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Co-Living - What it is. What it isn’t. How it’s good for tenants. How it’s good for landlords. And what its limits are.

On December 13, 2017, Michelle Itkowitz presented to the LandlordsNY 2017 Winter Property Management Symposium at New World Stages. Michelle's topic this time was, "Co-Living Defined and Dissected - What it is. What it isn’t. How it’s good for tenants. How it’s good for landlords. And what its limits are." Here is a link to the full materials. Here is an excerpt:  

C. Co-Living Defined 

I found that I needed a working definition of co-living for my practice, and this is what I came up with:

An arrangement by which a landlord rents an apartment to a group of tenants, for at least thirty days, where the tenants occupy and share the apartment as roommates, as an arrangement which the landlord consents to and facilitates as an active participant; the tenants have flexible terms, which are often short, and are allowed to vacate the apartment early without liability for the full term of the lease; if a roommate is lost, the landlord assists the remaining tenants with getting a qualified new roommate to take lost roommate’s place and gives the remaining tenants rent-relief while doing so; the landlord frequently provides the tenants with other advantages and amenities, including but not limited to furnishings and personal property, services, and thematic programming, such as dinners or lectures on topics of common interest to the roommates; co-living places a big emphasis on the creation of a community within the apartment; the price per square foot for the apartment is often higher than it would be if the same apartment was not rented for co-living. The advantages of co-living for the tenant are affordability, flexibility, convenience, limited liability for bad roommates, and community. The advantage of co-living to a landlord is a higher price per square foot and greater control of the occupants of an apartment.





II. WHAT CO-LIVING IS NOT

Next, let us go over in detail how co-living is an extremely different thing from other residential rental paradigms. Sometimes the best way to learn what something is, is to learn what it is not.

A. Co-Living is NOT the Classic Roommate Situation

First, the below diagram shows the classic roommate situation:




Under this scenario, a tenant decides she wants an apartment that she probably cannot afford on her own. Therefore, she aggregates a group of roommates on Craig’s List or using social media. That tenant finds the apartment and becomes the contact person for the group of tenants with the landlord. Maybe the landlord puts only the contact tenant on the lease, or maybe all roommates are on the lease[fn1].  After the initial renting, the landlord is done. 

If one of the roommates leaves or stops paying rent then there is tremendous pressure on the remaining roommates to make up the difference. When a landlord calls me up and tells me that one roommate has stopped paying rent, my best practices legal advice is always to sue ALL tenants on the lease, because they are all jointly and severally liable. This makes the nonpayment proceeding more expensive for the landlord, because there are more people to serve with the predicate notice and the nonpayment proceeding. This is a very stressful and burdensome situation for the tenants who paid their share of the rent. Now their names are in the Housing Court records even though they paid their share of the rent. 

If there is only one tenant on the lease, this is all the more burdensome for that tenant. Also, consider the plight of the guarantor of the single tenant. I have often received calls from parents who guaranteed a lease for an adult child in New York City. That guarantor can find themselves pursued for tens of thousands of dollars.

None of this is ideal for the landlord, who just wants the rent, not a Housing Court proceeding or a Guarantor Action.

Furthermore, the classic roommate situation is fraught with other difficulties. If Tenant 1 bought the coffee maker and then leaves and takes it with him, gone is the coffee maker. Tenant-roommates in the classic scenario have to divide responsibility for buying items used by all, like toilet paper. 

Moreover, the classic roommate situation does little in terms of creating community for people who are looking for that as part of a roommate experience. 


B. Co-Living is NOT SRO Usage

Next, the below diagram shows a Single Room Occupancy use (“SRO use”):




In this scenario, a landlord goes out and rents rooms within an apartment directly to individual tenants, people who have nothing to do with one another, although they may share a bathroom and a kitchen. The landlord uses separate leases for each room and each tenant, with separate prices and terms. There are most likely locks on the outside of the individual bedroom doors, as if each bedroom door is the threshold to a separate living unit. 

