Rosario v. Diagonal Realty, LLC, 8 N.Y.3d 755 (2007)

A landlord’s decision to accept federal Section 8 rent subsidy payments constitutes a ‘term and condition’ of a lease executed with a rent-stabilized tenant, requiring continuation of that term in renewal leases; federal law does not preempt this protection.

Summary

This case addresses whether a landlord in New York City can opt out of the Section 8 program for rent-stabilized tenants when a lease is up for renewal. The New York Court of Appeals held that a landlord’s acceptance of Section 8 subsidies becomes a ‘term and condition’ of the lease, which must be maintained upon renewal under the Rent Stabilization Code. The Court further decided that federal law doesn’t preempt this state protection, clarifying that the 1998 amendments to the Section 8 program aimed to streamline federal involvement, not undermine state tenant protections. This decision protects Section 8 recipients in rent-stabilized apartments from losing their subsidies upon lease renewal.

Facts

Sonia Rosario, a long-term tenant in a rent-stabilized apartment owned by Diagonal Realty, received Section 8 benefits for many years. Diagonal Realty notified the New York City Housing Authority (NYCHA) that it would no longer accept Section 8 payments for Rosario’s apartment. Diagonal Realty then initiated eviction proceedings against Rosario for nonpayment of rent, based on the full rent amount without the Section 8 subsidy.

Procedural History

Rosario and other similarly situated tenants sued their landlords in Supreme Court, seeking a declaration that the landlords could not opt out of the Section 8 program. The Supreme Court consolidated the cases and ruled in favor of the tenants, declaring that landlords were obligated to continue accepting Section 8 subsidies. The Appellate Division affirmed this decision. The New York Court of Appeals granted Diagonal Realty’s motion for leave to appeal.

Issue(s)

1. Whether a landlord’s prior acceptance of Section 8 subsidy payments constitutes a ‘term and condition’ of a lease that must be continued on a renewal lease under New York’s Rent Stabilization Code.

2. Whether 42 U.S.C. § 1437f preempts New York law requiring landlords of rent-stabilized tenants to renew leases with the same terms and conditions, including the acceptance of Section 8 subsidies.

Holding

1. Yes, because landlords accepting Section 8 payments are required to include a tenancy addendum in the lease, making acceptance of Section 8 subsidies a term of the lease. Consequently, this obligation must continue in a renewal lease, as required by the Rent Stabilization Code.

2. No, because Congress did not intend to preempt state laws protecting Section 8 recipients, and the 1998 amendments aimed to streamline federal involvement, not undermine state tenant protections.

Court’s Reasoning

The Court reasoned that under New York’s Rent Stabilization Code, renewal leases must be on the “same terms and conditions as the expired lease.” Since landlords who accept Section 8 are required to include a HUD-prescribed “tenancy addendum” in their leases, acceptance of Section 8 becomes a “term” of the lease. The court emphasized the language of 9 NYCRR 2522.5(g)(1), which mandates that renewal leases maintain the same terms as the *expired* lease, not necessarily the initial lease. Diagonal Realty argued that 42 U.S.C. § 1437f preempted state law, citing the 1998 amendments that clarified landlords could terminate tenancies “during the term of the lease” for cause. The Court rejected this argument, finding no express preemption in the statute. Citing *California Federal Sav. & Loan Assn. v Guerra, 479 US 272, 280 (1987)*, the court stated, “Congressional preemptive intent may be discerned in three ways: (1) expressly in the language of the Federal statute; (2) implicitly, when the Federal legislation is so comprehensive in scope that it is inferable that Congress intended to fully occupy the ‘field’ of its subject matter; or (3) implicitly, when State law actually ‘conflicts’ with Federal law”. The legislative history of the 1998 amendments indicated an intent to streamline the Section 8 program, not to undermine existing state tenant protections. HUD regulations also clarified that the Section 8 program was not intended to preempt state and local laws prohibiting discrimination against voucher holders. The Court also noted that the states “have broad power to regulate housing conditions in general and the landlord-tenant relationship in particular” (*Loretto v Teleprompter Manhattan CATV Corp., 458 US 419, 440 (1982)*). Finally, the Court found no conflict between federal and state law, as landlords could comply with both. The court concluded that Congress did not intend to remove state and local law protections afforded to Section 8 recipients when it ended the so-called “endless lease rule.”