Scott E. Mollen
Scott E. Mollen ()

Landlord-Tenant—Landlord and Tenants Agreed That Apartment Would be Decontrolled and that Their Agreements Should be Submitted to DHCR and They Would Request That DHCR Issue an Order Confirming that the Apartments Are Unregulated by Rent Control or Rent Stabilization—Even if Agreement Is Favorable to Tenants, It Is Not Enforceable Notwithstanding DHCR’s “Imprimatur”

The plaintiff landlord owns a New York City apartment building. In 1994, the prior owner and the subject tenants’ association (association) entered into an agreement (agreement) with respect to “the disputed rent regulation status of certain apartments.” The agreement contained the prior owner’s acknowledgement that the tenants were “rent controlled.” In 2006, the owner and the association entered into a revised agreement (new agreement). The new agreement provided that “the apartments of those tenants who signed the new agreement were no longer subject to rent regulation.” Such tenants were to receive “new 49-year leases, with an option to continue as month-to-month tenants for those who survived the 49-year term, with succession rights, as well as limits on annual increases in rents.

The owner and each tenant who signed the new agreement were required to jointly submit the new agreement to DHCR and request that DHCR issue an order “that would ‘declare and determine that each [apartment] and all of the tenants, residents, and/or other occupants [thereof], shall be exempt from coverage by and/or applicability of the City Rent Law (a/k/a Rent Control), the Rent and [E]viction Regulations, the Rent Stabilization Law of 1969, as amended, the Emergency [T]enant Protection Act of 1974, as amended, and/or the Rent Stabilization Code….”

Additionally, the new agreement provided that

neither the [association], nor any of the signatories to this New Agreement may oppose the application to DHCR, including but not limited to seeking a Petition for Administrative Review. Should the [association] oppose the application or support any opposition to the application, then [the owner] shall be permitted to declare [association] in breach of the New Agreement and void the agreement.

….

[G]randchildren and other descendents who are not children of the Settling Tenant(s) are not successor tenants and have no right of succession …, except where the grandchild is a resident of the apartment on the date of the New Agreement, and whose name is set forth….” Additionally, an otherwise qualified person was only eligible to succeed to an apartment if he or she was “co-occupying the apartment as a joint primary residence with the Settling Tenant for the two years immediately preceding the Settling Tenant’s permanent vacatur therefrom.” Further, the New Agreement required all tenants to maintain their apartments as their primary residence. The New Agreement specified that a breach of this requirement would entitle the landlord to seek a remedy in court, including “rescission of the future benefits under the New Agreement to the Settling or Successor tenant, and/or recovery of possession of said Settling or Successor Tenant’s apartment.

Defendant “A” and her grandson, Defendant “B” executed the new agreement. Their signature was underneath the words:

The following adult occupants of apartment […], who may have rights to succession under rent control or rent stabilization rules that are terminated by this Agreement, waive those potential rights and acknowledge this Agreement.

DHCR thereafter issued a deregulation order. Neither “A” nor “B” filed a petition for administrative review. “A” had signed a new 49-year lease which incorporated the terms of the new agreement and noted that the premises were “not subject to rent regulation.” In 2009, “A,” who allegedly has Alzheimer’s disease, moved into a nursing home. The landlord thereafter commenced the subject action, seeking a judgment declaring that “A” “failed to maintain the apartment as her primary residence,” that the new agreement should be terminated and all future benefits under the agreement rescinded. The landlord asserted that “B” was not a tenant of record, sought an order enjoining the defendants from occupying the apartment and sought “an order of ejectment of all persons occupying the apartment,” as well as “a judgment awarding it exclusive possession of the apartment.”

