BBWG June 2014 Newsletter June 2014 | Página 2

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.