First Hudson Capital, LLC v. Seaborn

Order of the Appellate Term of the Supreme Court of the State of New York, First Department, entered on or about March 30, 2007, which affirmed a judgment of the Civil Court, New York County (Gerald Lebovits, J.), entered June 20, 2005, after a nonjury trial, awarding possession to petitioner in a summary holdover proceeding, and modified an order, same court and Judge, entered on or about July 29, 2005, denying respondent’s motion to vacate the warrant of eviction and granting petitioner’s cross motion for a hearing to determine the fair market use and occupancy of the premises since the date of termination, to the extent of denying the cross motion and remanding the matter for further proceedings to determine the amount of use and occupancy due to petitioner, limited to the amount charged for the premises by petitioner plus additional amounts received by respondent as a result of the illegal roommate arrangements, reversed, on the law, without costs, the Civil Court orders vacated, the petition denied and respondent’s motion to vacate the warrant of eviction granted.

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 (BLE Realty Holding Corp. v Kasher, 299 AD2d 87, 91 [2002], Iv 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], Iv 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], Iv 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. Concur—Mazzarelli, J.P., Andrias and Sweeny, JJ.