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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.

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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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The Substantial Rehabilitation Exception to Rent Stabilization Coverage - 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 6 of a seven-part continuing legal education program for Lawline on Landlord and Tenant Litigation in New York Session 6 was "Introduction to Rent Stabilization".

Rent Stabilization is one of the most misunderstood areas of real property law. In this session we begin by answering the fundamental question of – How do I know if a tenant is Rent Stabilized (or not)? This is a very important question in this era of rampant illegal deregulation. If the tenant is Rent Stabilized, we explain what that means for the landlord and for the tenant. 

A clip from Session 6 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 22-page, 29-footnote materials, which accompanied this program:


THE SUBSTANTIAL REHABILITATION EXCEPTION TO RENT STABILIZATION COVERAGE

Moreover, there is an exemption from Rent Stabilization based upon Substantial Rehabilitation of a building, governed by Rent Stabilization Code § 2527.11 and § 2520.11(e). 

The best place to start a review of the law in this area is to study the exact text of the DHCR Operational Bulletin 95-2 [in magenta below], which sets forth the position of the DHCR regarding the circumstances under which the agency will find that a building has been substantially rehabilitated. DHCR tells you exactly what it wants. 

I. Criteria

DHCR will find that a building has been substantially rehabilitated within the meaning of TPR section 2500.9(e) and RSC section 2520.1l(e), and is therefore exempt from coverage under the ETPA or the RSL, for rent stabilized properties where the owner demonstrates, based upon the totality of the circumstances, that the following criteria have been met:

A. At least 75% of the building-wide and apartment systems contained on the following list must each have been completely replaced with new systems. 

Additionally, all ceilings, flooring and plasterboard or wall surfaces in common areas must have been replaced; and ceiling, wall, and floor surfaces in apartments, if not replaced, must have been made as new as determined by DHCR.

List of Building-wide and Apartment Systems:

1. Plumbing
2. Heating
3. Gas supply
4. Electrical wiring
5. Intercoms
6. Windows
7. Roof
8. Elevators
9. Incinerators or waste compactors
10. Fire escapes
11. Interior stairways
12. Kitchens
13. Bathrooms
14. Floors
15. Ceilings and wall surfaces
16. Pointing or exterior surface repair as needed
17. All doors and frames including the replacement of non-fire-rated items with fire-rated ones.

However, for good cause shown, on a case-by-case basis, limited exceptions to the stated criteria regarding the extent of the rehabilitation work to be effectuated building-wide or as to individual housing accommodations may be granted where the owner demonstrates that a particular component of the building or system has recently been installed or upgraded so that it is structurally sound and does not require replacement, or that the preservation of a particular component is desirable or required by law due to its aesthetic or historic merit.

B. The rehabilitation was commenced in a building that was in a substandard or seriously deteriorated condition. The extent to which the building was vacant of residential tenants when the rehabilitation was commenced shall, in addition to the items described in III “Documentation", constitute evidence of whether the building was in fact in such condition. Where the rehabilitation was commenced in a building that was at least 80% vacant of residential tenants, there shall be a presumption that the building was substandard or seriously deteriorated at that time.

***

D. All building systems comply with all applicable building codes and requirements, and the owner has submitted copies of the building's certificate of occupancy before and after the rehabilitation.

E. The Substantial Rehabilitation provision is intended to encourage the creation of new or rehabilitated housing. Accordingly, in making a determination as to the eligibility of a building for this exemption, DHCR will consider all facts that support this policy.

F. Where occupied, rent regulated units have not been rehabilitated, such units shall remain regulated for the duration of occupancy by the regulated tenants, notwithstanding a finding that the remainder of the building has been substantially rehabilitated and qualifies for exemption from regulation.

***

III. Documentation

The following documentation will be required from owners in support of a claim of substantial rehabilitation.

Records demonstrating the scope of the work actually performed in the building. These may include:

o an itemized description of replacements and installations
o copies of approved building plans
o architect's or general contractor's statements
o contracts for work performed
o appropriate government approvals
o photographs of conditions before
o photographs of conditions during
o photographs of conditions after the work was performed. 

Proof of payment by the owner for the rehabilitation work may be required. 

[END OF DHCR OPERATIONAL BULLETIN]

In general, for substantial rehabilitation a landlord needs to be able to prove that:


  • When the construction project commenced when the building was in substandard and seriously deteriorated condition and the Building was at least eighty percent (80%) vacant of residential tenants. 
  • All of the walls in the common area and the apartments were demolished.
  • One-hundred percent of more than 75% of the applicable Building-wide apartment systems contained on the list in DHCR Operational Bulletin 95-2 at I(A) have been completely replaced with new systems. 
  • All Building systems comply with all applicable building codes and requirements and the Building. 


This all needs to be proven by admissible and highly detailed proof. Litigating a Substantial Rehabilitation case is like litigating a construction litigation.

Substantial rehabilitation cases are often more than 10 single-spaced pages long. They are incredibly detailed. Suggesting that the proof that needs to be submitted must be very detailed. 

