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Illegal Apartments (i.e., cellar) collecting rent

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Illegal Apartments (i.e., cellar) collecting rent

Postby TenantNet » Thu Jul 14, 2016 1:46 pm

Unpaid Rent Can Be Recovered for Illegal One- or Two-Family Units
Lila Ayers, New York Law Journal
July 14, 2016

Anyone practicing landlord-tenant law in recent years, at some point, was likely to be informed "you can't collect rent on an 'illegal apartment.'" An "illegal apartment" was usually a basement or cellar.1 This is no longer true, at least with regard to a one-family building that rents space (normally a basement or cellar). With the Appellate Term, First Department's 2015 decision in Thomas v. Brown,2 it is now settled law in New York State that a landlord can recover rent from a tenant in an illegal unit of a one-family dwelling. (The author represented the landlord, Monica Thomas, at the trial and appellate levels.)

The Appellate Term, First Department, joined the Appellate Term, Second Department3 that held similarly in Pickering v. Chappe4 and Madden v. Julliet.5

Thomas Case

In Thomas, Monica Thomas was the owner of a one-family home, with a cellar. She rented the cellar to Merlene Brown. Brown didn't pay several months rent, and Thomas brought a nonpayment summary proceeding in Bronx Housing Court. In Housing Court, the parties signed a stipulation converting the case from a nonpayment to holdover action. Brown agreed to leave by a date certain; in consideration Thomas agreed to waive her claim for unpaid rent and/or use and occupancy. However, the stipulation stated if she did not leave by that date, landlord may make a motion for a money judgment for all the unpaid rent/use and occupancy she agreed to waive in exchange for her agreeing to vacate the premises. Brown did not leave when agreed to and stayed an extra 10 days.

Thomas made a motion for summary judgment for a money judgment based on Brown's violation of the stipulation. The Housing Court judge denied the motion saying that since the apartment was "illegal," Thomas could not collect any rent. The Appellate Term, First Department, reversed the Housing Court and held: 1. stipulations should be honored and upheld by the court; 2. since the dwelling unit at issue was not a multiple dwelling (had three or more units), the rent forfeiture provisions of the Multiple Dwelling Law do not apply. In sum, even though the cellar apartment was illegal, Thomas is able to collect unpaid rent.

Multiple Dwelling Law

Multiple Dwelling Law (MDL) §§302 and 325(2) forbid recovery of rent where there is an illegal dwelling. However, all Appellate Terms noted that the MDL applies only to "multiple dwellings" defined as a building "occupied or intended to be occupied as the residence of three or more families living independently of each other."6 With that the Pickering court7 reasoned as follows:

there is no bar to the recovery of rent when a dwelling that has a certificate of occupancy as a one-family dwelling contains an illegal apartment. It is only in the Multiple Dwelling Law that the Legislature has seen fit to impose a forfeiture of rent as a penalty. The Multiple Dwelling Law applies only to buildings occupied or intended to be occupied as the residence of three or more families living independently of each other (Multiple Dwelling Law § 4[7]; Rosario v. Koss, 26 A.D.2d 561, 271 N.Y.S.2d 77 [1966]). In the instant matter, while there was proof that the one-family house contained an illegal apartment, there was no proof that it constituted a multiple dwelling. Thus, the rent forfeiture provisions of the Multiple Dwelling Law (Multiple Dwelling Law §302[1][b ]; §325 [2] ), which are to be strictly construed (see Goho Equities v. Weiss, 149 Misc.2d 628, 631, 572 N.Y.S.2d 836 [App.Term, 1st Dept. 1991]; Coulston v. Teliscope Prods., 85 Misc.2d 339, 340, 378 N.Y.S.2d 553 [App.Term, 1st Dept. 1975]; Wokal v. Sequin, 167 Misc. 463, 4 N.Y.S.2d 86 [1938]), are inapplicable here. Consequently, defendants were not precluded from recovering rent for the months in which plaintiff resided in the apartment.

