Scott E. Mollen

Landlord-Tenant—Rent Control Tenant Was Not Primary Resident—Substantial Documentation Showed NYC Address, But Tenant Failed To Maintain “Ongoing, Substantial, Physical Nexus” for Actual Living Purposes—Medical Care in Puerto Rico Did Not Establish “Medical Necessity” to Remain in Puerto Rico—Tenant Sublet NYC Apartment

A landlord commenced a holdover proceeding against a rent-control tenant. The landlord alleged that the tenant “does not maintain the subject premises (apartment) as her primary residence.” The tenant owned two homes in Puerto Rico, occupancy of one Puerto Rico home was a condition of mortgage, her “income tax returns…showed that [tenant] took home mortgage tax deductions” with respect to the Puerto Rico homes and had sublet the apartment.

The tenant is married. She testified that her husband lives in the apartment. She stated that she had some “personal issues,” a “little spat,” with her husband. The husband allegedly had a job as a super in another building, but did not have to be at that building 24 hours a day. The husband co-owns the Puerto Rico homes with the tenant. She claimed that her husband came to Puerto Rico “many times between 2013 and 2015.”

The tenant acknowledged that she had “some kind” of a personal relationship with a woman. The court referred to her as the tenant’s paramour. The paramour was given keys to the apartment and stayed at the apartment in 2013 or 2014. The tenant denied that the paramour sublet the apartment. However, she had testified in deposition that the paramour gave the tenant $500 a month “for a time including when respondent was not in the subject premises.”

The tenant also claimed that she took “psychiatric medications.” The tenant had allegedly bought the first Puerto Rico home so that she could “get some space” from her husband. She claimed that the paramour gave her “money sometimes as a casual gift” and her relationship with the paramour caused her “anxiety and shame about her sexual orientation….” She had allegedly gone to Puerto Rico “to think about things” and had become unhappy when she learned that in Puerto Rico, “English is not spoken there.” The tenant produced substantial documentation that listed the apartment as her address.

A friend of the tenant testified that the tenant had been in Puerto Rico for “a couple of months in 2014,” the tenant was unhappy in Puerto Rico because of the inability to speak Spanish and the tenant expected to live in the apartment for the rest of her life. Another tenant witness testified that between 2013 and 2015, she had observed the tenant’s furnishings and papers in the apartment and that had been told that the tenant was “stuck in Puerto Rico having oral surgery.”

The tenant testified that she received Social Security Disability income based on her suffering from a “major depressive disorder, panic attacks, agoraphobia, and paranoia.” The tenant’s credit card and/or debit card purchases showed purchases in Puerto Rico on numerous occasions in 2013, 2014 and 2015. Bank and credit card statements had been mailed to the tenant at the apartment between September 2013 through October 2015 and Social Security income had been sent to the apartment.

Car insurance, medical bills, voter registration records and insurance bills had also been sent to the apartment. Her driver’s license and reduced fare metro card listed the apartment as her address. The tenant’s federal and New York income taxes for 2013 and 2014, which were filed in 2014 and 2015, also showed the apartment as her address. The tenant noted her medical care in New York City, citing her “primary care physician, a gynecologist, an asthma specialist and an audiologist” and her purchase of a cemetery plot in Queens, New York, because her mother was interred there.

The tenant asserted that while in Puerto Rico, she required “painful dental procedures” and had remained in Puerto Rico “because she was afraid of getting a blood clot or asthma attack on the plane.” She stated that she returned to New York in 2014 when her doctor said it was safe to travel. However, she returned to Puerto Rico and remained there from February to April 2015. She argued that she never “intended to move to Puerto Rico permanently.” She also noted that her Puerto Rican home was furnished with “second-hand furniture left by the seller,” she never opened bank accounts in Puerto Rico and she receives no mail in Puerto Rico. She explained that she had to call New York friends who spoke Spanish to help her purchase items in Puerto Rico.

Although the tenant claimed that her husband was fixing up the Puerto Rico properties to sell, they had not been sold at the time of the trial. She also admitted that the paramour stayed in the apartment “a few nights a week.” She stated that although the paramour “would leave money on the table” for the tenant to “help (tenant) out,” she had not asked the paramour for money and did not remember how much money she received.

The court explained that notwithstanding the tenant’s important documents which listed the apartment as her residence, the tenant had to have maintained “an ongoing, substantial, physical nexus with the subject premises for actual living purposes in order for the court to find that she maintains the subject premises as her primary residence.” A “physical presence” is significant in primary residence disputes and an absence from an apartment is “probative that a tenant is not maintaining the apartment as a primary residence.”

