Recent developments in landlord-tenant law

Real Estate Weekly, June 24, 1998 by Luise A. Barrack

This article should serve as a general outline on these topics; however, if you have any specific questions, you should contact a member of the firm.

Rent Demands

A Manhattan federal judge recently ruled that serving a three-day demand for rent which has been signed by a landlord's attorney violates the Federal Fair Debt Collection Practices Act (FDCPA). Under the FDCPA, any communication from someone other than the person to whom the debt is owed used in the collection of a debt must clearly state that it is attempting to collect a debt, and advise the debtor in writing that he or she has 30 days to contest in writing the validity of the alleged obligation.

The FDCPA applies to businesses or organizations which are in the business of collecting debts. One is in such a business if one collects more than five debts per year. Thus, a typical managing agent or landlord-tenant law firm would be considered a collection agency as defined by the FDCPA, and therefore subject to its requirements.

However, an owner is permitted to collect its own debts without triggering the FDCPA. Clearly, the best way for an owner to insure not running afoul of the law is for the owner or one of the owner's officers or directors to sign all rent demands and/or letters demanding the payment of rent.

Non-Primary Residence "Agreements"

In a case recently decided by the Appellate Division, First Department, the landlord and the tenant had entered in an "agreement" whereby the tenant acknowledged that he was not using the apartment as his primary residence, and would therefore pay a rent in excess of stabilization levels. The Court determined that the agreement was void as a matter of public policy. The Court also found that the overcharge was willful and awarded the tenant treble damages. Owners are cautioned against such agreements.

In addition, a lower court judge recently voided as against public policy an agreement (referred to as a "stipulation" in the decision) whereby a landlord agreed, in exchange for a substantial increase in rent, to forebear in commencing a non-primary residence proceeding against the tenant. The landlord thereafter breached the agreement by commencing such a proceeding, and the tenant moved to dismiss the proceeding based upon their agreement. The lower court found that the agreement was void because the Rent Stabilization Law sought to discourage non-primary residence.

Acceptance of Rent Cheeks as a Waiver

In a recent Civil Court case, a landlord served a tenant with a Notice of Termination. Thereafter, but before commencing a holdover proceeding, the landlord received and held three rent checks from the tenant. The Court ruled that the mere retention of these uncashed checks violated the Notice of Termination and warranted dismissal of the holdover.

In its decision, the Court analyzed several cases dealing with the acceptance of rent. The Court found that the mere receipt of rent checks, coupled with the prompt rejection of the uncashed checks, did not constitute acceptance of rent. The Court also found that where a rent check is received and inadvertently cashed, there is no acceptance of rent if the landlord promptly explains the inadvertent acceptance to the tenant and returns the money. However, where the uncashed rent checks were retained over a three-month period, the retention of the checks constituted a waiver of the termination. The Court held that the issue of waiver will be determined by the totality of the circumstances in each case.

Landlords commencing holdover proceedings should promptly reject any rent payments until advised otherwise by counsel. However, it remains clear that there is no issue as to the acceptance of rent after the commencement of a holdover proceeding. Statutory law clearly provides that acceptance of rent after commencement of a holdover proceeding shall not terminate such proceeding nor affect any award of possession to the landlord.

Rent Overcharges

Pursuant to a 1997 enactment, the New York State Legislature amended the Rent Stabilization Law to provide that "no determination of an overcharge and no award or calculation of an award of the amount of an overcharge" could be based upon an overcharge having occurred more than four years before the complaint is filed.

In a January, 1998 decision, the Appellate Division, First Department ruled that this statute was to be strictly construed in favor of owners, and applied to all pending overcharge actions or proceedings, whether judicial or administrative.

One New York County judge recently held that a dramatic increase in rent which occurred over 10 years ago was a continuing violation which recurred each month the purportedly illegal charge was included in the rent, and was thus within the four-year Statute of Limitations.

This interpretation was rejected thereafter by the Appellate Term, First Department, which held that a sudden increase in rent is instead a singular occurrence. If the sudden increase occurs more than four years before an overcharge allegation is raised, that increase is deemed legal and cannot be questioned in any way.