A Manhattan landlord may have lost the chance to collect more than two years of back rent because its counsel failed to file a timely nonpayment proceeding against the tenant when instructed.
Housing Court Judge Arlene Hahn (See Profile) ruled on Jan. 14 in 383 Realty Corp. v. Young, 89487/11, that the suit was barred by the doctrine of laches because the landlord did not actually commence a proceeding until three and a half years after the tenant, Lisa Young, stopped paying her $1,200 per month rent.
The landlord, 383 Realty Corp., said that it believed that its longtime counsel, Pennisi Daniels & Norelli, had filed a proceeding against Young. (The firm is now called Daniels Norelli Scully & Cecere.)
In fact, Ephraim Bulow, 383 Realty’s general counsel, said in an interview no such case had been filed. A paralegal at the firm who handled routine nonpayment cases told 383 Realty that a case had been filed and was moving forward, though with many delays. Eventually the paralegal claimed that 383 Realty had won a judgment against Young, but that it could not be enforced because Young had filed bankruptcy, and faxed Bulow a copy of the bankruptcy filing.
When Bulow looked up the case number in PACER, he found a different case, and it became clear to him that the paralegal had taken the filing from that case and pasted Young’s name onto it.
Bulow then notified Fred Daniels, the partner who supervised the paralegal. When Daniels discovered that the paralegal had faked the case, he fired her and paid the rent that had accrued while the fake case was supposedly pending himself.
“He was really a stand-up guy in my view,” Bulow said of Daniels, noting that the paralegal had been at the firm for 12 years and Daniels had no reason to distrust her. “I couldn’t think of a more ethical way of handling it than what he did.”
Daniels declined to comment.
383 Realty then hired Adam Leitman Bailey, P.C., which finally did sue Young for nonpayment in November 2011. Because Daniels’ payment was not actually a payment of rent, 383 Realty still sought the full accrued back rent from Young. Young asserted a defense of laches, arguing that the landlord had waited too long to file the suit.
Hahn’s decision did not disclose the name of the Daniels firm, which was determined by the Law Journal using other sources.
At the end of trial, both sides agreed that Young’s outstanding rent was about $47,000. Hahn ruled that laches apply to all the rent except what accrued after November 2010, one year before the case was filed. That amount is about $9,000, which also reflects a rent abatement for breach of the warrant of habitability. She awarded a possessory judgment for that rent, meaning that the landlord can evict Young if she fails to pay it.
Hahn awarded a money judgment of about $36,000 for the remaining rent, but that judgment is not possessory, meaning it cannot be enforced by eviction.
“I was a little surprised,” said Christopher Halligan of Bailey’s firm, who represents 383 Realty. “I thought the judge would have awarded more.”
He said even given the judge’s findings, that the possessory judgment was too small because of a math error, and said the landlord had moved to correct that.
Halligan also said his client is considering an appeal.
“The court’s decision underscores the defense of laches as a crucial mechanism to protect tenants, particularly tenants with disabilities, whose landlords unreasonably delay in asserting rights to unpaid rent,” said Young’s attorneys Scott Stamper and Sandra Gresl, staff attorneys at MFY Legal Services, in a joint emailed statement. “Where a landlord’s unreasonable delay in suing for rent may result in a tenant’s subsequent homelessness, laches stands for the principle that the landlord’s recovery of rent arrears is not always the most important factor at play.”