L ITIGATION UPDATE
DEEMED RENEWAL LEASE UPDATE
By Brian Clark Haberly
There have been several
articles over the past year
(including in the BBWG
Newsletter) discussing
“deemed” Rent Stabilized
renewal leases. Until the recent changes
to the Rent Stabilization Code, the Code
had previously stated that when a landlord
had properly offered a renewal lease and
the tenant remained in possession of the
apartment, but failed to sign the renewal
lease offer within the 60 day period provided
under the Code, the landlord was allowed
to “deem” the lease renewed and charge the
guidelines rent increase.
The
Appellate
Division,
Second
Department in a February 2012 case, struck
down the deemed renewal lease section
in the Code. In Samson Management v.
Hubert, the Appellate Division stated
that the procedure laid out by the Rent
Stabilization Code to deem leases renewed
is invalid. The Appellate Court found
that in an action by a landlord for unpaid
rent, the landlord could not deem a lease
renewed and denied the landlord’s motion
for a judgment for unpaid rent.
Since Samson was issued by the Second
Department (which covers Brooklyn,
Queens, Staten Island, Nassau, Westchester
2
and Rockland counties) it was originally
not clear if the First Department (which
covers Manhattan and Bronx counties)
would follow the ruling in Samson.
This ambiguity has now been resolved as
the legislature has amended the Code to
state that landlords will no longer be able
to “deem” Rent Stabilized leases renewed
under the Rent Stabilization Code.
Basically the legislature has followed the
reasoning in the Samson Management case
and removed the “deemed” renewal lease
provision from the Code.
Specifically the new section in the Rent
Stabilization Code states:
9 NYCRR §2523.5(c)(2):
Where the tenant fails to timely renew an
expiring lease or rental agreement offered
pursuant to this section, and remains in
occupancy after expiration of the lease,
such lease or rental agreement may be
deemed to be in effect, for the purpose
of determining the rent in an overcharge
proceeding, where such deeming would be
appropriate pursuant to Real Property Law
section 232-c. In such event, the expiring
lease will be deemed to have been renewed
upon the same terms and conditions at
the legal regulated rent, together with any
guidelines adjustments that would have
been applicable had the offer of a renewal
lease been timely accepted. The effective
date of the rent adjustment under the
“deemed” renewal lease shall commence
on the first rent payment date occurring no
less than 90 days after such offer is made
by the owner.
In light of the changes to the Code (along
with the Samson case), where a Rent
Stabilized tenant has failed to sign a renewal
lease, it would seem the most effective
(and quickest) solution for a landlord is to
serve a Notice of Termination and bring
a holdover proceeding in Housing Court
based upon the tenant’s failure to sign the
offered renewal lease. This would force the
tenant to either sign the renewal lease or be
evicted. Since these changes to the Code
have just been enacted by the legislature,
landlords should consult with an attorney
to determine the appropriate course of
action where a Rent Stabilized tenant has
refused to sign a renewal lease.
Brian Clark Haberly ([email protected])
is a partner in BBWG’s Litigation Department.