A landlord may not, however, rent rooms in regular apartments. Multiple Dwelling Law (“MDL”) § 4(16) states:

"“Single room occupancy” is the occupancy by one or two persons of a single room, or of two or more rooms which are joined together, separated from all other rooms within an apartment in a multiple dwelling, so that the occupant or occupants thereof reside separately and independently of the other occupant or occupants of the same apartment."  

MDL § 301 says that every building will be used in conformity with its certificate of occupancy (“CO”). The CO will state whether a building contains apartments or whether it may be rented for SRO use. Therefore, MDL § 301 would be violated if an apartment in a regular building was rented for SRO use.

If MDL § 301 is violated, then, according to MDL § 302, the building’s mortgage goes into default, no rent is due from the tenants, no law suit for rent may be brought against the tenants, and:

"2. The department may cause to be vacated any dwelling or any part thereof which contains a nuisance as defined in section three hundred nine, or is occupied by more families or persons than permitted in this chapter, or is erected, altered or occupied contrary to law. Any such dwelling shall not again be occupied until it or its occupancy, as the case may be, has been made to conform to law." [Emphasis supplied.][fn2] 

The New York City Housing Maintenance Code (“HMC”) applies to all dwellings.[fn3] There is a similar definition of an SRO (to that in the MDL) in the HMC, which calls an SRO unit a “Rooming Unit” at § 27-2004(a)(15) and states:

"Rooming unit shall mean one or more living rooms arranged to be occupied as a unit separate from all other living rooms, and which does not have both lawful sanitary facilities and lawful cooking facilities for the exclusive use of the family residing in such unit. It may be located either within an apartment or within any class A or class B multiple dwelling." 

Under HMC § 27-2004(14), an “Apartment shall mean one or more living rooms, arranged to be occupied as a unit separate from all other rooms within a dwelling, with lawful sanitary facilities and a lawful kitchen or kitchenette for the exclusive use of the family residing in such unit.” Under HMC § 27-2004(4), a “family” is:

"(a) A single person occupying a dwelling unit and maintaining a common household with not more than two boarders, roomers or lodgers; or
(b) Two or more persons related by blood, adoption, legal guardianship, marriage or domestic partnership; occupying a dwelling unit and maintaining a common household with not more than two boarders, roomers or lodgers; or
(c) Not more than three unrelated persons occupying a dwelling unit and maintaining a common household; or…."

Here is an example of a recent Environmental Control Board case. The New York City Department of Buildings (“DOB”) issued violation notices to landlord for converting a two-family house to six SRO units [pursuant to Title 28 of the HMC which has to do with construction]. Landlord claimed that she hadn't changed the building since buying it in 2014. She claimed that she lived on the first floor and landlord's relatives lived on the second floor. But landlord submitted photographs showing that there were locks on room doors. DOB submitted a number of photographs documenting its claim. The Administrative Law Judge  ruled against landlord and fined her $47,400, which included daily penalties. Landlord appealed and lost. Zhao: ECB App. No. 1700674 (8/3/17) [LVT Number: #27928].

C. Co-Living is NOT Short Term Leasing (Like Airbnb)

When a landlord puts her regular apartment building into use as a defacto hotel, on short-term leasing platforms, like Airbnb or VRBO, then the structure is much like the structure in the SRO diagram above, with all the same legal problems. If the terms for such renting are under 30 consecutive days, however, then there are additional legal problems.

The statutory prohibition against short-term occupancy is found in the New York State Multiple Dwelling Law (“MDL”), which applies to buildings with three or more units.  

MDL § 4(8)(a), the relevant statute, states:  

"A “class A” multiple dwelling is a multiple dwelling [3 units] that is occupied for permanent residence purposes…A class A multiple dwelling shall only be used for permanent residence purposes. For the purposes of this definition, “permanent residence purposes” shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit. The following uses of a dwelling unit by the permanent occupants thereof shall not be deemed to be inconsistent with the occupancy of such dwelling unit for permanent residence purposes:

(1)(A) occupancy of such dwelling unit for fewer than thirty consecutive days by other natural persons living within the household of the permanent occupant such as house guests or lawful boarders, roomers or lodgers; or (B) incidental and occasional occupancy of such dwelling unit for fewer than thirty consecutive days by other natural persons when the permanent occupants are temporarily absent for personal reasons such as vacation or medical treatment, provided that there is no monetary compensation paid to the permanent occupants for such occupancy." [Emphasis supplied.]

