Scott E. Mollen

Landlord-Tenant—Court Dismissed Claim for Possessory Judgment Based on Laches

A landlord commenced a summary proceeding against a tenant, seeking a money judgment and possession of an apartment based on nonpayment of rent. The tenant asserted a defense of laches. The court held a trial on the matter.

The landlord proved that the parties had a landlord-tenant relationship; the apartment was subject to the Rent Stabilization Law (RSL), the landlord complied with the registration requirements of 9 N.Y.C.R.R. and MDL §325; the tenant owed rent arrears before commencement of the proceeding and the landlord had made a proper and timely demand for payment of rent pursuant to RPAPL §711(2) in April 2016. The landlord’s ledger showed that the tenant was entitled to a credit of $90 as of December 2013.

The ledger also showed that the tenant “paid the monthly rent, in full, from July of 2015 onward.” The ledger additionally showed that the tenant had not paid rent for the months of December 2013, January 2014, March 2014, April 2014, June 2015 and May 2018 (the month in which the court held the trial). The tenant had paid $0.16 more than the monthly rent for 20 months and $0.50 more than the monthly rent for 16 months.

The landlord’s managing agent testified that the ledger “belatedly credited six rent payments, including but not limited to September of 2015 and March of 2016, because [tenant], at his own expense, traced money orders for rent paid for those months.” He further testified that he had contacted the tenant after a prior nonpayment proceeding in 2013 and did not receive a response.

The tenant testified that he is unemployed, has lived in the apartment for 25 years, had always paid his rent on time, did not know that the landlord “would sue him for nonpayment of rent,” and he did not know how he could pay the arrears that the landlord now sought, he had traced money orders and he had delivered the rent for May 2018 to the landlord, although the ledger did not yet show the payment.

The tenant had overpaid a total of $11.20 and on crediting such amount, there remained a balance of $4,920.16, without including May 2018 rent.

The court rejected the tenant’s argument that the landlord’s “admitted failure to credit six prior rent payments discredits the entirety of the ledger.” The ledger was “a business record and the ledger” had otherwise credited all payments that the tenant had made.

The tenant asserted a defense of laches to the claim for a judgment of $4,920.16. “The first month of this amount of arrears accrued in January of 2014” and the “last month accrued in June of 2015.” The landlord had first served a demand for rent in April of 2016.

The court explained:

In order to establish laches, a party must show: (1) conduct by an offending party giving rise to the situation complained of; (2) delay by the complainant in asserting his or her claim for relief despite the opportunity to do so; (3) lack of knowledge or notice on the part of the offending party that the complainant would assert his or her claim for relief; and (4) injury or prejudice to the offending party in the event that relief is accorded the complainant. All four elements are necessary for the proper invocation of the doctrine.

The court noted that “[t]he eight-month delay in between the last month of nonpayment and [landlord’s] demand for rent can potentially establish actionable delay for laches purposes.” A trial court decision had observed that “the general practice of the Second Department has been to disallow a possessory judgment based upon rent arrears older than six months.” The court further stated that “[l]aches is not a fixed time frame like a statute of limitations, and as an equitable doctrine, the length of actionable delay differs for every individual case.”

Here, the landlord admitted that the tenant had made six rent payments that had not initially been credited to the tenant’s account. The court stated that the “landlord’s repeated failure to credit payments certainly does not do anything to impart to a tenant that a tenant owes arrears, particularly when the tenant is as convinced that the tenant paid all the rent as [landlord] has been. These errors of [landlord], together with the passage of eight months in between the last month of a missing rent payment are specific facts that demonstrate that [tenant] has proven the first three elements of his laches defense.”

Furthermore, a tenant asserting “a laches defense can demonstrate prejudice” by showing “their inability to pay accumulated arrears due to having a low income.” Here, the tenant had “testified credibly” that he is currently unemployed and lacks the money to pay the rent arrears.

Accordingly, the court held that the tenant had “satisfied the elements of a laches defense.” Although the court dismissed the landlord’s claim for a possessory judgment, the court held that the landlord was entitled to a money judgment in the amount of $4,920.16. Since the tenant had testified that he had mailed the May 2018 rent, the court’s ruling was without prejudice to each parties’ rights with respect thereto.

Park N. Realty v. Cheik, Civ. Ct., N.Y. Co., Index No. 62392/2016, decided June 6, 2018, Stoller, J.

Landlord-Tenant—Tenants Defeat NYC Dep’t of Finance’s Effort to Recoup DRIE Credits; Tenants May Not Simultaneously Receive DRIE and SCRIE Benefits

This case involves an Article 78 proceeding commenced by tenants in premises owned by a co-respondent landlord, “seeking to reverse and annul” a decision by the co-respondent NYC Department of Finance (city). The city sought to recoup monies “allegedly erroneously paid to [landlord] on their behalf” under “the Disability Rent Increase Exemption Program (DRIE).” DRIE and its related program SCRIE (Senior Citizen Rent Increase Exemption) provide “an exemption against future rent increases for eligible disabled persons or senior citizens in rent regulated apartments as of the date of eligibility.” The DRIE exemption provides “the landlord with tax credits to make up the difference between the frozen rent and what the tenants would be paying without the program.”

The petitioner husband has received SCRIE benefits since March 2014 and continues to receive such benefits. On or about November 2013, the petitioner wife was injured in an accident and rendered bedridden. She applied in February 2014, for DRIE benefits “at the suggestion of a social worker handling her case.” The petitioners claimed they were “unaware that a single household could not receive both SCRIE and DRIE benefits simultaneously and that due to petitioners’ limited language proficiency they merely followed the directions of the social worker, who visited their home with an interpreter.”

