Owner recovers additional space for own use

Real Estate Weekly, Sept 8, 1993 by Sherwin Belkin

It has been a longstanding precept of rent regulation that owners must be permitted to recover possession of rent regulated housing for their own personal use. In a recent case, the court reaffirmed this principle and noted that where the landlord's application is substantiated by a "good faith" showing, the "Legislature has yet placed no limitation upon the amount of space a given owner may regain for personal use."

In Canino vs. Fogel the owners sought to recover a rent stabilized apartment as part of a single primary residence for themselves and their two children. The tenant asserted that the owners already had a significant degree of space in the building, including space recovered from other tenants, such that they needed no more. Moreover, the tenant claimed that the owners have used space recovered from other tenants as a "bed and breakfast" accommodation for profit.

Belkin Burden Wenig & Goldman represented the owners, Dr. Ian Canino and Teresa Canino, at trial, with partner, Jeffrey L. Goldman serving as trial counsel. The owners successfully demonstrated their good faith in seeking to recover the additional rent stabilized apartment and convincingly rebutted the tenant defenses.

Section 2524.4(a)(1) of the Rent Stabilization Code provides that an owner can elect not to offer a renewal lease to a tenant at the expiration of the lease term and subsequently commence a holdover proceeding where "[a]n owner who seeks to recover possession of the housing accommodation for such owner's personal use and occupancy, as his or her primary residence in the City of New York and/or for the use and occupancy of a member of his or her immediate family as his or her primary residence in the City of New York..." The court (Hon. Peter N. Wendt) noted that an owner is required to demonstrate a good faith intention to recover possession in making out its prima facie case. The court, relying on past precedent, defined good faith as an "honest intention and desire to gain possession of the premises for ones personal use or use by ones family members." In other words, an owner must prove that it will do what is says it will do, and not use owner occupancy as a vehicle to create a vacancy, only to bump up the rent to the next tenant.

The court noted that the owners already occupied space in the building. However, the court found that the tenant's occupancy of the top floor front apartment made it very difficult for the owners to create one large contiguous residence in the building without sacrificing significant space for additional interior stairways. If the owners were permitted to recover the tenant's apartment, the owners could make most of that stairwell part of their own living quarters. The court found:

"For this reason, the Court is convinced that petitioners want, in good faith, to recover respondent's apartment as part of their primary residence. The testimony the Caninos presented is entirely credible and the Court finds it to be sincere."

The court found no legal basis to the tenant defense predicated upon the owners already possessing a significant amount of space in the building. The court noted that there was no legislative limitation on the amount of space that can be recovered. Thus, with regard to recovery of the tenant's apartment, the court opined:

"This is certainly within their right. "

As to the claim that the owners were utilizing part of space already recovered as a "bed and breakfast," such defense was found to be completely without merit. In a scathing decision, the Court alternatively described this claim by the tenants as:

"Nothing more than mere conjecture", "[A] somewhat far fetched theory", "[A] theory [which] does not rise above the level of utter invention", "necessarily false testimony", "entirely without foundation."

In summary, with regard to the tenant's defense, the court stated:

"The most generous description of Mr. Fogel's testimony in this regard is self-serving fantasy - creative, but untrue."

The court thereupon awarded a final judgment of possession to the owners. In addition, having succeeded on their possessory claim, the court found that the owners were entitled to an award of attorneys' fees and set the matter down for a hearing.

Although rent regulation provides many limitations and restrictions upon an owner's use of its own property, the Legislature has always recognized that there is an inherent right in an owner to make use of its own property for its own personal living purposes. The court's decision in Canino vs. Fogel reaffirms this right and makes it clear that the threshold that an owner must meet is a showing of good faith, not compelling necessity. Moreover, a tenant defense which is intended to undermine the owner's claim of good faith, will not be sustained where the defense consists of nothing more than mere conjecture, speculation or falsehood.