New York Law Review

Tag: Co-op Conversion

  • Burns v. 500 East 83rd Street Corp., 59 N.Y.2d 784 (1983): Defines Tenant’s Right to Purchase in Co-op Conversion Under Rent Stabilization Law

    Burns v. 500 East 83rd Street Corp., 59 N.Y.2d 784 (1983)

    Under the Rent Stabilization Law, the right to purchase shares in a co-op conversion belongs to the tenant who is the lessee of record, even if that tenant does not reside in the apartment, so long as the occupancy is by immediate family members as permitted by the lease.

    Summary

    This case addresses who has the right to purchase shares allocated to an apartment under a co-op conversion plan when the husband is the sole lessee of record but does not reside in the apartment, while his wife and children do reside there. The court held that the husband, as the signatory to the lease, is the tenant with the right to purchase the shares, even though he doesn’t live there, because the wife’s occupancy is permitted under the lease as an immediate family member of the tenant. The court likened the wife’s position to that of a subtenant, whose presence does not strip the primary lessee of their purchase rights.

    Facts

    The husband signed the lease for the apartment and pays the rent.
    The lease permits occupancy “only by Tenant and the members of the immediate family of Tenant.”
    The wife resides in the apartment with the children, but the husband does not live there.
    The building is being converted to cooperative ownership, and the issue is who has the right to purchase the shares allocated to the apartment under the Rent Stabilization Law.

    Procedural History

    The lower courts found in favor of the husband, determining that he, as the lessee of record, held the right to purchase the shares. The Court of Appeals affirmed the order without costs.

    Issue(s)

    Whether, under the Rent Stabilization Law, the right to purchase shares allocated to an apartment under a co-op conversion plan belongs to the husband who is the sole lessee of record but does not reside in the apartment, or to the wife who is not a signatory of the lease but resides in the apartment with the permission of the lease.

    Holding

    Yes, because under Section 61(5) of the Code of the Rent Stabilization Association of New York City, Inc., the right to purchase belongs to “tenants in occupancy and lessees of record of vacant or subleased apartments at the time of the offering,” and the husband is the lessee of record, and his wife’s occupancy is considered occupancy by the tenant-husband.

    Court’s Reasoning

    The court reasoned that the husband, as the signatory of the lease, is the tenant, and the occupancy by his wife and children, as permitted by the lease, constitutes occupancy by the tenant-husband, even though he is not physically present. The court emphasized that the relevant provision protects the rights of a lessee of record to purchase, even if the apartment is subleased and the sublessee is in actual possession.

    Specifically, the court stated that the wife’s position is essentially no different than that of a subtenant. This analogy is critical because it reinforces the idea that the lessee of record maintains the primary right, irrespective of who is physically occupying the premises, as long as that occupancy is authorized by the lease.

    The court distinguished this case from Cooper v. 140 East Assoc., noting that Cooper involved rent-controlled premises and regulations defining “tenant” to include subtenants. The court also distinguished Ian v. Wassberg, pointing out that in Wassberg, the “paramount right to occupy” arose “under the circumstances of this case” where the occupant was put in possession by the landlord in violation of a prior lessee’s rights. The court implicitly limited the reach of Wassberg to very specific factual scenarios, confirming the primacy of the lessee of record in most situations.

    This case is significant because it clarifies the application of the Rent Stabilization Law in co-op conversions, specifically addressing situations where the lessee of record and the occupant are different individuals. The court’s decision provides a practical framework for determining who holds the right to purchase in such scenarios, focusing on the lease agreement and the authorization of occupancy. The holding reinforces the importance of the lease agreement and the rights it confers upon the lessee of record.

  • East 56th Plaza, Inc. v. New York City Conciliation and Appeals Board, 51 N.Y.2d 548 (1980): Enforceability of Lease Renewal Offers Under Rent Stabilization

    East 56th Plaza, Inc. v. New York City Conciliation and Appeals Board, 51 N.Y.2d 548 (1980)

    Under rent stabilization laws, a landlord’s offer of lease renewal must be a binding offer including all terms, such as a potential termination clause, existing at the time of the offer, to be enforceable.

    Summary

    East 56th Plaza, Inc. sought to include a 90-day termination clause in a lease renewal offered to a tenant under rent stabilization. The clause was contingent on the landlord obtaining approval for a co-op conversion plan after the initial renewal offer. The court held that the renewal offer must be binding and contain all terms, including any termination clauses, that are in effect at the time of the offer. Since the termination clause was not definite at the time of the offer, it could not be included in the binding lease agreement. The landlord’s intent is immaterial because the statute mandates that the offer be binding.

    Facts

    East 56th Plaza, Inc. (landlord) was subject to the Code of the Real Estate Industry Stabilization Association of New York City.
    The landlord offered a lease renewal to a tenant.
    The landlord attempted to include a 90-day termination clause in the renewal lease.
    This termination clause was contingent upon the landlord submitting a co-operative or condominium plan to the Attorney-General and having it approved by the Department of Housing Preservation and Development.
    At the time of the renewal offer, the co-op conversion plan was not yet approved.

    Procedural History

    The Supreme Court, New York County, ruled in favor of the tenant.
    The Appellate Division reversed the Supreme Court’s decision.
    The New York Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s judgment.

    Issue(s)

    Whether a landlord can include a termination clause in a lease renewal offer based on a contingency (approval of a co-op conversion plan) that was not yet satisfied at the time of the offer, under the Code of the Real Estate Industry Stabilization Association of New York City.

    Holding

    No, because Section 60 of the Code requires the landlord to offer the tenant renewal of the lease on the same terms except for authorized rent increases, and subdivision 7 of section 61 creates an exception only when the landlord has already satisfied the Department of Housing Preservation and Development that a proposed co-operative or condominium plan has been submitted to the Attorney-General; since the cancellation clause was not part of the offer at the time of acceptance, it cannot be part of the binding lease agreement.

    Court’s Reasoning

    The Court of Appeals reasoned that the statutory scheme requires the landlord to provide the tenant with a binding offer containing all terms of the lease, including the possibility of premature termination if a pending condominium or co-operative plan should become effective.
    Acceptance by the tenant creates a binding lease agreement on the terms authorized by statute and included in the offer. The court emphasized that “the obvious statutory scheme and purpose is to require the landlord to provide the tenant, within the statutory period, with a binding offer containing all terms of the lease including the possibility of premature termination if a pending condominium or co-operative plan should become effective.”
    Since the offer did not, and could not, include the cancellation clause prior to the tenant’s acceptance, that clause could not be part of the binding lease agreement.
    The court explicitly stated that the landlord’s intent is immaterial: “The fact that the landlord may not have intended the proposed lease and transmittal letter to constitute a binding offer is immaterial because the statute requires that the offer be binding.”
    The dissent, as noted by the Court of Appeals, sided with the Appellate Division opinion, but the Court of Appeals rejected that viewpoint in favor of a strict interpretation of the rent stabilization code.