On or about June 19, 2014, the city granted the petitioner wife’s application for DRIE benefits with “the amount of rent payable by petitioners to be frozen at $1,959.77.” The landlord had first subtracted the SCRIE and then the DRIE credits as reported by the city “from the amount of rent due in calculating the balance due from the…tenants.”

The city, in its answer, explained:

After issuing the DRIE order, DOF [Department of Finance] mistakenly provided the Landlord…with an additional monthly tax credit of $151.88 for twenty months-representing the difference between the contract rent and the tenant’s frozen rent-even though the Landlord…was already receiving this monthly tax credit through the SCRIE order. In early 2016, DOF recognized that it had been providing the Landlord…with a double tax credit in conjunction with the SCRIE and DRIE benefits. Subsequently, by notice dated February 1, 2016, DOF revoked the Petitioners’ DRIE benefits retroactive to July 1, 2014…. Accordingly, DOF sought to recoup $2,875.46 in tax credits to the Landlord…that it had mistakenly provided in conjunction with [tenant wife’s] DRIE order.

The wife filed for an administrative appeal of the DRIE revocation. In March 2016, the city denied the appeal based on a “rule that SCRIE and DRIE benefits cannot be simultaneously received by the same household.” The city then sought “to recoup the DRIE credits.” The landlord had commenced a non-payment proceeding against the petitioners in the Housing Court. But the court had stayed such proceeding. The tenants were current in their rent except for the “amount sought in recoupment” by the city.

The petitioners argued that the city’s effort to recoup the DRIE credits is “arbitrary and capricious because the DRIE application and the DRIE order issued by the…city failed to set forth that there was any prohibition on receiving DRIE and SCRIE simultaneously and there is no evidence nor allegation that the petitioners or the landlord made any false…statement or misrepresentation with respect to the DRIE credits initially granted by the city.”The wife filed for an administrative appeal of the DRIE revocation. In March 2016, the city denied the appeal based on a “rule that SCRIE and DRIE benefits cannot be simultaneously received by the same household.” The city then sought “to recoup the DRIE credits.” The landlord had commenced a non-payment proceeding against the petitioners in the Housing Court. But the court had stayed such proceeding. The tenants were current in their rent except for the “amount sought in recoupment” by the city.

The city countered that “the amount of rent to be paid by the petitioners was clearly set forth in the DRIE and SCRIE orders and…therefore the petitioners were not prejudiced by any additional credits issued to the landlord on their behalf to the extent they exceed those to which they were entitled.”

The petitioners did not challenge the city’s revocation of DRIE benefits in the Feb. 1, 2016 order to the extent that the “Order revokes the issuance of any credits after that date.” The salient issue was whether the city’s claim for recoupment based on the subject facts is appropriate.

Precedent held that “where there is no valid SCRIE/DRIE order issued by the city, recoupment is an appropriate remedy because a landlord is not authorized to take a tax abatement unless a valid order has been issued and a landlord is required to take reasonable steps to determine whether a tenant has been certified as eligible for SCRIE/DRIE.” Recoupment has also been held to be appropriate “where evidence established that the deceased tenant had not submitted any renewal/recertification applications from after 1984 even though the landlord, aware of this fact, continued to claim abatements.”

In the subject case, the city had issued a DRIE exemption order to the wife. Thus, the city had granted the landlord an abatement on the basis of the city’s issuance of the DRIE order. The city did not argue that the DRIE application had been “improperly completed.” Although the city argued that “it ‘mistakenly’ provided the landlord with a DRIE tax credit,” the court found that such argument was “incorrect because the city itself issued the order and followed it.” The court noted that “[a]ny mistake was not in the payment, but in the city’s processing of the petitioner’s initial application.” Unlike prior cases, the subject landlord had not retained “any benefit from the credits but fully passed them through to the tenants.”

The court concluded that “where there is no allegation of intentional misconduct by the tenants or the landlord in applying for or receiving the DRIE exemption; the city issued a DRIE order which the landlord and the tenants properly obeyed; and there was no notice to either the tenants or landlord that the benefits claimed were in anyway improper; it would be unfair and against the purpose of the program to allow the city to retroactively deny those benefits in a manner that would cause the tenants the very financial harm the DRIE program was created to avoid in the first place. The city is the only party which had in its possession all the information needed to determine the validity of the order it issued and therefore it is equitable to place the burden on the city of administering the program by verifying its records in cases such as these.” Furthermore, “[t]he city cannot claim to be surprised by such a result since a Justice of this Court has previously rejected its arguments to place the burden of recoupment in SCRIE/DRIE matters on innocent parties.” See Coccaro v. Stupp, 166 Misc.2d 948, 952 (Sup Ct, NY County 1995).

Coccaco found that the agency was attempting “to place the burden of the mistake that occurred between the landlord and the SCRIE agencies upon the senior citizen tenant, the innocent party who is in need of the most protection.” See also, Dwyer v. Department of Hous. Preservation & Dev., (Index No. 41092/95) (Dwyer). Dwyer held that “[i]t would be inequitable to subject a tenant to eviction for arrears when he was unaware it was…owing” and lacked “the opportunity to budget his income…for the increased rent and now faces a judgment for the arrears. The tenant was blameless and any loss should be borne by the responsible party.”

Here, the city had “issued a DRIE order based upon an application which was properly completed. There was no fault by the petitioners nor landlord and any fault was on the part of the city….” Therefore, the court found that the tenant was entitled to “rely on the…conduct…of HPD [in] granting [the] exemption for the disputed period.”

Accordingly, the court granted the petition to the extent of vacating that part of the determination that sought to retroactively recoup “DRIE credit amounts granted to the petitioners’ landlord prior to” the city’s determination of Feb. 1, 2016.

Matter of Sung v. Jiha, Sup. Ct., N.Y. Co., Index No. 100807/2016, decided May 16, 2018, James, J.

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