Documentary evidence demonstrated that the tenant was in Puerto Rico for a significant amount of time between April 10, 2013 and Sept. 27, 2013, five-and-a-half months, and was also there from Feb. 27, 2014 through Oct. 15, 2014, seven-and-a-half months and also between Feb. 13, 2015 through May 11, 2015, three months. The tenant had been in Puerto Rico for 15 months out of the 24 months before the landlord had purported to terminate the tenancy.

The court noted that “an absence from a rent-controlled apartment for more than 183 days, i.e., half of a year, per year tends to show nonprimary residence.” Moreover, subletting a rent-controlled apartment also demonstrates nonprimary residence. Although the tenant denied that she sublet the apartment, the paramour gave her “periodic payments” while the tenant was in Puerto Rico. Bank statements showed deposits for several months unrelated to payments from the Social Security Administration. They do not show the source of deposits, but they have “probative value” that the tenant received money for the use of the apartment by the paramour, especially in conjunction with the tenant’s deposition testimony.

The court explained that when a rent-regulated tenant occupies an apartment for less than 183 days, the absence from the apartment has been excused in part when the regulated tenant did not sublet the regulated premises. The court also cited the home mortgage tax deductions on the Puerto Rico home and the Puerto Rico mortgage provisions which required the tenant to reside there.

The court reasoned that the objective evidence of tenant’s physical absence from the apartment outweighed the tenant’s “subjective evidence” and the “preponderance of the evidence” demonstrated that the tenant had not “maintained the subject premises as her primary residence.” Moreover, the tenant had not pled medical necessity as a defense and failed to produce evidence from “any medical professional showing a connection between (tenant’s) relocation to Puerto Rico and any psychiatric or medical need.”

The court noted that receiving medical treatment does not prove “medical necessity” to remain in Puerto Rico and the medical issues did not explain the subletting or utilization of a home mortgage tax deduction. Accordingly, the court awarded landlord a final judgment of possession.

Comment: Adam Leitman Bailey, counsel for the landlord, stated, inter alia, that the trial exposed “fraud” by a tenant who had two homes and mortgages in Puerto Rico and who had sublet her apartment. He noted that the court analyzed “almost every day of the tenant’s complicated life for two years.”

Tiffany Femiano, of MFY Legal Services, a counsel for the tenant, stated that “the Rent Stabilization Law permits temporary relocation.” She confirmed that a notice of appeal has been filed.

245 East 30th Street v. Joanna Alarcon, Civil Court, New York Co., Index No. 70872/2015, decided Oct. 16, 2018, Stoller, J. 


Contracts—Claim Based on Implied Contract for Purchase of City Owned Properties Dismissed—Alleged Option Unenforceable Under the Statute of Frauds

This decision determined whether “an alleged option to purchase real property is enforceable under General Obligations Law (GOL) §5-703…. (the ‘Statute of Frauds or SOF’).” The plaintiffs alleged that the defendant city of New York (city) through its Department of Housing Preservation and Development (HPD) had entered into an “implied contract,” pursuant to which the city agreed to sell to the plaintiffs’ city-owned properties (properties) for the price of $70,000.

The plaintiffs based their implied contract claim on an Aug. 21, 1996 letter, from the then Commissioner of HPD, to the Chair of the NYC Board of Standards and Appeals (BSA). That letter authorized the plaintiffs to apply for a zoning variance to permit the Properties to be used as “accessory parking, and expressed support” for such application. The letter explained that, HPD “intends to convey the sites to (plaintiffs) so that they may be used for accessory parking as part of the owner’s plan to build a catering hall.”

HPD thereafter wrote to BSA on Jan. 1, 1999, again in support for the variance and stated that HPD would “additionally take the necessary steps to initiate the disposition of the city-owned lots, conditioned on ‘Public Review and hearings under ULURP.’” In February 1999, the BSA approved the variance application.

The city thereafter leased the properties to the plaintiffs for 18 years for use as a parking lot for the plaintiffs’ restaurant. The lease specified that it could be terminated “at any time without cause,” tenant was “precluded from claiming any interest other than the month-to-month tenancy,” the property was designated for redevelopment and could be “disposed of for that purpose at any time” and the tenant “had no right or priority to purchase, lease, or obtain title to the property.”

In November 2007, HPD advised the plaintiffs that HPD would be offering the properties to potential developers through a request for proposals (RFP). RFP contemplated development of affordable housing. The plaintiffs were encouraged to submit a proposal. They did not submit a proposal nor challenge the issuance of the RFP, nor did they attempt to prevent the award of a development contract. Thereafter, HPD awarded a contract to developer for a low-income housing project.

