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245 Realty Associates v. Sussis

May 28, 1998

245 REALTY ASSOCIATES, PETITIONER-RESPONDENT,
v.
ABE SUSSIS, AS COURT-APPOINTED ADMINISTRATOR OF THE ESTATE OF ARTHUR SUSSIS, DECEASED, AND DONALD N. SUSSIS, RESPONDENTS-APPELLANTS



The opinion of the court was delivered by: Tom, Justice.

Before WALLACH, J.P., and RUBIN WILLIAMS, TOM and ANDRIAS, JJ.

The issue presented is whether the successor-in-interest of a rent-stabilized apartment is entitled to attorneys' fees as the successful party in a holdover proceeding, pursuant to a clause in the lease conferring such a right on the tenant of record as well as successors-in-interest.

The deceased Arthur Sussis was the rent-stabilized tenant of apartment 9C at 105 West 73rd Street in Manhattan from December 1983 to February 1993, the time of his death. The last renewal lease expired on December 31, 1993. Respondent Donald Sussis, decedent's brother, had been the tenant of record of the premises prior to Arthur's tenancy. In 1985 Donald separated from his wife and thereafter moved back in with Arthur. It is undisputed for present purposes that respondent Donald Sussis resided with Arthur in the premises for at least two years prior to Arthur's death. In September 1993, Donald executed and returned a Renewal Lease Form to the landlord. The accompanying letter from Donald's attorney advised the landlord of Arthur's death, that Donald had resided in the apartment with Arthur for five years and that Donald was exercising his right to a renewal lease under the Rent Stabilization Law.

In March 1994, the landlord, the holder of the shares and proprietary lessee for the premises, commenced a holdover proceeding against the Estate of Arthur Sussis by Abe Sussis, administrator, and Donald Sussis, contending that the tenancy had terminated with the expiration of the renewal lease on December 31, 1993.

The respondents, in their answer, denied the allegations of the petition and asserted that Donald Sussis was entitled to succeed his brother as tenant under the Rent Stabilization Code and counterclaimed for attorney's fees under Real Property Law § 234. Paragraph 20 of the lease provided for reciprocal rights to legal fees by the landlord as well as the tenant. Specifically for the tenant, reasonable legal fees would be recoverable in the event that the tenant successfully defended a lawsuit commenced by the owner, to the extent provided by Real Property Law § 234.

By decision and order dated August 17, 1995, Civil Court, New York County (Marilyn Shafer, J.), dismissed the petition with prejudice, finding that Donald had resided in the apartment from 1985 until Arthur's death, and hence had acquired statutory rights as a qualifying family member to his tenancy under 9 NYCRR 2523.5(b)(1). The court also noted the landlord's failure to contest Donald's entitlement to attorney fees, which were granted and allowed for a hearing in the event that the parties disputed the amount. Donald Sussis subsequently moved to restore the matter for a hearing to determine the amount of attorneys fees.

The landlord cross-moved for reargument. The landlord argued that the occupant is not entitled to recover attorneys fees under the lease since there was no privity of contract between the parties and that the landlord would not have been entitled to attorneys fees if it had prevailed, which raises the issue of reciprocity, infra. Respondents argued that if an occupant is entitled to be offered a renewal lease by operation of the Rent Stabilization Code, then that party should be entitled to collect legal fees as per the lease when litigation is necessary to secure the offer. The court concluded that it was constrained by Appellate Term case law that required that the correlating right to collect attorneys fees pursuant to Real Property Law § 234 not be accorded to those who legally succeed to tenant's rights by law only after prevailing in a holdover proceedings. By decision and order dated November 21, 1995, the court, granting reargument, modified its prior ruling only to the extent of denying the respondents' request for attorneys fees.

By order entered November 29, 1996, Appellate Term unanimously affirmed denial of attorneys fees. Appellate Term found that although the rent-stabilized lease contained an enforceable attorneys fee provision, it was enforceable only as a consequence of the contractual relationship between the landlord and the tenant of record. Appellate Term found that Donald's succession rights accrued only after adjudication of the holdover proceeding, so that he was not entitled to attorneys fees incurred in defense of that proceeding. Appellate Term also found that if the landlord had prevailed, it would have had neither a statutory nor a contractual basis to seek fees from the evicted occupant, so that Real Property Law § 234 would not have been invoked, leaving the occupant without a legal predicate upon which to recover attorneys fees. By order entered March 12, 1997, Appellate Term granted leave to appeal to this Court.

