Opinion
071255/04.
Decided November 3, 2004.
Kucker Bruh, LLP (Jodi M. Materna of counsel), New York City, for petitioner.
Respondent Pro Se.
In this nonpayment proceeding, petitioner, William Curry, seeks arrears from respondent, Marco Battistotti, in the amount of $21,579.63 allegedly owed from March 2002 through November 2004. The court finds after trial that respondent was subject to significant rent overcharges and that respondent is entitled to an abatement for conditions in his apartment.
At trial, petitioner admitted that from September 1999 until August 2002, he submitted false registration statements with the New York State Division of Housing and Community Renewal (DHCR). The false registration statements listed Jennifer Goold instead of respondent as the tenant of the subject premises, a rent-stabilized apartment. Goold was the tenant in the apartment before respondent moved in. Petitioner testified that he viewed respondent as Goold's subtenant, even though petitioner knew that Goold had permanently moved to Boston by July 1999, before respondent moved into the apartment. Petitioner also testified that he directed respondent to pay the rent in cash. Petitioner further testified that he orally agreed with respondent to lease the apartment on a month-to-month basis. Petitioner admitted, moreover, that he did not offer a written lease to respondent, an immigrant with limited knowledge of the English language. Petitioner additionally testified that he rented the apartment to respondent for $900, which respondent paid from July 1999 until March 2000. Petitioner stated that he rented the apartment to respondent for less than the legal regulated rent because respondent occasionally worked for him.
In April 2000, petitioner and respondent entered into a second oral agreement. Respondent agreed to pay $1254.81 a month, or $354.81 more than the $900 agreed-upon rent. Respondent paid petitioner that additional $354.81 a month as a down payment for a larger apartment that petitioner promised respondent. By February 2002, it became apparent to respondent that petitioner would not give respondent the larger apartment. To rectify petitioner's breach of the parties' second oral agreement, respondent decided not to pay rent from March 2002 through June 2002.
On July 31, 2002, petitioner finally registered respondent's tenancy with the DHCR. Petitioner registered the $1254.81 a month rent but did not register the preferential rent petitioner had first given to respondent. The parties then entered into a two-year "renewal lease" in July 2002 for a monthly rent of $1330.10. Respondent did not, however, pay the agreed-upon rent in full throughout the two-year "renewal lease" period. Respondent believed that petitioner owed him an abatement of rent for defects in the apartment. In July 2004, the parties entered into a second "renewal lease" for one year for a monthly rent of $1389.95.
Before the court are three issues. The first is the length of time to which a tenant is entitled to pay a preferential rent when a landlord initially fails to offer the tenant a written rent-stabilized lease. The court concludes that when a landlord does not offer a valid original lease for a tenancy registered with the DHCR, the preferential rent lasts until a valid lease is entered into and registered. The second issue is whether the statute of limitations bars this court from reaching back to determine a rent overcharge. The court concludes that petitioner first registered with the DHCR within the last four years, and thus that the court can look to the period four years before the registration to calculate any rent overcharges. The third issue is whether conditions in the apartment warrant a rent abatement. The court concludes that they do.
Under Rent Stabilization Code (9 NYCCR) § 2521.2, a landlord must register the legal regulated rent with the DHCR. If a tenant pays a lower agreed-upon rent than the legal regulated rent registered with DHCR, that rent is a preferential rent. ( Id.) A preferential rent then becomes the starting point for any lawful adjustments. ( Id.) The preferential rent is the starting rent to calculate rent increases after the initial preferential rent. ( Id.)
On June 15, 2003, the Legislature passed Chapter 82, which repealed parts of both the New York City Rent Stabilization Code and the Emergency Tenant Protection Regulations. Section 6 of Chapter 82 of the Laws of 2003 provides that when a tenant has paid preferential rent, "the amount of rent . . . which may be charged upon renewal or upon vacancy thereof may, at the option of the owner, be based upon such previously established legal regulated rent." Chapter 82 imposes a condition that both the legal regulated rent and the preferential rent be properly registered with the DHCR and be "specifically provided for in the lease agreement/lease renewals, subject to DHCR's review." (DHCR Fact Sheet Number 40: Preferential Rents and Rent Concessions for Rent Stabilized Apartments, http://www.dhcr.state.ny.us/ora/pubs/pdf/orafac40.pdf, accessed October 22, 2004.)
Petitioner argues that Chapter 82 supports his contention that the legal regulated rent is the starting rent to calculate the rent increase for the renewal leases that petitioner had respondent sign. Petitioner argues that he is allowed to raise the preferential rent to the legal regulated rent when the lease was renewed in July 2002. Petitioner relies on Matter of Missionary Sisters Sacred Heart v. DHCR ( 283 AD2d 284 [1st Dept 2001]), in which the Appellate Division found that a preferential rent does not automatically become the base rent to calculate future rent increases for the entire tenancy when the parties agree otherwise in writing. The court disagreees.
