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Fox v. 12 East 88th LLC

Supreme Court of New York, First Department

April 3, 2018

Barry Fox, et al., Plaintiffs-Appellants-Respondents,
v.
12 East 88th LLC, et al., Defendants-Respondents-Appellants.

          Emery Celli Brinckerhoff & Abady LLP, New York (Richard D. Emery of counsel), for appellants-respondents.

          Rose & Rose, New York (Paul Coppe of counsel), for respondents-appellants.

          Friedman, J.P., Kahn, Gesmer, Kern, Moulton, JJ.

         Order, Supreme Court, New York County (Paul Wooten, J.), entered October 18, 2016, which, to the extent appealed from as limited by the briefs, denied defendants' motion for summary judgment declaring that the subject apartment was deregulated by the 2008 lease renewal, granted plaintiffs' motion for summary judgment declaring in their favor, and declared that the apartment is subject to rent stabilization, denied plaintiffs' motion as to the application of the default formula for determining the regulated rent and calculating overcharge damages, granted defendants' motion for a declaration that the default formula for determining the regulated rent is not applicable, and set the base rent for calculating overcharge damages as the market rate rent being charged in May 2010, denied plaintiffs' motion as to attorneys' fees, and sub silentio denied plaintiffs' motion as to treble damages, reversed, on the law, without costs, as to the declaration that the apartment was not deregulated in 2008, and it is declared that the apartment was deregulated in 2008, and the appeal therefrom otherwise dismissed, as academic.

         In 1975, plaintiff Barry Fox leased a rent-stabilized penthouse apartment from defendant Nostra Realty Corp. In 1996, when the neighboring rent-stabilized penthouse apartment became vacant, Fox agreed with Nostra to combine the two units, at his expense, and to enter into a market rate lease. Unbeknownst to Fox, Nostra was receiving J-51 tax benefits in connection with the building at the time the units were combined and purportedly deregulated (see Roberts v Tishman Speyer Props., L.P., 13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270 [2009]).

         In 2008, at Fox's suggestion, a renewal lease was entered into by plaintiff MBE Ltd., an entity wholly owned by Fox, with the understanding that Fox would continue to occupy the apartment; MBE executed renewal leases for the apartment in 2010 and 2012. Fox has continued to live in the apartment since MBE became the tenant of record. In 2014, defendant 12 East 88th LLC purchased the building and informed Fox that the lease would not be renewed.

         Because the 2008 lease, and the subsequent lease renewals, named MBE as the sole tenant and did not identify as the occupant of the apartment a particular individual with a right to demand a renewal lease, Fox is not entitled to the renewal of the lease (see Manocherian v Lenox Hill Hosp., 229 A.D.2d 197, 205 [1st Dept 1997], lv denied 90 N.Y.2d 835 [1997]; accord 501 E. 87th St. Realty Co. v Ole Pa Enters., 304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310 [1st Dept 2003]; Avon Bard Co. v Aquarian Found., 260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207 [1st Dept 1999], appeal dismissed 93 N.Y.2d 998');">93 N.Y.2d 998');">93 N.Y.2d 998');">93 N.Y.2d 998 [1999]).

         In Manocherian, this Court established that "a corporation is entitled to a renewal lease where the lease specifies a particular individual as the occupant and no perpetual tenancy is possible" (Manocherian v Lenox Hill Hosp., 229 A.D.2d at 205). Our subsequent cases have construed the first requirement strictly, denying rent stabilization protections to individual occupants who are not actually identified in an entity's rent stabilized lease (see Avon Bard Co. v Aquarian Found., 260 A.D.2d at 211 [even where a corporation's rent stabilized lease is "manifestly for the benefit of" an individual occupant, the individual is not protected by the Rent Stabilization Law if her or she is not designated in the lease [internal quotation marks omitted]; 501 E. 87th St. Realty Co. v Ole Pa Enters., 304 A.D.2d at 310-311 [same holding, despite individual tenant's residence in the subject apartment for more than 20 years]). Here, Fox is neither a party to nor identified as a tenant in the 2008 lease, and thus ceased to be a tenant under Rent Stabilization Code (RSC) (9 NYCCR) § 2520.6(d) at that time. Further, he was not identified as an individual occupant in the 2010 or 2012 lease, as required under Manocherian, and is therefore barred from rent stabilization protection under their terms, as well.