At this point, when a landlord calls me about an Airbnb problem in her or his building, my first question is this – am I dealing with real human beings attempting to engage in the “sharing economy” or am I dealing with a de facto hotelier, a “professional operator” – someone who rents a whole bunch of apartments, which he or she never lives in, and which he or she continuously illegally short-term sublets.  

According to the office of the New York State Attorney General, Eric T. Schneiderman, almost half of Airbnb’s $1.45 million in 2010 revenue in the city came from hosts who had at least three listings on the site.[fn4] An analysis of global Airbnb listings in 2014 showed that hosts offering multiple listings made up over 40% of the company's business.[fn5] A 2016 report from Penn State researchers for the American Hotel and Lodging Association determined that $378M of Airbnb's total revenue—nearly 30%—was generated from "full-time operators" listing rentals year-round.[fn6] 

Dealing with a professional operator is completely different from dealing with a regular person. I had a client recently who discovered that one of his tenants, let’s call him “John”, had rented three apartments in the building, using his wife’s name for one unit and his friend’s name for another. John did not live in any of the three units and all three were continuously rented on Airbnb. The landlord was furious. When he confronted John, John said, “When the Marshal comes, I will stop. I have a lawyer and have been in this situation before.” The landlord then made a terrible mistake – (without consulting a lawyer) he hired a security guard to prevent guests of the three units from entering. John took the landlord immediately to court on three illegal lockout proceedings and won. Landlord had to stop blocking access and begin legitimate court cases. You can never use self-help eviction against a residential tenant in New York City. You can NOT lock a tenant out of their apartment. In New York State, in the context of a residential lease, a landlord is forbidden from resorting to self-help under any circumstances and can be subject to compensatory, punitive, and treble damages.[fn7]    

Suffice it to say, a professional Airbnb operator is NOT engaged in co-living, even if the pro-operator tries to dress it up that way.


D. Co-Living is NOT Micro Units

This last section has no law in it, and it contains mostly my opinion, so skip it if you want to.

Co-living is NOT Micro! Micro units, to me, mean that a development has little tiny apartments. Those apartments are not rooms, they have kitchens and baths. To compensate for the tiny apartments, the development will have great building-wide common space amenities. Maybe your kitchen is teeny-tiny, but there is a great barbeque area on the room, complete with tools and stocked with charcoal. Maybe you have almost no living room, but there are party rooms in the building you can rent, and various decks and lounges available for free. This is all great. But it is not co-living. Micro means you have a small apartment in a great building. 

Co-Living has an unmistakable communal aspect to it that the Micro development lacks.

[fn1] There are pros and cons to each approach; See the LNY online lease!

[fn2] In Association For Neighborhood Rehabilitation, Inc. v. Board of Assessors of Ogdensburg, 81 A.D.3d 1214 (3rd dept. 2011), the court found that “SRO tenants have a single sleeping room, with access to a communal kitchen, bathroom and social area.”

[fn3] N.Y. ADC. LAW § 27-2003.

[fn4] http://www.nytimes.com/2014/11/30/magazine/the-business-tycoons-of-airbnb.html?mwrsm=Email&_r=0.

[fn5] https://www.fastcompany.com/3043468/the-secrets-of-airbnb-superhosts.  

[fn6] https://www.bisnow.com/national/news/hotel/report-professional-operators-make-a-killing-off-airbnb-59859. 

[fn7] See Real Property Actions and Proceedings Law (“RPAPL”) § 853; Romanello v. Hirschfeld, 63 N.Y.2d 613, 615 (1984).

[END OF EXCERPT]





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The Ever-Evolving Relationship Between Rent Stabilization and Short-Term Subletting (like Airbnb!)

