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188-90 Eighth Avenue Housing Development Fund Corp. v. Guzman

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

February 24, 2009


The opinion of the court was delivered by: Joseph E. Capella, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

The petitioner commenced this holdover proceeding on the premise that the respondent is a month-to-month tenant not subject to any rent regulation. The respondent interposed an answer alleging, inter alia, that she is either the owner of the cooperative shares for the subject unit or, alternatively, the rent controlled tenant. The petitioner now moves to strike all of the respondent's affirmative defenses (CPLR 3211) and seeks summary judgment (CPLR 3212) in its favor, and the respondent likewise cross moves for summary judgment.

There is no dispute that the respondent's tenancy was initially subject to the New York City Rent and Rehabilitation Law ("Rent Control"); however, in 1988, the New York State Department of Law approved an eviction plan to convert the subject building into cooperative ownership. Under the eviction plan, non-purchasing rent controlled tenants that were disabled could file an appropriate notice with the Attorney General of the State of New York in order to avoid eviction. According to the respondent, although she was disabled, she elected to purchase the shares for the subject unit at a price of $250, and on January 29, 1988, the parties entered into an agreement for same. At the time, however, the respondent was in arrears with her rent, resulting in a nonpayment proceeding, which the parties settled on August 31, 1988. The August 31, 1988-stipulation provided the petitioner with a final judgment for the outstanding rent, gave the respondent a payment plan to pay off her arrears, and at the conclusion of said payments, entitled her to purchased the shares for the subject unit. In the stipulation, the petitioner acknowledged "holding [the] $250 . . . purchase price." It is not exactly clear what ultimately occurred in the nonpayment proceeding after the stipulation was entered into, but there is no dispute that the respondent was neither evicted nor given shares.

In 2005 and again in 2007, the petitioner commenced holdover proceedings against the respondent to terminate her rent controlled tenancy due to non-primary residence (9 NYCRR § 2204.6); however, neither proceeding went beyond the discovery stage. In 2005, the respondent commenced a Supreme Court action seeking an order directing the petitioner to issue her the shares for the subject apartment. Although the Supreme Court ruled in the respondent's favor, the Appellate Division, First Department reversed, finding that her cause of action was not for mandamus relief, (CPLR 7803(1)), but instead a breach of contract claim (i.e., the August 1988 stipulation). (Guzman v 188-190 HDFC, 37 AD3d 295 [2007].) The Appellate Division then applied a six year statute of limitations, (CPLR § 213[2]), and dismissed the action as time barred.

It is well settled that at the expiration of a rent controlled lease, the tenant becomes a "statutory tenant" and all terms of the lease are projected into and govern the statutory tenancy. (Park v Finkelstein, 299 NY 70 [1949].) However, under the General Business Law ("GBL") rent controlled tenants who buy into a cooperative purchase shares that are allocated to the individual apartment, and receive a proprietary lease. (GBL § 352-eeee.) A purchaser is specifically defined as a person who owns (emphasis added) the shares allocated to a dwelling unit, (GBL § 352-eeee(1)(d)), and a non-purchasing tenant is a person who has not purchased under the plan and who is a tenant entitled to possession at the time the plan is declared effective or a person to whom a dwelling unit is rented subsequent to the effective date (GBL § 352-eeee(1)(e)). Unlike statutory tenants who are disabled and decline to purchase under an eviction conversion plan and thus retain their statutory status under rent control (GBL § 352-eee(2)(d)(iii)), those who elect to purchase are viewed as having voluntarily relinquished their statutory protection in exchange for ownership in the cooperative.*fn1

To date, the respondent does not own the shares appurtenant to the subject unit. Neither side could cite any authority which addresses the status of a previously rent controlled tenant who elects to purchase under an eviction plan, but for one reason or another never receives shares in the corporation. Justice Saxe addressed a somewhat similar issue in De Santis v White Rose, (152 Misc 2d 567 [Sup Ct, NY Cty 1991]), which involved a mortgagee that had foreclosed upon a cooperative and sought to evict the apartment owners due to their failure to remain current in use and occupancy payments. The apartment owners were formerly rent stabilized tenants. Relying on Greenberg v Colonial, (279 AD 555 [1st Dept 1951]), Justice Saxe ultimately determined that upon the foreclosure sale, the apartment owners reverted back to their rent stabilized status. According to Justice Saxe, the Rent Stabilization Law and Code do not apply to cooperatives (NYC Admin. Code § 26-504) for so long as (emphasis added) the housing accommodation is owned as a cooperative (9 NYCRR § 2520.11). Therefore, as soon as a multiple dwelling is no longer owned as a cooperative, the Rent Stabilization Law and Code again automatically become applicable.

According to the petitioner's offering plan, "[a]s of the date of Closing, Previously Controlled Tenants who do not buy shares will be subject to the provisions of Rent Control." Now although the Rent Control Law does not contain language identical to the Rent Stabilization Code and Law, and the instant proceeding does not involve a foreclosure (De Santis v White Rose, (152 Misc 2d 567, supra), the respondent is not a purchaser, and therefore there should be no issue as to whether she reverts back to her prior rent controlled status. And to the extent that it is an issue, given that the respondent never became an owner, but merely opted to purchase, she is in a better position to revert back to her prior status. The General Business Law also provides that non-purchasing tenants who reside in dwelling units subject to government regulation "shall continue to be subject thereto during the period of occupancy." (GBL § 352-eee(2)(d)(ii).) In addition, the petitioner acknowledged the respondent's statutory tenancy in the 2005 and 2007 non-primary residence holdover proceedings. The petitioner has also been charging the respondent rent (versus use and occupancy or maintenance) for some time, which itself is a recognition by the petitioner that the respondent is a tenant of some sort. Yet the respondent's statutory tenancy should not be deemed terminated by virtue of her opting to purchase, since she never actually become an owner in the cooperative. Based on the aforementioned, this court finds that the respondent is neither a month-to-month nor a purchasing tenant, but in fact remains a statutory tenant to this day.

While the terms of the offering plan and General Business Law § 352-eeee may permit a cooperative to bring an eviction proceeding against a rent controlled tenant if at least 35% of the previously rent controlled tenants in the subject building bought shares within six months from the presentation date, the petitioner has not based its claim on such an argument. Rather, both the predicate notice and petition allege that the premises is not subject to rent regulation and that the respondent is a month-to-month tenant. This misstatement of the respondent's interest in the subject premises renders the petition defective. (MSG Pomp v Doe, 185 AD2d 798 [1st Dept 1992].) Therefore, the respondent's motion for summary judgment and dismissal is granted accordingly, and the petitioner's motion is denied as moot.

This constitutes the decision and order of this court, copies of which are being mailed by the court to the parties.

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