Burns v. 500 East 83rd Street Corp., 24 N.Y.2d 117 (1969)

A subtenant in exclusive possession of a rent-controlled apartment for the entire term of the lease, with the landlord’s explicit consent to the sublet, qualifies as a ‘tenant in occupancy’ and is entitled to the exclusive right to purchase the co-operative shares allocated to that apartment during a co-op conversion.

Summary

This case addresses the rights of a subtenant in a rent-controlled apartment during a building’s conversion to cooperative ownership. Burns, a subtenant, sought to compel the building owners to offer her the co-op shares allocated to her apartment. The court held that because Burns was in exclusive possession for the entire lease term with the landlord’s explicit permission and treated as a tenant, she qualified as a ‘tenant in occupancy’ under rent control regulations, entitling her to purchase the co-op shares. This decision clarifies the definition of ‘tenant in occupancy’ to include subtenants with long-term, landlord-approved arrangements, preventing landlords from circumventing tenant protections during co-op conversions.

Facts

Burns was a subtenant occupying a rent-controlled apartment. The original tenant, Henderson, had a lease containing a clause that the landlord would grant permission for a sublet to Burns. Burns continuously occupied the apartment throughout Henderson’s two-year lease. The landlord accepted rent payments directly from Burns. During this period, the building’s owners initiated a cooperative conversion plan, which, under New York City rent regulations, gave ‘each tenant in occupancy’ the right to purchase the allocated shares. The landlord refused to offer Burns the shares, arguing she was merely a subtenant.

Procedural History

Burns sued the building owners and managers seeking an order compelling them to offer her the co-op stock allocated to her apartment. The trial court ruled in favor of the defendants. The Appellate Division affirmed the trial court’s decision. Burns appealed to the New York Court of Appeals.

Issue(s)

1. Whether a subtenant in exclusive and continuous possession of a rent-controlled apartment for the entire term of a lease, with the landlord’s express consent to the sublease, qualifies as a “tenant in occupancy” under Section 55(c)(3) of the Rent, Eviction and Rehabilitation Regulations, thereby entitling her to the exclusive right to purchase the co-operative shares allocated to the apartment?

Holding

1. Yes, because the rent regulations define “tenant” to include “subtenant” and “sublessee,” and the landlord’s explicit consent to the sublet, coupled with the subtenant’s continuous and exclusive occupancy, demonstrates that the subtenant is the “tenant in occupancy” for the purposes of the co-op conversion offering. The court found that Henderson was not a “tenant in occupancy” because he did not live in the apartment. The Court held, “It was for the protection of just such an occupant of rent-controlled accommodations that section 55 (subd. e, par. [3]) was promulgated.”

Court’s Reasoning

The Court of Appeals emphasized the broad definition of “tenant” in the relevant regulations, which explicitly includes “subtenant” and “sublessee.” It reasoned that Burns’s continuous and exclusive occupancy of the apartment, coupled with the landlord’s express consent to the sublease, established her as the “tenant in occupancy” within the meaning of Section 55(c)(3) of the Rent, Eviction, and Rehabilitation Regulations. The court noted that Henderson, the named tenant, did not occupy the premises during the lease term, further solidifying Burns’s claim. The Court stated, “It is not open to dispute, therefore, that plaintiff was for the entire period of the lease the ‘tenant in occupancy’ of the apartment literally within section 55 (subd. c, par. [3]) of the Regulations.” The court distinguished Burns’s situation from “casual occupation, or other kinds of relationships with landlords,” suggesting that the specific facts—long-term occupancy and landlord approval—were crucial. Furthermore, the court suggested that the subletting for the entire lease period, expressly approved by the landlord, may have had the legal effect of an assignment of the lease. The court ultimately decided it was unnecessary to reach the question whether she is also an assignee of the lease because she was found to be a tenant in occupancy.