Chapter 82 applies only to tenancies created by a valid original lease. The lease between petitioner and respondent was invalid and unlawful because it was a month-to-month oral lease for a rent-stabilized apartment with an unregistered preferential rent. Petitioner covered up the oral agreement when he registered the apartment in the name of a fictitious tenant. Rent Stabilization Code (9 NYCCR) § 2528.4 gives owners an incentive to register all rent-stabilized units because of the possible penalties for nonregistration. Under § 2528.4 (a), an owner's failure to register a rent-stabilized apartment bars the owner from collecting any rent above the base-date rent plus any lawful increases. The base-date rent is the amount the owner charged four years before a tenant files an overcharge complaint. ( 9 NYCRR § 2520.6 [f].)
A new base rent should be set when a court learns that a landlord has abused the rent-registration system. In Lyndonville Properties Mgmt., Inc. v. DHCR ( 291 AD2d 311, 312 [1st Dept 2002]), the court held that the DHCR acted rationally to fix the base rent for an apartment in the amount stated in the first reviewable registration statements rather than in the unexplained amount that the landlord actually charged and collected. The court found that the landlord attempted to collect rent above what it had filed with the DHCR, that the landlord did not offer the tenants a lease for more than a decade, and that the landlord filed false registration statements with the DHCR using fictitious names for the tenants. ( Id. at 311-312.) The court determined that to allow the landlord to charge more than the legal regulated rent that it falsely registered with the DHCR would "undermine the registration system." ( Id. at 312.) Here, similarly, petitioner abused the registration system. Petitioner did not allow the DHCR to recognize the preferential rent first agreed upon, given that he never filed the preferential rent with the DHCR. Petitioner also falsified registration statements using fictitious names for the tenant and did not offer respondent a written lease agreement for more than three years. The court will therefore set the base-date rent at the initial preferential rent of $900.
The preferential-rent amount to which both petitioner and respondent agreed at the beginning of the tenancy remains the starting point for later adjustments throughout respondent's tenancy. When no written original lease agreement exists between the parties, the preferential rent "shall remain in effect until such tenant vacates." ( Matter of Melendez v. DHCR, 304 AD2d 580, 581 [2d Dept 2003] [holding that preferential rent shall remain throughout tenancy].) The Melendez court emphasized the importance of a valid written original lease agreement, which the State legislature codified a few months later in Chapter 82. Chapter 82 provides that "the amount of rent . . . may be based upon such previously established legal regulated rent." Petitioner should have properly registered the rent with the DHCR to establish the legal regulated rent. Instead, petitioner did not offer respondent a written lease agreement and never registered the preferential rent with the DHCR. Chapter 82 does not apply when a landlord does not have a valid written original lease properly registered with the DHCR.
During trial, petitioner admitted that he lied to the DHCR by registering a fictitious tenant as the legal tenant from September 1999 through July 2002, even though respondent was living in the apartment during that time. Petitioner also admitted that he required respondent to pay the preferential rent in cash and that he never registered the preferential rent with the DHCR. Petitioner did not want the DHCR to recognize the lease agreement between petitioner and respondent. This court will also not recognize an invalid lease agreement between the parties. A landlord's ability to increase a preferential rent from a valid original lease to the legal regulated rent through a renewal lease under Chapter 82 cannot apply to the facts of this case. Under Chapter 82, a landlord may change the preferential rent to the legal regulated rent in a renewal lease if a valid original lease is properly registered with the DHCR. But here there was no valid original lease. And a lease that never existed cannot be renewed.
In respondent's answer to the nonpayment petition, he claimed that he deserves a "credit" for the amount of money he was paying over the agreed-upon preferential rent. The court interprets that claim as an overcharge counterclaim. Petitioner opposes giving any credit. Petitioner argues that if the court finds that he is engaging in rent overcharging, the statute of limitations limits his liability. According to petitioner, the statute of limitations on respondent's overcharge claim has run. Petitioner relies on CPLR 213-a, which provides that the court may not consider rent overcharges that occur more than four years before a tenant interposes an overcharge claim. Respondent's overcharge complaint is not time-barred. There are two separate four-year limitation periods. Under CPLR 213-a, the statute of limitations for a residential rent overcharge action is four years before the tenant files a rent-overcharge complaint. Under Rent Stabilization Law (RSL) (Administrative Code of City of NY) § 26-516 (a) (i), the legal regulated rent to determine an overcharge is the registered rent four years before the most recent registration with the DHCR. The two statutes of limitation are not exclusive; they must be read together. ( Crabtree v. DHCR, NYLJ, July 19, 2000, at 23, col 3 [Sup Ct, NY County].) If petitioner registers with the DHCR within four years of a tenant's overcharge complaint, that registration is challengeable even where the registration relates to a year earlier than the four years from which the tenant filed the overcharge complaint. ( Id.) Petitioner registered respondent and the rent amount for the apartment with the DHCR on July 31, 2002, which is within four years of respondent's overcharge claim. This court can therefore look back to when the rent overcharges began — in April 2000.