The plaintiffs did not assert that the city or HPD had taken any action in “furtherance of the alleged implied contract between February 1999 through the end of 2015.” The plaintiffs claim that in 2016, HPD’s staff advised them to “move the project along,” in furtherance of the implied contract. Plaintiffs asserted that based on HPD’s encouragement, they paid $120,000 to construct a 10 foot wall surrounding the properties and expended additional funds to hire an appraiser and conduct soil tests. They did not submit receipts for such expenditures.

In 2017, the city terminated the month-to-month lease and commenced a holdover proceeding against plaintiffs. A stipulation of settlement awarded inter alia, final possession to the city. The stipulation stated that the city was aware of the plaintiffs’ claim that at one time HPD “offered to allow respondent to purchase the property, after the ULURP process was completed.”

It further stated that “[n]othing herein waives respondent’s claims with respect to his having an option to purchase or right to buy the … premises from the city nor HPD of right to claim reimbursement for any improvements thereon from the petitioner.” The settlement acknowledged respondent’s “right to commence an appropriate … action to enforce whatever rights he may legally have including that of seeking a stay … of this action.”

In the subject litigation, the plaintiffs sought an order compelling, inter alia, the city to convey the properties for $70,000. The city cross-moved to dismiss for failure to state a cause of action and because the action is time barred.

The court explained that that SOF provides

“An estate or interest in real property, other than a lease for a term not exceeding one year… cannot be created, granted … unless by act or operation of law, or by a deed or conveyance in writing…” Since an option to purchase real property is a contract for its future conveyance, it must conform to the (SOF) requirement that it be embodied in a writing…. The option, in order to be enforceable, must also contain the essential terms of a valid contract, without leaving any material term for future negotiation…. An option which is ambiguous as to the intent of the party purportedly bound thereunder is not sufficient under the (SOF); it must contain “some direct and explicit evidence of actual intent.”

In order to be enforceable, the option must also be supported by valid consideration. Valid consideration consists of either a benefit to the promisor or a detriment to the promisee.

The court found that HPD’s August 21, 1996 letter to the BSA did not “constitute an enforceable option contract under the (SOF).” That letter expressed HPD’s intention, but lacked “the essential elements of an option contract” and did not manifest “unequivocal intent to transfer ownership of the property to plaintiffs.” The letter lacked a “price term” or “any type of consideration.” The plaintiffs did not claim that the city had received a “direct benefit, monetary or otherwise, in exchange for granting the alleged option, and plaintiff does not claim to have suffered any legal detriment, monetary or otherwise, in exchange for the alleged option.” Further, the Aug. 21 letter was not addressed to a plaintiff and did not “present any offer to him.”

Moreover, the Jan. 1, 1999 letter from HPD to the BSA also was not addressed to a plaintiff and “could not create an agreement with him.” Additionally, there was no evidence that the city or HPD had “committed to a price of $70,000.” Such price term had not appeared in plaintiffs’ application nor in the BSA’s resolution approving the variance. The $70,000 number appeared “only in an unsigned” variance application on a different property and it had been written by “an unknown individual….” The plaintiffs had not alleged that the “$70,000 price term was created by a representative of the city or a representative with authority to bind the city.”

Furthermore, the plaintiffs’ alleged oral conversations with HPD staff in 2016, did not create an implied contract. Based upon the SOF, the discussions would be “nugatory and unenforceable.” Additionally, a part performance exception to the SOF must be based on performance that is “‘unequivocally referable’ to the alleged agreement,” i.e., performance must be “inconsistent with any other explanation.” Since there was never a “complete oral agreement as to the material terms,” the “doctrine of partial performance” is inapplicable. Thus, the money allegedly spent by the tenant did not warrant application of the part performance exception to the SOF.

Accordingly, the court denied the plaintiffs’ motion for preliminary injunction on the grounds that the plaintiffs failed to demonstrate the likelihood of success on the merits and dismissed the complaint, based on the plaintiffs’ failure to state any cause of action since there was “neither an actual nor implied contract … with respect to the right to purchase the Property for $70,000.

Comment: Some people think that a city employee’s positive conversation about a transaction involving a government owned property or government project may give rise to a legal right. Generally, estoppel is not available against a municipality when the matter involves a public function and oral agreements are not only difficult to prove, but they may run afoul of the Statute of Frauds. Here, plaintiff’s lease contained his acknowledgement that the lease did not create property rights beyond those specifically stated in the lease and the lease did not embody a right to purchase of the property and subsequent alleged oral conversations could not satisfy the Statute of Frauds.

Freeman v. City of N.Y., Supreme Court, Kings Co., Case No. 516731/2017, decided Oct. 31, 2018, Levine, J.

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