On December 1, 2017Michelle Itkowitz taught a Live Webinar Continuing Legal Education program for Lorman Education Services entitled: "Short-Term Illegal Sublets in NY Multi-Family Buildings".  Here are 12 slides from that presentation that examine the ever-evolving relationship between Rent Stabilization and Short-Term Subletting (like Airbnb!)
























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A Day (Or Two) In the Life of a Commercial Landlord and Tenant Litigator - CLE for the NYSBA Commercial Leasing Committee

On November 30, 2017, Michelle Itkowitz was honored to teach a continuing legal education class to the New York State Bar Association, Real Property Section, Commercial Leasing Committee. The presentation was entitled:


A DAY (OR TWO) IN THE LIFE OF 
A COMMERCIAL LANDLORD AND TENANT LITIGATOR

“I drafted a commercial lease. The tenant defaulted. I wonder what happens when my lease gets litigated…”


Here is a link to the full materials. Here is an excerpt from the materials:

I. INTRODUCTION TO THIS PRESENTATION

You are done drafting that commercial lease. Maybe you represented the landlord. Maybe you represented the tenant. Your client was happy. You got paid. Both parties went away with enthusiasm for the future, at the threshold of a new chapter for their businesses and the physical space. You close the file.

But what happens when there is…a default? Now your lease is put to the test.

The author of these CLE materials is a landlord and tenant litigator in the City of New York for over twenty years. I work on both commercial and residential litigations. I represent both landlords and tenants. I do NOT draft commercial leases! Alas, I am not there when the champagne is passed around on the day the lease is executed. No one thinks to call me to share in the good times. I do spend my days, however, hunched over big thick commercial leases and their riders, amendments, modifications, and attendant guarantees. People call me when things go wrong.

This continuing legal education program is designed to share with drafters how the lease clauses they construct perform in a fairly typical commercial landlord and tenant litigation, by taking the audience through an ACTUAL (and the most recent) case that came across my desk. I will present the material in the order in which I, as a litigator, am forced to think about it. We will explore:

The description of the premises and the floor plan
The default and remedies clauses of the lease
The security clauses
Additional rent
The conditional limitations
Service of process in a landlord and tenant proceeding
The interplay between the lease and the guaranty


I am interested in hearing the audience’s feedback about how clauses could be set up differently and why they are drafted the way they typically are.

***

F. Conditional Limitations

Back to our lease - Paragraph 28(A)(i) makes non-payment of rent a default subject to a conditional limitation, on a 7-day notice to cure and a 5-day notice of termination.

Paragraph 28(A)(ii) makes it a defaulting under any other provision of the lease subject to a conditional limitation, on a 20-day notice to cure and a 5-day notice of termination.

One of the landlord’s most powerful remedies, a default subject to a conditional limitation pursuant to the lease, permits the landlord to terminate the lease by following certain procedures.

1. Types of Defaults Subject To Conditional Limitations in a Lease

a. Non-Rent Defaults Subject to Conditional Limitations

The following are events of default subject to a conditional limitation under a typical form of Store Lease:

"If the Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted; or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if the lease be rejected under Section 365 of Title II of the U.S. Code (Bankruptcy Code); or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposit hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder; or if Tenant shall be in default with respect to any other lease between Owner and Tenant; or if Tenant shall fail to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease…."

Other defaults which may be included in the lease as subject to a conditional limitation are: 

assigning, mortgaging or encumbering the lease or subletting without the landlord’s permission
the filing of a mechanic’s lien against the premises which is not discharged within a period of time after notification of the tenant by the landlord
the failure to maintain insurance
assigning the lease, or any interest in the lease, transfer ownership of the lease 
illegal sublets
closing for a period of ten or more days not for landlord authorized renovations

b. Nonpayment of Rent as a Conditional Limitation

Although the many leases specifically exclude such, a lease can provide a mechanism whereby the landlord may terminate the lease, after default in the payment of rent, in the commercial context. Properly drafted, a conditional limitation clause for the nonpayment of rent in a commercial lease will be enforced by the courts and is, perhaps, the landlord’s most powerful remedy, nonpayment being the most common default. This is particularly true where the market has quickly improved and the lease-rent has fallen “below market.” A properly structured conditional limitation for the non-payment of rent should utilize the language cited approvingly by the court in Grand Liberte Co-op Inc. v. Billhaud,[fn1] expressly making the conditional limitation applicable to rent defaults and stating that “it [is] the intention of the parties hereto to create hereby a conditional limitation.”[fn1]   