The rent respondent should have paid during the tenancy will be calculated according to the Rent Guidelines Board rent increases for rent-stabilized apartments, with the preferential rent of $900 as the starting rent. Under RSL (Administrative Code of City of NY) § 26-510, the Rent Guidelines Board establishes rent adjustments for the units subject to the New York City RSL. ( See Administrative Code of City of NY § 26-510 [b]; see also Rent Guidelines Board, Mission Statement, http://www.housingnyc.com/html/about/about.html, accessed October 27, 2004.) The adjustment for a one-year renewal lease commencing between October 1, 1999, and September 30, 2000, is two percent. (Order 31.) The adjustment for a one-year renewal lease commencing between October 1, 2000, and September 30, 2001, is four percent. (Order 32.) The adjustment for a two-year renewal lease commencing between October 1, 2001, and September 30, 2002, is six percent. (Order33.) The adjustment for a one-year renewal lease commencing between October 1, 2003, and September 30, 2004, is four and a half percent. (Order 35; see Rent Guidelines Board, Apartment and Loft Guidelines, http://www.housingnyc.com/html/guidelines/apt.html, accessed October 27, 2004.)
Under the Rent Guidelines Board adjustments, the following are the proper rent increases for this apartment over the past five years. From July 1999 through June 2000, the rent for the apartment was $900 a month. From July 2000 through June 2001, the rent should have been $918 a month (by calculating the two percent increase allowed by the Rent Guidelines Board): $900 × 2% + $900. From July 2001 through June 2002, the rent should have been $954.72 a month (by calculating the four percent increase allowed by the Rent Guidelines Board): $918 × 4% + $918. From July 2002 through June 2004, the rent should have been $1012 a month (by calculating the six percent increase allowed by the Rent Guidelines Board): $954.72 × 6% + $954.72. From July 2004 through June 2005, the rent should have been $1057.54 a month (by calculating the four-and-a-half percent increase allowed by the Rent Guidelines Board): $1012 × 4.5% + $1012.
Respondent is entitled to a credit for being overcharged rent since April 2000. The following is a breakdown of the money paid and owed over the course of the tenancy, all consistent with both parties' testimony at trial. From July 1999 through March 2000, respondent paid $900 a month. From April 2000 through June 2000, respondent paid $1254.81 a month, but petitioner was entitled only to $900 a month. Petitioner overcharged respondent by $354.81 a month, totaling $1064.43 for those three months. From July 2000 through June 2001, respondent paid $1254.81 a month, but petitioner was entitled to charge only $918 a month. Petitioner overcharged respondent $356.81 a month, totaling $4141.72 for those twelve months. From July 2001 through February 2002, respondent paid $1254.81 a month, but petitioner was entitled to charge only $954.72 a month. Petitioner overcharged respondent by $300.09 a month totaling $2400.72 for those eight months. From April 2000 through February 2002, petitioner overcharged respondent a total of $7606.87.
From March 2002 through June 2002, respondent did not pay the calculated corrected monthly rent of $954.72. Respondent owes petitioner $3818.88 for those four months. In July 2002, respondent paid $1200.72, but petitioner was entitled to charge only $1012 a month.
Petitioner overcharged respondent by $188.72 for the month of July 2002. From August 2002 through September 2002, respondent did not pay the court-calculated monthly rent of $1012. Respondent owes petitioner $2024 for those two months. In October 2002, respondent paid $240 of the $1012 to which petitioner was entitled. Respondent owes petitioner $772 for October 2002. In November 2002, respondent paid $758.16 of the $1012 to which petitioner was entitled. Respondent owes petitioner $253.84 for November 2002. In December 2002, respondent paid $872.88 of the $1012 to which petitioner was entitled. Respondent owes petitioner $139.12 for December 2002. From January 2003 through June 2004, respondent paid $914.45 a month of the $1012 to which petitioner was entitled. Respondent owes petitioner $97.55 a month for those eighteen months, for a total of $1755.90. From March 2002 through June 2004, respondent owes petitioner $8575.02.