“B” asserted that “A” is a rent-controlled tenant and that “B” resided with her in the apartment for a period of more than two years before “A” permanently moved into the nursing home. “B” admitted that during his co-occupancy of the apartment “there were ‘periods of time during which [he] was absent for educational reasons,’” but argued that “these absences did not ‘vitiate primary residency.’” “B” also claimed that he was a rent regulated tenant, not only because of his co-occupancy, but also because the landlord had accepted rent subsequent to “A’s” vacatur. Additionally, “B” argued that “he was not a party to any proceeding brought by any agency seeking deregulation, and thus could not be bound by any deregulation order resulting from such a proceeding….” He claimed that “any purported waiver of rent regulation would be void as against public policy.”

“B” further argued that the landlord had failed to serve a notice to cure and notice of termination. He sought a judgment that he was a rent-regulated tenant of the apartment and compensation for any rent overcharges. He alleged that the landlord had received a J-51 tax abatement which precluded deregulation. “B” also asserted that the landlord improperly failed to offer him a renewal lease.

“A,” through a guardian ad litem, moved to dismiss the complaint as against her, alleging that “she was mentally incapable of defending against the action, was unable to leave her extended-care facility …, and was making no claim to possession of the apartment.” “B” also argued that the action should have been commenced in the Housing Court and that Supreme Court should decline jurisdiction.

The landlord argued that as the primary tenant on the lease, “A” was a necessary party, additional discovery was necessary with respect to “B’s” primary residence issue and that the DHCR deregulation order was “the product of a lengthy negotiation between the previous owner and the tenants’ association, involving sophisticated counsel on both sides, and the cooperation of the agency.” The landlord also asserted that “collateral estoppel and the doctrine of administrative finality barred ['B'] from relitigating DHCR’s order deregulating the apartment, since neither ['B'] nor ['A'] challenged the order administratively.” The landlord also asserted that it had not received new J-51 benefits since April 2005 and that the Supreme Court was an appropriate venue.

The Appellate Division, First Department (court) cited a prior appellate precedent which held that:

parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void (Rent Stabilization Code [9 NYCRR] §2520.13), and this Court has uniformly thwarted attempts, whether by mutual consent or by contract of adhesion, to circumvent regulated rent maximums.

The court explained that even an agreement that “modifies the rent laws in a manner favorable to the tenant is of no effect….” The new agreement did not just modify the rent regulations, it declared them “inapplicable to the apartment.” Thus, the court held that the new agreement was “void.” Moreover, although prior precedent involved agreements to deregulate rent stabilized apartments, the court opined that there was “no logical reason why the same principle should not apply to the rent-controlled apartment at issue here.”

The court then found that DHCR had reached its decision based solely on the new agreement and there had been no indication that DHCR had actually “addressed the issue whether the apartment was eligible for deregulation.”

The court opined that the new agreement’s requirement that DHCR issue a deregulation order appeared “to have been an attempt to lend the agreement the agency’s imprimatur and avoid its coming undone after the new leases were issued.” The court explained that “[p]arties…may not agree to ignore the rent laws, even for the most noble of purposes.” That is because it would be “‘in violation of the well-established judicial policy of refusing to enforce agreements that are unlawful or injurious to the public, particularly where an attempt to circumvent the Rent Stabilization Law is concerned’….” Thus, “the New Agreement and the resulting order were void ab initio” and the court did not need to decide whether “any receipt of J-51 benefits by plaintiff or its predecessor(s) barred the deregulation of rents….”

Additionally, even under rent control, “B” may only succeed to the apartment if he can establish that he had “co-occupied the apartment as his primary residence with ['A'] during the two years immediately preceding ['A''s] vacatur.” Generally, “‘a conflict as to where the primary residence is, really should be resolved at trial’….” The court opined that “[t]his is especially the case where there is some evidence that the person claiming succession rights had an occupancy interest somewhere else during the relevant time period….”

“B” acknowledged that “during one period in the two years preceding ['A''s] vacatur, he resided in Washington, D.C. three days per week to teach, and during another period had a two-day-per-week job.” “B” filed tax returns in Washington, and maintained a bank account there. There was also evidence that “B” received mail at addresses other than the subject apartment during the subject time period. Although “B” had “possible explanations for these facts and documents that support his position that the apartment was his primary residence,” the court found that “on this record, it is impossible to determine the issue as a matter of law….”