Note, however, that this strategy will not work in a residential context. A conditional limitation regarding the nonpayment of rent in a residential lease has been held to violate public policy as it would provoke a forfeiture, and the law disfavors automatic forfeitures of residential tenancies.[fn2]   

2. Notice to Cure

In many commercial leases, the landlord must first notify the tenant of the default and set forth a time period in which the tenant must cure the default; or, if it is impossible to cure within the time period, it must set forth a time period in which the tenant must begin curing the default. The time period in many commercial leases is fifteen (15) days. This notice is commonly referred to as a “notice to cure” or “notice of default.”  

3. "Yellowstone" and Tolling Time to Cure Defaults

Giving a notice to cure may force the commercial tenant to initiate a proceeding in Supreme Court commonly referred to as a “Yellowstone,” so called after the case of First National Stores v. Yellowstone Shopping Center.[fn3] The essence of a Yellowstone proceeding is a declaratory judgment complaint accompanied by a stay application (which is routinely granted, at least in the form of a temporary restraining order, pending a hearing on a preliminary injunction), which seeks a trial on the issue of whether the tenant is indeed in violation of the lease. This procedure is designed to toll the time the tenant would ordinarily have to cure a lease violation while the court resolves the issue of whether the tenant is indeed in violation and/or has cured the violation. If the court finds the tenant in violation, then by virtue of the stay of the notice to cure, the tenant still has the opportunity to cure the violation before the cure period ends. This process in itself can buy the tenant significant time as the resolution of the proceeding can take months, if not years. 

The purpose of a Yellowstone injunction is to maintain the status quo by means of a temporary stay while the tenant challenges the landlord’s notice to cure.[fn4] Thus, the Yellowstone injunction tolls the cure period set forth in the landlord’s notice of default until there is a judicial determination of the parties’ rights.[fn5]   

To demonstrate one’s entitlement to a Yellowstone injunction, a tenant must demonstrate that he/she: (i) holds a valuable commercial lease (ii) has received a notice to cure; (iii) has requested injunctive relief prior to the termination of the lease; and (iv) is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises.[fn6] “These standards reflect and reinforce the limited purpose of a Yellowstone injunction: to stop the running of the applicable cure period.”[fn7]   

A Yellowstone injunction can provide a modicum of protection to landlords as well as tenants, because they are often conditioned upon the tenant’s ongoing payment of rent and/or the posting of a bond to protect the landlord from a wrongfully issued injunction.

The First Department has held that commercial tenants have a right to a virtually automatic issuance of a Yellowstone injunction[fn8] and has held that in order to obtain a Yellowstone, rather than requiring the tenant to prove on his application that he can cure the alleged default, a tenant must merely state his desire and ability to cure the default by any means short of vacating the premises.[fn8] Furthermore, a tenant is entitled to a Yellowstone injunction when the tenant argues that he is not in violation of the lease, and that if he is, he concedes to cure any such violations.[fn9]   

If the tenant is successful in having the Yellowstone injunction implemented, then the landlord must answer the Supreme Court action and counterclaim for termination of the tenancy. This is an example of a landlord and tenant dispute in a summary proceeding being litigated in a forum other than civil court.

An invariable condition of a Yellowstone Injunction is that the tenant is ordered to pay rent during the pendency of the action.

4. Termination Notice

If no Yellowstone proceeding is commenced and the default is not cured or being cured by the date specified in the notice to cure or if the default is not curable (see below), then the landlord may notify the tenant that the lease will be terminated in a certain number of days. In such case, many commercial leases allow termination in five (5) days. This notice is commonly referred to as a “notice to terminate.” After the expiration of the termination notice, the landlord may commence a summary holdover proceeding against the tenant to recover possession of the premises.  

