Scott E. Mollen

Landlord-Tenant—Fraud—Tenant Obtained Low Income Apartment by Understating Income by a Factor of Eight

A landlord commenced a holdover proceeding, alleging that the tenant had committed fraud in reporting his income and household composition. The tenant denied the allegations and moved for leave to obtain discovery. The landlord cross-moved for summary judgment.

The apartment was subject to the Rent Stabilization Law and regulations relating to “tax credits that require tenants to report their incomes and household compositions, including tax credits pursuant to 26 U.S.C. §42 and RPTL §421-a.” When the tenant moved into the apartment in May 2012, the tenant represented that his income fell below the level necessary to obtain the apartment. The tenant’s lease warned that “misrepresenting income or household composition is a ground for termination.” The tenant did not dispute the sworn income statement nor his income tax return for the year 2012, which showed that his income in 2012 was more than eight times greater than the income that he had listed when seeking the apartment.

The court explained that the tenant’s “sizable under-reporting of his income implicates his eligibility to be a tenant in the subject premises and constitutes a material misrepresentation triggering the default provision of [tenant’s] lease.”

The tenant argued that he had not misrepresented his income in May 2012, since the income form requested “anticipated income.” However, the tenant did not explain the “eightfold gulf between the income he ‘anticipated’ in May of 2012 when he executed the certification and the income he eventually reaped that year, nor provide any detail as to how any good faith ‘anticipation’ of [his] income at ‘x’ level in May of 2012 when he was trying to obtain a below-market-rent apartment intended for low-income individuals coincidentally and unforeseeably rose to ‘8x’ by the end of 2012.”

The court stated that the tenant “merely assigns the word ‘anticipated’ an unsustainable weight and leaves it at that.” The court opined that “[b]y itself, such a bald, conclusory assertion that [tenant] under-reported his income by a factor of eight because he erroneously ‘anticipated’ such a shortfall amounts to ‘a shadowy semblance of an issue’ insufficient to defeat summary judgment.” The tenant was required to “reveal his proofs in order to show real issues of fact that he is capable of establishing at trial in order to defeat [landlord’s] summary judgment motion.” Moreover, “[m]ere conclusions, expressions of hope, or unsubstantiated allegations or assertions are insufficient to defeat summary judgment.”

The tenant had also argued that the income he reported in May of 2012 was his actual income in 2011. The court stated that such argument contradicts the tenant’s position that the income he reported in May 2012, was his “anticipated” income and the tenant did not explain why his income from a prior year was a truthful statement as to the subsequent year. Furthermore, the income form required “current anticipated income.”

The court further explained that the landlord was not obligated to provide an opportunity to cure since the actual income would not entitle the tenant to obtain the occupancy. Additionally, this proceeding was not based on the section of the Rent Stabilization Code (RSC) concerning a breach of an obligation of the tenancy, but, based the proceeding on RSC §2524.3(c), “which permits a landlord to terminate a tenancy that is illegal because of the requirements of law, thus subjecting a landlord to, inter alia, civil penalties, or when a tenancy is in violation of contracts with governmental agencies.”

The court noted that “[a] landlord not in compliance with program requirements for low-income housing tax credits indeed risks losing said tax credits…., thus indicating Petitioner’s liability for failing to take action against Respondent for false reporting of income.” Thus, the RSC did not require service of a notice to cure.

The court also held that a review of the tenant’s occupancy by the New York State Housing (HFA) was not a valid defense. The respondent had not proved that “HFA adjudicated [tenant’s] cause of action in a litigation setting as opposed to merely reviewing the case.” The review stated “HFA closed its file on [tenant’s] case because HFA was satisfied with [landlord’s] response to the situation, in part because of [landlord’s] commencement of a holdover proceeding against [tenant].” Therefore, the HFA review did not establish a collateral estoppel defense or “raise an issue of material fact precluding summary judgment.”

DD 11th Ave. LLC v. Sans, Civ. Ct., N.Y. Co., Case No. 71058/2017, decided Jan. 29, 2018, Stoller, J.


Landlord–Tenant—Family Member Did Not Lose Succession Rights Because Absent Tenant Paid Rent And Had Signed Renewal Leases—Third Lenox Terrace Assoc. v. Edwards Distinguished

This decision involved an appeal to review a determination of the deputy commissioner of the NYS Division of Housing and Community Renewal (DHCR) dated July 1, 2014, which granted a Petition for Administrative Review and revoked a decision of a Rent Administrator (RA) dated April 29, 2013. The RA had found that an occupant (mother), was entitled to succession rights to a rent stabilized apartment (apartment). The trial court had granted the Article 78 petition, annulled the July 1, 2014 determination and essentially, reinstated the RA’s determination, finding that the mother was entitled to succession rights to the apartment.