         Our dissenting colleague's reliance on our decision in Herald Towers LLC v Sun Lord Int. (302 A.D.2d 306');">302 A.D.2d 306');">302 A.D.2d 306');">302 A.D.2d 306 [1st Dept 2003]) and similar cases (see e.g. WM Wellington, LLC v Grafstein Diamond, Inc. 22 Misc.3d 1123 [A], 2009 NY Slip Op 50255[U] [Civ Ct, NY County 2009]) to support an examination of extrinsic evidence showing that the individual tenant not named in the corporate entity's lease was the actual and intended occupant of the apartment, is misplaced. In such cases, summary judgment was denied because there was record evidence that it had been the landlord, and not the individual tenant, who had initiated the change to tenancy by the corporate tenant. Here, however, it is uncontroverted that the substitution of MBE as tenant of record was undertaken at Fox's own instance.

         With respect to the second Manocherian requirement, plaintiffs urge that there is no risk of perpetual tenancy because the 2008 tenant information sheet identifies Fox as the "tenant" of the apartment, Fox submitted pet forms to the owner in conjunction with the 2010 and 2012 lease renewals, and it is undisputed that Fox never vacated the apartment. Whether or not these facts are sufficient to satisfy Manocherian 's second requirement (cf. 501 East 87th St. Realty Co., 304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310');">304 A.D.2d 310 [fact that individual was president of corporate tenant and had occupied apartment for two decades held insufficient]; Avon Bard Co., 260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207');">260 A.D.2d 207 [fact that individual was pastor of the church listed as tenant held insufficient]), the fact remains that under our settled precedent, the corporate tenant is only entitled to the protections of rent stabilization if an individual tenant is named in the lease and no perpetual tenancy is created. Thus, the apartment was deregulated in 2008, and plaintiffs have no right to renew the lease.

         Plaintiffs are not aided by their reliance on Roberts v Tishman Speyer Props L.P. (13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270');">13 N.Y.3d 270 [2009], supra). Although a tenant cannot waive rent stabilization coverage where, as here, a building is receiving J-51 tax abatement benefits (id.; RSC § 2520.13), the apartment was no longer subject to rent stabilization protections upon the signing of the 2008 lease. As we explained in Gersten v 56 7th Ave. LLC (88 A.D.3d 189 [1st Dept 2011], appeal withdrawn 18 N.Y.3d 954 [2012]), "[t]he rent-regulated status of an apartment is a continuous circumstance that remains until different facts or events occur that change the status of the apartment " (id. at 199 [emphasis added]). Here, precisely such an event occurred to change the status of the apartment, in accordance with Manocherian: a high-rent vacancy deregulation occurred when, on May 19, 2008, at Fox's request, a market rate renewal lease was entered into by MBE at $25, 000 per month, without Fox being a signatory to the lease. Fox was thereby deemed to have vacated the apartment (see 501 E. 87th St. Realty Co., 304 A.D.2d at 310-311). From that time onward, Fox ceased being a tenant and no longer had any of the rights to which a rent-stabilized tenant is entitled, and therefore could not have waived them. Thus, the dissent's position that Fox, an attorney, effected an unknowing, and impermissible, waiver of such rights is without basis.

         For the same reason, Fox is not entitled to pursue his overcharge claim in this action (see Taylor v 72A Realty Assoc., L.P.) (151 A.D.3d 95, 102 [1st Dept 2017] ["challenges to the level of rent charged must be made within [the] four-year limitations period... immediately preceding the filing of a complaint"].

         All concur except Gesmer, J. who dissents in a ...


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