Real Property Law § 234 is triggered when the lease contains a provision regarding recovery of attorneys fees in lease disputes. It was intended to "level the playing field" between landlords and residential tenants ( Matter of Duell v. Condon, 84 N.Y.2d 773, 780, 622 N.Y.S.2d 891, 647 N.E.2d 96). The statute addresses those situations where such reciprocity is not built into the lease, but, rather, the lease provides only for the landlord's recovery of legal fees. The statute then implies in the lease a covenant by the landlord to pay the tenant the reasonable attorneys' fees and expenses "incurred by the tenant as the result of the ... successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease ..." (Real Property Law § 234). Here, paragraph 20 explicitly provides for tenant's reciprocal right to recover attorney's fees. The statute also was intended to discourage landlords "from engaging in frivolous litigation in an effort to harass tenants ... into terminating legal occupancy" ( Matter of Duell v. Condon, supra, 84 N.Y.2d 773, 780, 622 N.Y.S.2d 891, 647 N.E.2d 96; cf., Hughes v. Lenox Hill Hospital, 226 A.D.2d 4, 651 N.Y.S.2d 418, dismissed 90 N.Y.2d 829, 660 N.Y.S.2d 552, 683 N.E.2d 17). Parenthetically, given the absence of any merit to the landlord's holdover proceeding, especially in view of its failure to take even rudimentary steps to ascertain the occupant's residency status or to offer any concrete evidence to rebut Donald's proof of his occupancy of the premises, this is the very sort of frivolous litigation that the Legislature contemplated.

The family-succession provision of the Rent Stabilization Code (9 NYCRR 2523.5[b][1] ) states that when the tenant of record is entitled to a renewal lease, a qualifying family member, defined to include a sibling ( see, 9 NYCRR 2520.6[ o] ) who has resided with the tenant in that residence, as a primary residence, for no less than two years immediately prior to the tenant of record permanently vacating the unit, "shall be entitled to be named as a tenant on the renewal lease." The family-succession provision of 9 NYCRR 2523.5(b)(1) was intended to regulate "disruptive rent and eviction practices ... [which are] essentially accomplished by requiring that landlords offer the option of lease renewal" ( Festa v. Leshen, 145 A.D.2d 49, 62, 537 N.Y.S.2d 147) and to "spare[ ] family members the disruption of relocation at a time of emotional and possibly financial turmoil. Indeed, the thread that runs through the cases construing the succession provision is the need for continuity in possession ..." ( Hughes v. Lenox Hill Hospital, supra, at 15, 651 N.Y.S.2d 418). We have noted that "in the ordinary course of events, a family member, who remains in the apartment following the departure of the named tenant, will receive a renewal notice towards the end of the lease term, directed to the named tenant; the recipient will thereupon inform the landlord of the tenant's departure as well as his status as a family member; and, assuming there is no dispute regarding his status, the surviving family member will receive a renewal lease designating him tenant of record" ( Hughes v. Lenox Hill Hospital, supra, at 13-14, 651 N.Y.S.2d 418).

The landlord relied on Appellate Term case law that declined to apply Real Property Law § 234 to succession-rights cases involving rent-stabilized apartments since the successor tenant was not a signatory to the lease agreement. The Court of Appeals specifically has declined to rule on the validity of this line of cases ( Matter of Duell v. Condon, supra ). We also take no position on whether those decisions are correctly decided since we are presented here with different circumstances. Those cases are distinguishable from the instant case by virtue of paragraph 32 of the present lease agreement.

Paragraph 32 of the lease between petitioner landlord and Arthur Sussis provided:

32 SUCCESSOR INTERESTS

The agreements in this lease shall be binding on Owner and You and on those who succeed to the interests of Owner or ...


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