Stern v. Equipping Corp. of America, 31 N.Y.2d 857 (1972)
Section 232-c of the Real Property Law alters the common-law rule regarding holdover tenancies by requiring acceptance of rent for tenancies longer than one month to create a holdover tenancy, absent an express or implied agreement otherwise.
Summary
This case clarifies the effect of Section 232-c of the Real Property Law on holdover tenancies in New York. The court held that merely remaining in possession after the lease expires for tenancies longer than one month does not automatically create a holdover tenancy unless the landlord accepts rent. The statute’s reference to “an agreement either express or implied” pertains solely to extending the holdover tenancy beyond a month-to-month basis. Without rent acceptance, the landlord’s remedies are limited to eviction and damages for use and occupation, but not an action for unpaid rent based on a unilaterally set amount.
Facts
Equipping Corp. of America (tenant) remained in possession of the premises after its lease term expired. The landlord, Stern, did not accept any rent from the tenant for the holdover period, nor was any rent offered by the tenant. Stern attempted to create a holdover tenancy and sue for nonpayment of rent based on a rent amount unilaterally fixed by Stern.
Procedural History
The landlord initiated an action for nonpayment of rent. The lower court’s decision was appealed to the Appellate Division. The Appellate Division’s order was then appealed to the New York Court of Appeals.
Issue(s)
Whether, under Section 232-c of the Real Property Law, a landlord can create a holdover tenancy for a term longer than one month simply by the tenant remaining in possession after the lease expires, without the landlord accepting rent from the tenant during the holdover period?
Holding
No, because Section 232-c requires the landlord to accept rent from the holding-over tenant to create a holdover tenancy for tenancies longer than one month, absent an express or implied agreement to the contrary.
Court’s Reasoning
The court emphasized that Section 232-c of the Real Property Law changed the common-law rule. The court stated that the statute “provides that the mere holding over by a tenant whose term is longer than one month does not allow the landlord to create a holdover tenancy without his acceptance of rent from the holding over tenant.” The court interpreted the phrase “unless an agreement either express or implied is made providing otherwise” to refer solely to the duration of the holdover tenancy, not to the fundamental requirement of rent acceptance to establish the tenancy itself. Since the landlord did not accept rent, no holdover tenancy was created. The court clarified that the landlord’s recourse is to remove the tenant and seek damages for both incidental losses and for the tenant’s use and occupation of the premises. Because there was no agreement on rent and no rent paid, there was no basis for an action for nonpayment of rent; “there being no tenancy in fact or at law obligating the tenant for such rent.” The court reinforced the necessity of actual agreement (or implied agreement through conduct such as rent acceptance) to bind the tenant to a new rental obligation. The decision reflects a policy favoring clear contractual obligations over implied tenancies, especially when dealing with commercial leases.