As noted, this holding is contrary to prior lower court holdings. Pickering specifically mentioned Fazio v. Kelly8 as holding that rent cannot be recovered from a tenant in an "illegal apartment in a one-family house."9

Fazio was an ejectment action, under RPAPL Article 6, not a summary proceeding, under RPAPL Article 7.10 Significantly, it involved an illegal multiple dwelling, i.e., "a legal two family which the plaintiff has been renting as an illegal three family home."11 Yet, the Fazio court asserted, in dicta, that MDL's provisions that make it illegal to rent cellar and basement apartments12 without a permit, apply to one- and two-family units as well as multiple dwellings. That is, "It is hornbook law that the court cannot be asked to enforce contracts with illegal subject matter." As stated, the Pickering court rejected that reasoning and emphasized that "it is only in the MDL that the Legislature has seen fit to impose a forfeiture of rent as a penalty," and the MDL must be strictly construed.13

The court in Acquino v. Ballester14 cited and followed the analysis of Fazio. It is notable that both Acquino and Fazio involved illegal multiple dwellings, in contrast to Pickering and Thomas. In Acquino, both a basement and an attic were rented, in addition to the legal units of the two-family house. Also, in Acquino there was a New York City Department of Buildings' vacate order, due to the illegal tenancies and there was no certificate of occupancy. Further, this was not an Article 7 summary proceeding, but a civil action by a basement tenant for a refund of rents already paid to her landlord. Thus, the ruling of the Acquino court was also dicta.

Regardless, the Acquino court15 reasoned as follows:

Although there is no statute prohibiting the collection of rent from illegal one and two family dwellings, no rent is recoverable because the contract is illegal, the apartment is presumably unsafe because it is not built to code, public policy requires such a finding. Not to do so encourages people to ignore the law and place the health and safety of the buildings occupants and first-responders at risk.

Cases that have allowed landlords to collect rent on illegal apartments in one or two family dwellings are correct, the Multiple Dwelling Law does not apply. However, to accept that analysis ignores the fact that the MDL is not the "tenant rent relief" act but that it is a safety statute designed to insure that renters in New York City are living in buildings constructed and maintained in compliance with building and safety codes. Are not tenants in one or two family houses entitled to the same safety protections as those in multiple dwellings?

Thus, although the court in Acquino conceded there is no statute prohibiting the collection of rent from illegal one- and two-family dwellings and the MDL does not apply, it would still forbid the collection of rent on public policy grounds. However, as the Pickering court held, the MDL must be strictly construed and because no statute specifically forbids the collection of rent from an illegal one-family dwelling, it can be collected.16

In sum, in this area of law, strict construction of statutes trump public policy considerations.

Endnotes:

1. Defined in Multiple Dwelling Law §§4(37) and (38), respectively.

2. 2015 NY Slip Op 51907(U), 50 Misc.3d 130(A) (App Term, 1st Dept. 2015).

3. The Second Department's Appellate Term comprises two separate courts, one for the Second, Eleventh, and Thirteenth Districts; and another for the Ninth and Tenth Districts. The Appellate Term of the Second, Eleventh, and Thirteenth Districts serves Brooklyn, Queens, and Staten Island (Richmond County). The Appellate Term of the Ninth and Tenth Districts hears appeals from City and Justice Courts in Long Island (Suffolk County), Rockland, Westchester, Orange, Putnam, and Dutchess Counties, as well as District Courts in Nassau and Suffolk Counties. 22 NYCRR §730.1.

4. 29 Misc.3d 6, 908 N.Y.S.2d 523 (App Term, 2nd Dept. 2010).

5. 2015 NY Slip Op 50214(U), 46 Misc.3d 146(A)(App Term, 9th and 10th Dists. 2015).

6. MDL §4(7).

7. 29 Misc.3d at 7 (emphasis added).

8. 2003 N.Y. Slip Op. 51276[U], 2003 WL 22227363 (Civ.Ct. Richmond Co. 2003).

9. 29 Misc.3d at 7.

10. A "summary proceeding," is designed to proceed quickly, see, CPLR Art. 4. A party serves and files a notice of petition and petition, and gets an immediate court date, often a little more than a week from filing. In contrast, an Article 6 ejectment case proceeds like normal litigation—a tenant is served with a summons and complaint and has 20 or 30 days to answer. It could be followed by discovery, a court date, etc. Due to its speed and efficiency, landlords always want to proceed under Article 7. (In New York City, summary proceedings are held in the Housing Court, while ejectment proceedings are generally in Civil Court.)

11. Fazio, supra.

12. See, n. 1, supra.

13. 29 Misc.3d at 7.

14. 37 Misc.3d 705, 953 N.Y.S.2d 818 (Richmond Cty New York City Civ Ct. 2012).

15. 37 Misc.3d at 707-08 (emphasis added).

16. 29 Misc.3d at 7.

Lila Ayers is a solo practitioner in Mount Vernon. She represented the appellant-petitioner-landlord
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