An issue of fact also existed as to whether the landlord created a month-to-month tenancy by accepting “B’s” rent. Finally, the court held that “A” was a necessary party and the Supreme Court had proper jurisdiction of the matter.

Extell Belnord v. Uppman, 110098/11, NYLJ 1202629734140, at *1 (App. Div., 1st, Decided Nov. 19, 2013) Before: Gonzalez, P.J., Mazzarelli, Acosta, Renwick, JJ. Opinion Decision by Mazzarelli, J. All concur.

Land Use—Court Denies Motion for Preliminary Injunction to Prevent Destruction of Paintings On Exterior of Buildings That Are Scheduled For Demolition—Visual Artists Rights Act of 1990—Graffiti Act

The court held that the plaintiffs were not entitled to a preliminary injunction under the Visual Artists Rights Act of 1990 (VARA), 17 U.S.C. §106A, “to prevent the destruction of their paintings that adorned the exterior of the buildings owned by the defendants, which are scheduled for demolition.” The buildings “had become the repository of the largest collection of exterior aerosol art (often also referred to as ‘graffiti art’) in the United States, and had consequently become a significant tourist attraction-commonly known as 5 Pointz.” The court had “to determine whether the work of an exterior aerosol artist—given its general ephemeral nature—is worthy of any protection under the law.”

The court explained:

VARA recognizes that a work of visual art “may be incorporated in or made part of a building,” and includes within its protective reach any such work that was created after its enactment on June 1, 1991, unless a written waiver was obtained from the artist….

Whether a protected work is of “recognized stature,” is “best viewed as a gate-keeping mechanism”…. Accordingly, since plaintiffs’ works post-dated VARA and no written waivers were obtained, the court held a preliminary injunction hearing …, and ordered the parties “to be prepared to address, inter alia, whether each plaintiff’s work was of “recognized stature.”

The court further noted that:

a “work of visual art” is defined by the Act “in terms both positive (what it is) and negative (what it is not)”…. Thus, the definition includes “‘a painting, drawing, print, or sculpture, existing in a single copy’ or in a limited edition of 200 copies or fewer,’” but excludes “‘any poster, map, globe, chart, technical drawing, diagram, model, applied art, motion picture or other audio-visual work’”…. Therefore, …, “Congress meant to distinguish works of visual art from other media, such as audio-visual works and motion pictures, due to the different circumstances surrounding how works of each genre are created and disseminated”…. Although “this concern led to a narrow definition of works of visual art,”…., the Second Circuit adopted the language of the House Report that:

[t]he courts should use common sense and generally accepted standards of the artistic community in determining whether a particular work falls within the scope of the definition. Artists may work in a variety of media, and use any number of materials in creating their work. Therefore, whether a particular work falls within the definition should not depend on the medium or materials used.

Prior Second Circuit precedent did not address what constitutes a work of “recognized stature.”

The owner appreciated the works of art at 5 Pointz. However, he believed that “the time had come to knock down the buildings to make room for two apartment complexes that are expected to provide approximately 1,000 residences.” The City Planning Commission (CPC) had required, as a condition for the issuance of a building permit, that the defendants “include 75 affordable housing units and install 3,300 square feet of exterior art panels ‘to be used to maintain artist street wall art in the area.’” The owner asserted that “there was no feasible engineering way he could preserve the existing buildings, with their ‘beautiful’ art work, and incorporate them into the new ones.” The owner claimed that he let the plaintiff control the artwork, he advised the plaintiff that the buildings would be “knocked down” and that the artwork would be “temporary.”

It was publicly known that the owner was seeking a building permit and that “the buildings were destined for demolition.” The plaintiff countered that when the owner had put him in charge of the artwork, there had been “no discussion of any life span, and at the time [the plaintiff] really didn’t have any long-lived expectations.” However, the plaintiff stated that “[e]very year [he] heard the building was coming down.”