Here is an example from an actual decision regarding just one building system – electric:

"Concerning electrical wiring, Mr. Goldstein states that there could not have been a total replacement of the electrical wiring because as he observed during his 2012 inspection of the building and the tenant's room, the wiring in the tenant's room is deficient in, among other ways: there are only two outlets, one outlet has no cover and the electrical wiring in the junction box is open and exposed, the remaining outlet is incapable of supporting the tenant's appliances, the kitchen outlet does not have the required ground-fault circuit interrupter (GFCI) incorporated into it, as required by law, there is no 3-pronged grounded outlet, as would have been installed during a complete electrical replacement; that none of the various electricians who allegedly worked in the building ever filed complete plans for such work with the Department of Buildings; that the electrical application in the Department's records do not show the electrical work alleged." 

NOTE this was counteracted by LL’s proof which was:  

"The evidence in this proceeding shows that the electrical wiring in the building and the apartments was replaced. The 1979 vacate order states that no electricity was being supplied to the building. The Commissioner makes a reasonable inference, based upon the language of the vacate order, that given the substandard condition of the entire building and given the lack of electricity, the electrical system needed to be replaced. [There was an electricians affidavit.]  The owner submitted canceled checks … The tenant's contentions that as no permits for electrical work were applied for … and the poor condition of his outlets in his room show no total replacement of the electrical system are insufficient to rebut the 1979 vacate order and the owner's evidence."

Here is an example of the DHCR asking the petitioner for more information:

"On October 16, 2014, the Rent Administrator requested additional information from the petitioner, including the circumstances under which the building was vacant in 2008; when did the rehabilitation project start and end; whether any of the former tenants reoccupied their apartments; photographs before, during and after the renovation; an affidavit from the registered professional architect or engineer who worked on and/or certified the project stating which specific building wide and apartment systems were replaced pursuant to DHCR Operational Bulletin 95 - 2 and what work was done in the common areas of the building; copies of architectural plans approved by the DOB; and the new Certificate of Occupancy or Letter of Completion." 

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Steps a Tenant Should Take if a Landlord is Failing to Uphold the Warranty of Habitability - an Excerpt from Michelle Itkowitz's Lawline CLE on Landlord and Tenant Litigation in New York

On October 3, 2017, Michelle Maratto Itkowitz taught Session 5 of a seven-part continuing legal education program for Lawline on Landlord and tenant Litigation in New York. Session 5 was "Residential Landlord and Tenant Law - Special Issues".

Residential landlord and tenant law is, in many ways, a more difficult area of law than commercial landlord and tenant law. This is so because many of the provisions of a residential lease are, essentially, meaningless. A lease, for example, might say that a residential tenant is prohibited from subletting, but that is simply not the case. We approach Session 5 from the point of view of myth-busting, and track a standard residential lease and point out all the rights that a residential tenant actually has and that a landlord of a residential premises must respect and be mindful of.

HERE IS A CLIP - New York City Short Term Leasing Law: What Is Prohibited?

And below is an excerpt from the 41-page, 22-footnote materials, which accompanied this program:

STEPS A TENANT SHOULD TAKE IF LANDLORD IS FAILING TO UPHOLD THE WARRANTY OF HABITABILITY 

G. First Steps for Tenant If Landlord Is Failing To Uphold the Warranty of Habitability

Just as we began in Session One talking about how a Landlord had to do his homework and his legwork to properly prepare to prosecute a landlord and tenant matter, in this instance we emphasize that a Tenant has to prepare for a legal battle regarding repairs and warranty of habitability issues. 

1. Pictures, Complaints, Letters, and Logs

If the Landlord appears to be violating the Warranty of Habitability, the Tenant should document the problem thoroughly. 

A picture is worth a thousand words. Pictures of the conditions should be taken, saved and dated. Videos are even better, especially if the condition is dynamic, such as a leak. 

Complaints to the Landlord should be made through the building’s formal complaint process, if there is one, and copies of such complaints should be saved. If there is no formal complaint process or if the formal complaint process is getting Tenant and unsatisfactory response, then Tenant should write a letter to management, and, of course, keep a record of the email or send the letter by certified or overnight mail so there is a record. 

Also, if the condition is repetitive, such as a leak or an odor, or if the condition is something that cannot be photographed, such as an odor - keep a log, preferably in a spreadsheet. The spreadsheet should have three columns:

Date and Time
What Happened
Backup (pictures, 311 reference numbers, other witnesses names)  

Example:




2. Complaints to City Agencies

If the Landlord appears to be violating the Warranty of Habitability, the tenant should report the Landlord to the New York City Department of Housing Preservation and Development, the City agency that is responsible for enforcing the New York State Multiple Dwelling Law and the New York City Housing Maintenance Code. If the Tenant’s issue concerns elevators, renovations occurring in the building, demolitions, or structural conditions, then the tenant should contact the New York City Department of Buildings.

Tenant will have to make time in his or her schedule to grant access to New York City inspectors. Violations issued by these agencies appear online:

HPD:  http://www.nyc.gov/html/hpd/html/home/home.shtml

DOB:  http://www.nyc.gov/html/dob/html/home/home.shtml

H. Next Steps if Landlord Does Not Effectuate Repairs

If the Landlord appears to be violating the Warranty of Habitability and complaints, letters, pictures, logs, and complaints to City agencies are not getting the Tenant anywhere, the Tenant can approach the situation in the following ways.