From July 2004 through August 2004, respondent paid $1389.95, but petitioner was entitled to charge only $1057.54. Petitioner overcharged respondent $332.41 a month for those two months, totaling $664.82. In September 2004, respondent did not pay the current calculated rent of $1057.54. From July 2004 through September 2004, respondent owes petitioner $392.72. For October 2004 and November 2004, respondent owes petitioner $2115.08, calculated as two months of the adjusted preferential rent of $1057.54.
Upon the full calculation, this court finds that from April 2000 through November 2004, the total amount respondent owes petitioner is $3475.95.
The court may award a tenant treble damages against a landlord who overcharges the tenant for rent. Once the court finds that a landlord overcharged a tenant, the burden shifts to the landlord to establish by a preponderance of the evidence that the overcharges were not willful. ( See e.g. Chu v. DHCR, 231 AD2d 567, 568 [2d Dept 1996, mem]). Petitioner has failed to establish that his rent overcharge was not willful. He intentionally deceived the DHCR, the court, and respondent. But treble damages can be calculated only from an amount that respondent paid over an amount that petitioner is owed. The court cannot award treble damages to respondent. Although petitioner overcharged respondent, respondent owes petitioner $3475.95, as calculated from the rent paid and owed from March 2000 until November 2004.
Respondent also counterclaimed for an abatement due to the breach of the warranty of habitability. An abatement based on a breach of the implied warranty of habitability under RPL § 235-b protects against conditions that materially affect a tenant's health and safety of or those deficiencies a reasonable person would believe deprive a tenant of the essential functions expected of residence. ( See e.g. Solow v. Wellner, 86 NY2d 582, 588-589.)
The court relies on respondent's testimony as well as on photographs of the building to determine what conditions existed in and around the apartment. The court also relies on the testimony of Robert Goldrick, the former tenant (and Jennifer Goold's husband), whom the court finds credible. The court discredits petitioner's testimony.
From March 2002 until it was cured in September 2002, the front door lights and lobby lights were not working properly, wires on the front door buzzer were exposed, the lobby was cluttered with personal belongings, and rotting wood and rusted nails protruded out of the step leading into respondent's shower. From March 2002 until it was cured in October 2002, nails protruded out of the wood panel placed in the front door, broken glass was in the front door, and respondent's smoke detector was broken. From March 2002 until it was cured on December 2002, paint in the public lobby was chipping. From March 2002 until it was cured in July 2004, the bathroom faucet leaked constantly.
Some conditions have existed since March 2002 and have not been repaired. Respondent's wood floor is cracked and splintered. Garbage is kept in the open in the public lobby. Respondent's windows have gaps in them that allow cold air to seep in. Mice and roaches have been entering the apartment through a hole in the kitchen.
Respondent showed through his testimony and pictures that the above conditions impacted or affected his health, safety, and welfare and use of the premises. Respondent is entitled to a five percent abatement for the conditions that exist and have existed in the apartment. Petitioner must inspect and repair, as required by law, those conditions that have not yet been corrected. The parties are to agree on dates for petitioner to have access to respondent's apartment to fix the remaining conditions.
A five percent abatement of the monthly rent beginning March 2000 until September 2004 is calculated as followed. From March 2000 through June 2000 an abatement of $45 ($900 × 5%) a month for a total of $180 ($45 × 4 months). From July 2000 through June 2001 respondent is entitled to an abatement of $45.90 ($918 × 5%) a month for a total of $550.80 ($45.90 × 12 months). From July 2001 through June 2002 respondent is entitled to an abatement of $47.74 ($954.72 × 5%) a month for a total of $572.88 ($47.74 × 12 months). From July 2002 through June 2004 respondent is entitled to an abatement of $50.60 ($1012 × 5%) a month for a total of $1214.40 ($50.60 × 24 months). From July 2004 through November 2004 respondent is entitled to an abatement of $52.88 ($1057.54 × 5%) a month for a total of $264.40 ($52.88 × 5 months). The total abatement owed to respondent for the conditions in the apartment is $2782.48.
Respondent owes petitioner $693.47, calculated as the difference in outstanding rent through November 2004 owed to petitioner minus the total abatement awarded to respondent ($3475.95-$2782.48). Final possessory judgment for petitioner, therefore, for $693.47. Warrant to issue forthwith. Execution stayed for five days from entry of judgment with notice on respondent.
Petitioner is ordered to give respondent an original lease, to be registered with the DHCR, for $1057.54 a month. That rent is determined by calculating a four-and-a-half percent increase to the preferential rent for 2004: $1012 multiplied by four-and-a-half percent added to the previous rent of $1012.
This opinion is the court's decision and order.