Rent Stabilization Code (RSC) §2523.5(b)(1) and Public Housing Law §14(4)(a), under certain circumstances, vest family members living with tenants in stabilized apartments with succession rights. The appellate issue was “whether a family member who had been residing in an apartment with the tenant for years, and who had the right to seek succession when the tenant moved out of the apartment,” lost that right “by virtue of the fact that the tenant continued to pay the rent and executed a renewal lease after moving out.” The Appellate Division (Court) held that the family member (mother) did not lose her succession rights.

The tenant of record (tenant) had commenced occupancy in December 2003. Her mother lived in the apartment with the tenant from the outset of the tenancy. The tenant had signed a lease renewal in September 2005, which listed the mother as an additional occupant. Although the tenant moved to Virginia in 2008, she continued to pay rent for the apartment and in September 2009, executed a renewal lease for a period ending Dec. 31, 2011. The mother continued to live in the apartment without the tenant. In September 2011, the landlord served a notice of intention to not renew the lease on the ground that the tenant “lived in Virginia and had not been seen” at the property “since at least February 2010.” The mother filed a complaint with DHCR.

The mother’s documentary evidence established that she lived in the apartment since 2003 and she was a disabled senior citizen. The tenant alleged that she had called the building’s former manager to try to add the mother’s name on the lease as a primary tenant, but was told that such change was unnecessary since she was already listed as an occupant.

A DHCR Deputy Commissioner, citing the Appellate Division, First Dept. decision in ‘Third Lenox Terrace Assoc. v. Edwards,’ (91 AD3d 532) (Third Lenox Terrace), held that the mother was not entitled to succession rights. The mother then commenced the subject Art. 78 proceeding.

Although the tenant moved out of the apartment in 2008, the landlord argued that the tenant did not “permanently” vacate the apartment at that time because she continued to pay rent and in September 2009, had executed a renewal lease for a term ending Dec. 31, 2011. The landlord asserted that the tenant only permanently vacated the apartment when the last renewal lease expired on Dec. 31, 2011 and the mother was not entitled to succession rights because, during the one year period immediately prior to Dec. 31, 2011, the mother had not resided with the tenant.

The court acknowledged that there was case law which supported the landlord’s interpretation of the applicable regulations and the “language of the regulation is arguably ambiguous in that it could be read in a manner suggested by [landlord].” However, the court reasoned that “in promulgating [RSC] §2523.5(b)(1), the DHCR intended the ‘permanent vacating of the housing accommodation by the tenant’ to mean the time that the tenant permanently ceased residing at the housing accommodation, and that the mere execution of a renewal lease and the continuation of rent payments by the tenant after the tenant permanently ceases to reside at the housing accommodation does not extend the relevant time period.”

Thus, the court held that “the relevant one- or two-year period (depending on whether or not the family member is a senior citizen or disabled) in which the family member must ‘reside with’ the tenant is the one- or two-year period immediately prior to when the tenant ceases residing at the housing accommodation.” Since the succession rule was intended “to prevent displacement of family members who have been residing with tenants…for long periods of time….,” the court saw “no reason why the DHCR would intend to deny succession rights to a family member who had been residing in a unit for a long…time merely because there was a period of time when the named tenant no longer resided there but still maintained some connection to the property.” Here, the mother “would have been entitled to succession if she had sought it immediately after her daughter moved out of the apartment in 2008.”

Generally, an agency’s “‘interpretation of its own regulations is entitled to deference if that interpretation is not irrational or unreasonable.’” However, before the Third Lenox Terrace decision, DHCR had not interpreted the RSC as barring “a family member of a tenant, who had moved out but continued to pay the rent and sign renewal leases from making a succession claim.” Although DHCR initially asserted that the mother was not entitled to succession rights based on the Third Lenox Terrace decision, DHCR changed its position on appeal and then contended that the mother should not be barred from succeeding to the lease, simply because the tenant continued to pay rent and executed a renewal lease after she moved out of the apartment.

Some decisions interpreting RSC §2523.5(b)(1), involved the contexts where tenants had moved out, but continued to execute renewal leases and courts were “concerned with fraud on the part of the tenant and prejudice to the landlord resulting from any fraud.” Here, the tenant had executed only one renewal lease after moving out of the apartment as opposed to the three two-year renewal leases which had been executed by the tenant in ‘Third Lenox Terrace.’ The court opined that the execution of one renewal lease after moving out of an apartment, did “not necessarily indicate an attempt to deceive the landlord.” This is especially so since the mother would have been entitled to succession if she had asserted a succession claim immediately before the daughter moved out in 2008. “For the purposes of succession, [mother and tenant] had nothing to gain by representing that [tenant] was still living there.”

Under these circumstances, the court found that the landlord had not been “prejudiced by any misrepresentation or delay” and the mother was entitled to succession rights.

Matter of Jourdain v. N.Y.S. Div. of Housing & Cmty. Renewal, App. Div., 2nd Dept., Case Number: 2015:10508, decided Jan. 31, 2018, Decision by Hall, J. Mastro, J.P., Cohen and Iannacci, JJ. concur.


Scott E. Mollen is a partner at Herrick, Feinstein.