1. Withhold Rent, Get Sued, Argue About it in the Nonpayment Proceeding

The Tenant can inform the Landlord in writing that Tenant is withholding rent over the condition, and deposit the rent in an escrow account, pending the conditions being fixed. Then when the Landlord sues the Tenant for nonpayment of rent, Tenant can raise the repair issues as a defense to the nonpayment proceeding and the repairs can be dealt with in the context of the nonpayment proceeding.

In my opinion, it is important that the Tenant put the money in an attorney escrow account or some other segregated holding place. It becomes tempting for a Tenant who has not paid the rent to spend the extra money on hand on something else, hoping that it never comes due as rent. Inasmuch as there are no guaranties in litigation, this is a very dangerous idea.

2. Do an HP Proceeding

New York City Civil Court Act § 110 sets up the mechanism for Tenants to seek enforcement of state and local laws for the maintenance of housing standards, including, but not limited to, the Multiple Dwelling Law and the Housing Maintenance Code, Building Code and Health Code of the administrative code of the City of New York.

The “HP Part”, as it is known, is where Tenants can bring actions for the imposition and collection of civil penalties for the violation of such laws. It can also issue injunctions and restraining orders or other orders for the enforcement of housing standards under such laws. The housing judges who sit in the HP part have the power to punish for contempt. 

This Part is set up to work with Tenants on a pro se basis. If you are representing a Tenant and would like to keep their fees low, the Tenant can likely represent him or herself in this stage of a litigation. 

The general way in which the HP Part works is as follows. The Tenant files and HP proceeding with the assistance of a Pro Se Clerk at the courthouse. The papers are usually served by mail. When the proceeding appears on the Court’s calendar the Landlord (often represented by counsel), the Tenant (often pro se) and an attorney for HPD enter into a stipulation whereby the Tenant will provide access by a certain date for repairs and the Landlord will correct violations by a certain date. The matter appears again on the Court’s calendar to monitor compliance. If Tenant provides access and the Landlord fails to make the repairs on time, the Landlord is subject to fines. The fines go to the City, not to the Tenant.

3. Tenant Can Withhold Rent and Do An HP Proceeding

A Tenant can simultaneously take both approaches described above. You can withhold rent and do battle in a non-payment proceeding and do an HP Proceeding. The nonpayment proceeding gets you the abatement, while the HP proceeding gets you the repairs. Here is a chart explaining the difference between the two approaches.



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Additional Rent in a Commercial Landlord and Tenant Proceeding - an Excerpt from Michelle Itkowitz's Lawline CLE on Landlord and Tenant Litigation in New York

On October 3, 2017, Michelle Maratto Itkowitz taught Session 4 of a seven-part continuing legal education program for Lawline on Landlord and Tenant Litigation in New York. Session 4 was "Commercial Landlord and Tenant Law - Special Issues"

Commercial landlord and tenant law is sophisticated commercial litigation and needs to be approached as such. In this Session 4, we examine the many commonly litigated issues in commercial landlord and tenant law, delving into the many subtleties that make the area particularly challenging, including Yellowstone Injunctions and Good Guy Guaranties.

HERE IS A CLIP - How Good Guy Guaranties Have Evolved with special guest Jay B. Itkowitz.

And below is an excerpt from the 41-page, 45-footnote materials, which accompanied this program:

ADDITIONAL RENT

If notices were sent to the tenant regarding the computation of additional rent, these should be examined before drafting the papers, and brought to court for trial as well. In the commercial context, unlike the residential, there is regular monthly rent, and then there is also “Additional Rent” – payments that the tenant has to make the landlord for all kinds of other items. Usually these things are priced outside of the rent because they are changeable and unpredictable. For example, electricity or real estate tax escalations. If the taxes on the building go up over the years, commercial tenants agree to shoulder a portion of the increase. Extra charges for repairs and key cards are also additional rent.

When I see additional rent in a case, I have three questions.

1. Is the additional really due?

Is the additional rent really due? For example – I have seen landlords try to bill tenants for things they shouldn’t be entitled to. Like trying to bill building-wide architectural fees to a tenant as “repairs.” You need to check the lease for the authority to bill the item as additional rent.

2. If the additional rent is really due, was it calculated in a defensible way?

If the additional rent is really do, was it calculated in a defensible way? Many of these items require a little math. For real estate tax escalations the lease usually says subtract the base year from the current taxes and then the tenant pays a percentage, usually commensurate with their percentage of the building. I like to make sure they did the math right. 

3. Was the additional rent billed correctly?

Was the additional rent billed correctly? Unlike regular monthly rent, which is usually due without demand as per the lease, Additional Rent does, indeed, need first to be billed. How else would the tenant even know it was due. Thus, tenant needs to be billed in accordance with whatever the lease says about such things. Many leases say something like the landlord needs to present tenant with a bill for additional rent and tenant gets 10 days to pay and some leases even say how that bill has to be sent and who it has to be sent to.

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