive use of the other bedroom.   Ms. Gonzalez paid all of the utility bills for the apartment, including electricity, gas, telephone, and cable TV, without any contribution from Ms. Minaya.   Ms. Minaya paid Ms. Gonzalez $90.00 per week during her occupancy.

Ms. Minaya testified at trial as petitioner's witness, as did Maria Marosa, Ms. Minaya's home attendant, who began working in the apartment in October 2001.   Ms. Gonzalez testified on her own behalf.   Ms. Gonzalez and Ms. Minaya contradicted one another with respect to certain aspects of their arrangement.   Ms. Gonzalez testified that her original arrangement with Ms. Minaya gave Ms. Minaya the right to use Ms. Gonzalez's telephone, and that Ms. Minaya in fact used Ms. Gonzalez's phone to call her daughter on a regular basis during the early months of their co-occupancy.   Ms. Minaya testified that she never used Ms. Gonzalez's telephone.   Both women agreed that Ms. Minaya installed her own telephone in her room in September 2001, four months into her occupancy.   Ms. Minaya testified that she used only a cell phone prior to that time.

Ms. Gonzalez testified that in the early months of their arrangement, she prepared meals for Ms. Minaya, who was not well, and that the two of them sometimes ate together in the living room.   This arrangement ended, according to Ms. Gonzalez, when Ms. Minaya was hospitalized in September 2001.   Upon her release from the hospital, Ms. Minaya began receiving regular home care from Ms. Marosa, who prepared all of her meals from October 2001 onward.   Ms. Minaya denied that Ms. Gonzalez had ever prepared any meals for her.
Ms. Gonzalez testified that she supplied Ms. Minaya with cable television service in Ms. Minaya's bedroom during the entire tenancy. Ms. Minaya testified that she had never had cable service in her bedroom.

It is certainly clear from the uncontroverted evidence at the trial that Ms. Minaya's payment of $90.00 per week covered more than just rent.   At a minimum, it also covered the bedroom furniture supplied by Ms. Gonzalez, the bed linens and towels also supplied by Ms. Gonzalez, and the gas and electrical service Ms. Gonzalez paid for in the apartment.   Whether it also included telephone and cable service and food preparation is a matter of dispute.

I find, based upon Ms. Gonzalez's credible testimony, that the agreement between the two women included access for Ms. Minaya to Ms. Gonzalez's telephone.   I do not credit Ms. Minaya's claim that she relied solely on cell phone service in May, June, July and August 2001.   Ms. Minaya decided to install her own phone in September 2001, but there is no evidence that Ms. Gonzalez ever restricted her access to Ms. Gonzalez's phone.

Ms. Minaya's claim that she prepared all of her own food prior to October 2001 but required a home attendant to prepare food for her full time, seven days a week, starting in October 2001, is not credible.   I credit Ms. Gonzalez's testimony that during the early months of their co-occupancy, she prepared meals for Ms. Minaya, but stopped when Ms. Minaya's home attendant service started.

Ms. Gonzalez's cable television bills did not support her claim that she supplied cable television service to the television in Ms. Minaya's room.   If there was an unauthorized and unbilled cable connection in Ms. Minaya's room, it did not cost Ms. Gonzalez any money and is not relevant here.   There was no testimony that Ms. Minaya used the cable television connections in other parts of the house.

Section 2525.7(b) of the Rent Stabilization Code provides:  “The rental amount that a tenant may charge a person in occupancy pursuant to Section 235-f of the Real Property Law shall not exceed such occupant's proportionate share of the legal regulated rent charged to and paid by the tenant for the subject housing accommodation.   For purposes of this subdivision, an occupant's proportionate share shall be determined by dividing the legal regulated rent by the total number of tenants named on the lease and the total number of occupants residing in the subject housing accommodation.   However, the total number of tenants named on the lease shall not include a tenant's spouse, and the total number of occupants shall not include a tenant's family member or an occupant's dependent child.”

The Appellate Term held in Ram I LLC v. Mazzola, 2001 WL 1682829, that Section 2525.7(b) gives rise to a cause of action to terminate a rent stabilized tenancy where it is alleged that the tenant has charged a roommate in excess of the roommate's proportionate share of the regulated rent.   The tenant in Mazzola charged her roommate more than the total regulated rent that the tenant was paying for the apartment.   The appeal was taken from the trial court's denial of a motion by the tenant to dismiss the proceeding for failure to state a cause of action.   The appellate court hence determined only that a landlord has a possessory cause of action against a tenant for overcharging a roommate, and did not address what constitutes an overcharge when a roommate's payment includes contributions toward costs other than rent.   There have been no other reported cases interpreting Section 2525.7(b) in the almost two years since it was adopted.

Petitioner's argument in this case is a simple one.   It is agreed that the regulated rent for the subject apartment is $598.00 per month.   Petitioner argues that Ms. Minaya's “proportionate share” is half that, or $298.00 per month.1  As Ms. Minaya paid $390.00 per month ($90.00 per week for 52 weeks in a year is $4680.00, divided by 12 months is $390.00 per month), petitioner argues that Ms. Gonzalez violated the regulation and that her tenancy can be terminated.

Respondent counters that when furniture, utilities, and other services are taken into account, Ms. Minaya did in fact pay her “proportionate share” of the costs associated with living in the apartment.

Ms. Gonzalez supplied Ms. Minaya with furniture, bedding, linens and towels, and with gas, electricity, and telephone service.   All of these services were covered by Ms. Minaya's $90.00 per week payment.   Section 2525.6 of the Rent Stabilization Code, a parallel provision to Section 2525.7, which applies to subtenancies rather than co-occupancy arrangements, permits a tenant to charge a subtenant a surcharge of 10% when an apartment is sublet with furniture.   Assuming Ms. Minaya's proportionate share of the rent alone was $298. 00, a similar allowance for furniture in this case would be $29.80.   Ms. Gonzalez established at trial that her average bill for electricity and gas service during the eight months during which Ms. Minaya shared her apartment was $86.20.   Ms. Minaya's proportionate share of these costs would be $43.10.   The addition of these two entirely reasonable and quantifiable additional costs would raise Ms. Minaya's “proportionate share” from $298.00 per month to $370.90 per month.

This leaves an additional $19.10 per month to cover the other less quantifiable items supplied by Ms. Gonzalez:  the bedding, linens and towels, use of the telephone, and food preparation for the ailing Ms. Minaya when she did not yet have access to home care.
On this record, I cannot find that Ms. Gonzalez overcharged Ms. Minaya.   The amount the two women agreed upon as rent was a reasonable approximation of Ms. Minaya's fair share of the rent plus utilities, furniture and other items provided by Ms. Gonzalez.   There is no evidence here that Ms. Gonzalez made a profit from her rent regulated apartment.   It would work a grave injustice if petitioner were able to end Ms. Gonzalez's tenancy because she exercised her legal right under Section 235-f of the Real Property Law to share her under-occupied apartment with someone who needed a place to live, and charged that individual a reasonable approximation of the individual's fair share of the apartment's expenses, including rent.

Accordingly, the proceeding is dismissed on the merits.

FOOTNOTES

1.  The record reflects that a boyfriend of Ms. Gonzalez stayed in the apartment for part of the time that Ms. Minaya lived there, but it was not established that he resided there, and he apparently left for good in October 2001.

JEAN T. SCHNEIDER, J.
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