Notices to cure and notices to terminate pursuant to the terms of a lease are served on the tenant in accordance with the lease. No statute specifies other methods of service for notices given strictly pursuant to a lease.[fn10] If the lease is silent on a method of service, the method used must be “reasonable.”

*** 

6. Defaults the Tenant Refuses To Cure

If a tenant’s position is that it refuses to cure the default, Tenant can’t have the Yellowstone. In Linmont Realty, Inc. v. Vitocarl, Inc., 147 A.D.2d 618 (2nd Dept. 1989), the Yellowstone application was denied. There were 17 defaults, including failure to renew environmental liability insurance, failure to keep daily records of gasoline inventory, failure to have tanks tested, failure to permit the defendants to inspect records of tank tests and inventory control, failure to clean and maintain the premises, and illegally subletting a portion of the premises for the storage and distribution of newspapers. The Linmont court reasoned: 

To procure a Yellowstone injunction, a commercial tenant must demonstrate, inter alia, that it has the desire and ability to cure the alleged default by any means short of vacating the premises. The plaintiff herein has made no offer to cure any of the charged defaults, alleging instead that many of the alleged defaults listed in the Notice of Termination of Lease were not its responsibility, that various conditions did not exist as claimed by the defendants, and that the remainder of the defaults had been waived by the defendants acceptance of rent with knowledge of their existence. [(internal quotation marks and citation omitted)]. 

[Finally, here is a chart from later in the presentation:]



[fn1] Grand Liberte Co-op Inc. v. Billhaud, 126 Misc.2d 961 (1st Dept. App. Term. 1984).

[fn2] Semans Family Ltd. Partnership v. Kennedy, 177 Misc.2d 345 (N.Y.C. Civ.Ct. N.Y. Cty. 1998).

[fn3] First National Stores v. Yellowstone Shopping Center, 21 N.Y.2d 630 (1968), rearg. denied, 22 N.Y.2d 827 (1968).

[fn4] See e.g., Jemaltown of 125th Street, Inc. v. Leon Betesh/Park Seen Realty Assocs., 115 A.D.2d 381 (1st Dept. 1985); Fratto v. Red Barn Farmers Market Corp., 144 A.D.2d 635 (2nd Dept. 1988).

[fn5] See, Finley v. Park Ten Associates, 83 A.D.2d 537 (1st Dept. 1981); South Ferry Building Co. v. J. Henry Schroder Bank & Trust Co., 91 A.D.2d 963 (1st Dept. 1983).

[fn6] Garland v. Titan West Assocs., 147 A.D.2d 304 (1st Dept. 1989).  

[fn7] Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Associates, 93 N.Y.2d 508 (1999).

[fn8] See Herzfeld & Stern v. Ironwood Realty Corp., 102 A.D.2d 737 (1st Dept. 1984); 34 N.Y.Jur.2d § 261 (“where a tenant denies any default and demonstrates that the landlord has given notice of default, and where a period of time remains within which to cure, the tenant is entitled to a grant of preliminary relief in the form of a Yellowstone injunction; since the law does not favor forfeitures, the tenant is not required, as a prerequisite to such relief, to demonstrate a likelihood of success on the merits or an ability to cure, and the proper inquiry instead is whether a basis exists for believing that the tenant desires to cure and has the ability to do so through any means short of vacating the premises”).

[fn8] Id. at 738.

[fn9] See Empire State Building Assocs. v. Trump Empire State Partners, 245 A.D.2d 225 (1st Dept. 1997) (where a tenant can show that it is able and willing to bring itself into compliance with the lease absent vacating the premises, forfeiture is inappropriate); Garland, supra, at 38.

[fn10] See Rose Assoc. v. Bernstein, 138 Misc.2d 1044 (N.Y.C. Civ.Ct. N.Y. Cty. 1988).  


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Co-Living Defined!