The court believed that the plaintiffs “understood that the nature of the exterior aerosol art … was transient, and that all of the works that [the owner] allowed to be painted on the buildings would last only until they would be demolished to make room for [the owner's] housing project.” The plaintiff had acknowledged in an interview in 2011, that he knew all along about “the plan to demolish the buildings.”

The court explained that “whether a particular work falls within the definition of visual art, ‘should not depend on the medium or materials used’….” The court expressed its regret that it lacked authority under VARA “to preserve 5 Pointz as a tourist site.” The court stated that 5 Pointz had become “a scenic attraction and “the City probably could have exercised its power of eminent domain to acquire the site outright. It chose not to.”

The court found that “at least some of the 24 works, which plaintiffs contend were of recognized stature, … present ‘sufficiently serious questions going to the merits to make them a fair ground for litigation.’” However, “[t]he final resolution of whether any do indeed qualify as such works of art is best left for a fuller exploration of the merits after the case has been properly prepared for trial, rather than at the preliminary injunction stage.” “Since VARA does not define ‘recognized stature,’ the court … will have to decide whether to embrace the strictures of the academic views espoused by the defendants or the more expansive ones suggested by the plaintiffs.”

The works had already been destroyed by the owner and the court found that the plaintiffs “would be hard-pressed to contend that no amount of money would compensate them for their paintings….” VARA does not distinguish between “temporary and permanent works of visual art.” VARA does provide that “significant monetary damages may be awarded for their wrongful destruction.”

The court noted that “paintings generally are meant to be sold. Their value is invariably reflected in the money they command in the marketplace. Here, the works were painted for free, but surely the plaintiffs would gladly have accepted money from the defendants to acquire their works, albeit on a wall rather than on a canvas.” The court further noted that the plaintiffs’ works “can live on in other media,” i.e., the subject 24 works had been photographed and “[a]ll would be protected under traditional copyright law.”

In considering irreparable harm and balancing of the hardships, the court noted the transient nature of the plaintiffs’ works. The plaintiff “always knew that the buildings were coming down—and that his paintings … would be destroyed. Particularly disturbing is that many of the paintings were created as recently as this past September, just weeks after the [CPC] gave final approval to the defendants’ building plans.” Thus, the court found that “[i]n a very real sense, plaintiffs’ have created their own hardships.”

However, the court explained that the owner may be responsible for damages. The owner had permitted the artists to decorate the buildings and he had not protected himself “from liability by requiring VARA waivers.” Although the owner appreciated their work, “he also stood to benefit economically from all the attention that had been drawn to the site as he planned to market the new buildings’ residences.” The court noted that “VARA protects even temporary works from destruction….” Thus, the court stated that the defendants may be “exposed to potentially significant monetary damages if it is ultimately determined after trial that the plaintiffs’ works were of ‘recognized stature.’”

The court then observed that the public interests “will be served by the new apartments, including the 75 affordable housing units, and while the present walls will no longer exist, the public’s aesthetic interests were addressed by the CPC by requiring 3,300 square feet of the exterior of the new buildings to be made available for art.” The court noted that “[d]efendants can do even more,” i.e., “they can make much more space available, and give written permission to [plaintiff] to continue to be the curator so that he may establish a large, permanent home for quality work by him and his acclaimed aerosol artists.” The court stated that it would “look kindly on such largesse when it might be required to consider the issue of monetary damages; and 5 Pointz, as reincarnated, would live.”

Comment: The owner had painted over the works of visual art at 5 Pointz during the period between the initial denial of the preliminary and the issuance of the subject opinion. The City’s Landmarks Preservation Commission had denied a request to designate the 5 Pointz site as a landmark since the “feature of interest—the artwork—had not been in existence for at least thirty years.”

Cohen v. G&M Realty, 13-CV-5612(FB) (JMA), NYLJ 1202630137221, at *1 (EDNY, Decided Nov. 20, 2013), Block, J.

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John’s University School of Law.