On November 1, 2017, Michelle Maratto Itkowitz taught a Continuing Legal Education class for Lorman entitled, "Current Issues in Apartment Overcrowding and Illegal Occupancies". One of the sections of the program was completely new material that Michelle had never taught before - it was on co-living. Michelle has many co-living companies as clients these days. Here are two small excerpts from the November 1 program:

Introduction

People today, especially younger people (millennials), occupy apartments differently than people did twenty years ago. I have extensive anecdotal experience from my landlord and tenant litigation practice in New York City to support that last statement. I represent BOTH landlords and tenants, by the way. 

Today, tenants bring more people into apartments with them – including family members, roommates, and subtenants. In some cases, we see married couples living together with other married couples – as roommates. People are “location independent” in their work lives these days and operate businesses from their apartments. Then of course, we have people turning their apartments into beds-and-breakfasts and/or hotel rooms, via Airbnb and other short-term leasing platforms. Then we have “Co-Living”, an exploding phenomena where people are living in apartment buildings as if they are dorms. 

Some of these occupancies are illegal, and some are perfectly legal. To some landlords, all of this activity might seem like “Overcrowding”. The more people in a building, the more stress on the infrastructure, the more garbage, the more noise, the greater the need for maintenance, etc. To tenants (and this program is good for tenant’s counsel too) these new modalities of occupancy represent more choice in housing in an increasingly expensive marketplace. To the developers and lenders who build the apartment buildings, this changing environment represents more risk and more opportunity.

***

Co-Living

This is the definition of co-living that I have developed for use in my practice:


An arrangement by which a landlord rents an apartment to a group of tenants, where the tenants occupy and share the apartment as roommates, an arrangement which the landlord consents to and facilitates as an active participant; the tenants have flexible terms, which are often short, and are allowed to vacate the apartment early without liability for the full term of the lease; if a roommate is lost, the landlord assists the remaining tenants with getting a qualified new roommate to take lost roommate’s place and gives the remaining tenants rent relief while doing so; the landlord frequently provides the tenants with other advantages and amenities, including but not limited to furnishings and personal property, services, and thematic programming, such as dinners or lectures on topics of common interest to the roommates; co-living places a big emphasis on the creation of a community within the apartment; the price per square foot for the apartment is often higher than it would be if the same apartment was not rented for co-living. The advantages of co-living for the tenant are flexibility, convenience, limited liability for bad roommates, and community. The advantage of co-living to a landlord are a higher price per square foot and greater control of the occupants of an apartment.

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The Owner's Use Exception to Rent Stabilization - An Uphill Battle for A Landlord Not Often Worth Fighting - an Excerpt from Michelle Itkowitz's Lawline CLE on Landlord and Tenant Litigation in New York

On October 17, 2017, Michelle Maratto Itkowitz taught Session 7 of a seven-part continuing legal education program for Lawline on Landlord and Tenant Litigation in New York Session 7 was "Rent Stabilization – Evictions and Defense".

This session takes us through the most common possibilities for evicting a Rent Stabilized Tenant - including non-primary residence proceedings, owner's use proceedings, and "Airbnb Evictions". As always, those defending tenants in such cases will find a wealth of information here as well.

A clip from Session 7 is not available yet, but here is a clip from an earlier session in the program - Motions the Should Never Happen in Housing Court, But Often Do.



And below is an excerpt from the 38-page, 63-footnote materials, which accompanied this program:


THE OWNER'S USE EXCEPTION TO RENT STABILIZATION - AN UPHILL BATTLE FOR A LANDLORD NOT OFTEN WORTH FIGHTING

In New York City, an individual owner of a building may recover one or more Rent Stabilized units for his own use of that of his family.  

A. What I Tell Every Landlord Client About Owner’s Use Cases

The following (in magenta) is the text of a stock email that I send to every landlord who writes to me to consult about prosecuting an Owner’s Use case:

Owner’s use cases are tough, and you need to know these things about them:

(1) Most importantly – Owner’s Use is a temporary exemption. Temporary. The next tenant you install AFTER an Owner’s Use Eviction is legally Rent Stabilized! There is no getting around that. Owner’s Use does not liberate you from regulation. 

(2) You must own the building in your own name. Not in an LLC. Get extra insurance. I am not an insurance lawyer or a transactional lawyer, you should see both before doing this. 

(3) The only way you have a prayer of the case working is if you are being 100% absolutely honest. I will not work on a case where the landlord is making it up. The tenant will get to depose you under oath and whichever family members and their spouses who you claim are moving into the tenant’s apartment. Then everyone will have to testify again at trial. Before I take one of these cases, I make sure to interview all the witnesses in person. You need to convince me before you can convince a court.  

(4) You can ONLY start these cases in the Renewal Period – between 90 and 150 days before the end of a Rent Stabilized lease. So the lease must have been properly renewed and you must wait to get in to that Golub period.

(5) If the tenant or her spouse is over 62 years old, then you must relocate the tenant upon putting yourself or your family into the apartment. You must relocate them to ANOTHER Rent Stabilized apartment at the same rent in the same neighborhood. If you cannot do that, the eviction will not happen.

(6) These cases are more expensive than the average Housing Court litigation, because there is going to be discovery - exchange of paper and depositions. In Brooklyn, it will take at least 2 years.

These items discourage most landlords from doing such a case.

[END OF SAMPLE EMAIL.]

B. Owner’s Use Cases Are Fact-Specific 

Some brief examples follow, and are included to demonstrate how very fact specific these cases are.  


  • Pennella v. Joy, 79 A.D.2d 606 (2nd Dept. 1980) (Landlord did not prove good faith intent when there were five other empty apartments in six-unit building.)
  • Horsford v. Bacott, 5 Misc. 3d 132(A) (App. Term 1st Dept. 2004) aff’d, 32 A.D.3d 310 (1st Dept. 2006) (“A finding of a lack of good faith is not mandated by either the claimed availability of another apartment in the building or any prior discord between the parties.”)
  • Gussow v. Hornblower, 4 Misc. 3d 131(A) (App. Term 1st Dept. 2004) (“A finding of lack of good faith is not mandated by either the claimed availability of the apartment or any prior discord between the parties. Nor is it fatal to the landlord’s otherwise persuasive owner use claim that at the time of trial her daughter-in-law was not actively pursuing her stated plan to attend business school—one of the factors specified in the underlying notice of nonrenewal in support of the landlord’s possessory claim. ‘Absolute synchronicity’ between the trial evidence and the allegations set out in a predicate notice is not required.”)
  • Raffo v. McIntosh, 3 Misc. 3d 127(A) (App. Term 1st Dept. 2004) (“Landlord’s claim that a second bedroom in tenants’ apartment is required to provide for a ‘live-in’ caretaker for the parents was negated by evidence that a back room in the parents’ own apartment—of the same or larger dimension—is equally suitable or adaptable for that purpose.”)
  • Matter of Bath, DHCR Admin. Rev. Dckt. No. JK910174RT (5/30/96) (Landlord demonstrated requisite immediate and compelling necessity and good faith when landlord’s 21-year-old son slept on pull-out bed in landlord’s dining room, was in the process of starting his own business, and only tenant’s apartment had expiring lease with rent that the son could afford.)


Unless the tenant is offered “equivalent or superior housing at the same or lower stabilized rent in a closely proximate area,” a landlord may not recover a unit for owner occupancy when the New York City Rent Stabilized tenant or the tenant’s spouse: is 62 years of age or older or suffers from an anatomical, physiological, or psychological impairment.  There is no owner-occupancy exemption for New York City Rent Stabilized tenants on the basis of long-term occupancy.

Note, however, that turning 62 or suffering from an impairment does not mean that the Landlord cannot seek to recover the apartment for owner occupancy, but rather that he must provide you with an equivalent or superior housing accommodation at the same or lower stabilized rent in a closely proximate area. For purposes of owner occupancy, an "anatomical, physiological, or psychological impairment" is defined as an impairment, other than addiction to alcohol, gambling, or controlled substances, demonstrable by standard diagnostic techniques and which is expected to be permanent and to prevent the tenant from engaging in substantial, gainful employment. 

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