Source: http://www.davidfrazerlaw.com/blog/
Timestamp: 2019-04-24 05:50:57+00:00

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The Appellate Division, First Department, has just issued a major new decision with potentially disastrous results for rent-regulated tenants who file inaccurate tax returns or other documents in which they represent their residence as somewhere other than their apartment. In Ansonia Associates LP v. Unwin, the tenant filed federal tax returns in which she took a 100% business deduction for her rent even though she actually resided in the apartment. The court ruled that, as the tax returns were filed under penalty of perjury, the tenant was now prohibited from claiming that the apartment was her residence.
This case has potentially seismic implications for primary residence cases, especially those involving live-work lofts or apartments where tenants carry on home occupations. If you are deducting 100% [or other disproportionate share] of the rent on your taxes, you should amend your returns immediately.
Beyond this, the decision may implicate tenants who file tax returns from their weekend homes or who take a homestead exemption in another state, most commonly Florida. It is also not inconceivable that this could be extended to representations on mortgage documents, which are also signed under penalties of perjury. It is common for tenants financing a second home to unthinkingly take out a “primary residence” mortgage in order to secure a lower rate. That is, they sign under penalty of perjury that the house will be their primary residence. In light of Unwin, this now may put rent-regulated apartments at risk. The same could apply to the even more mundane practice of saving on auto insurance by registering the car at the upstate house when, in reality, it is garaged in the city.
The message the court is sending is unmistakable: tenants who are benefiting from rent regulation must be scrupulously honest. Tenants who try to have it both ways – to take advantage of the rent laws while also simultaneously benefiting from a claim to live elsewhere – are putting their actual homes in peril.
After a chaotic legislative session, the legislature amended §282-a of the Loft Law to reinstate the application period. This erases the prior application deadline of March 11, 2014. Now, loft tenants have until June 2017 to file coverage applications.
Tenants, however, should not delay filing. To establish coverage tenants still must prove occupancy during the “window period,” January 1, 2008 through December 31, 2009. Unless the tenant applying for coverage was living in the apartment at the time, it is going to mean tracking down the window period tenants. Given that 2008 is now seven years, finding those tenants — and hoping they have relevant documentation from the window period — is becoming increasingly difficult with the passage of time. Waiting another two years will only make this quest more difficult.
In advising a tenant involved in a Housing Court proceeding, one of the most important considerations is attorney’s fees. It’s not only how much the tenant’s fees will be, but whether or not she is entitled to collect fees if she wins or, conversely, if she would have to pay the landlord’s fees if she loses. While, we’d all like to believe that the outcome of cases are based on the law and justice, in reality many cases are settled based on a party’s financial exposure. Whether a tenant would be liable for her landlord’s legal fees if she loses, or vice versa, could be a determinative factor in how, or whether, to proceed in a particular case. Thus, it is critical to be able to counsel a client on the risk of attorney’s fees.
In many cases, however, this has been difficult to do in recent years due to a string of contradictory cases issued by the appellate courts. Except for certain statutory claims such as rent overcharges, a party’s entitlement to legal fees is determined by the lease. Many residential leases have a clause requiring a tenant to pay the landlord’s fees in the event the tenant breaches the lease. Real Property Law §234 provides that wherever a lease has such a provision it is deemed reciprocal and the tenant is entitled to fees if the landlord sues but the tenant wins. The idea is to “level the playing field” between landlord and tenant and discourage frivolous cases by causing the landlord to consider the risk of having to pay the tenant’s fees. See Duell v Condon, 84 NY2d 773 (1995).
Any rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses and second to pay any amounts Tenant owes under this Lease. Landlord’s expenses include the costs of getting possession and re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.
This had become known as the “Bunny Realty” language, after the first appellate case to address legal fees under this provision. Bunny Realty Corp. v. Miller, 180 Ad2d 460 (1st Dep’t 1992). Over the past few years, the appellate courts had split on the construction of this peculiar language. The First Department, which covers Manhattan and the Bronx, said the language did not trigger a tenant’s right to fees under RPL §234. Oxford Towers Co. v. Wagner, LLC, 58 AD3d 422 (1st Dep’t 2009). The Second Department, which covers Brooklyn and Queens, went the opposite way. Cassamento v. Juaregui, 88 AD3d 235 (2d Dep’t 2001). There were also a series of lower court opinions in which the judges contorted themselves into the legal equivalent of a pretzel to apply these conflicting decisions to the facts of specific cases. Given the confusing – and confused – legal landscape, it was difficult to provide clients with the Bunny Realty a reliable assessment of their ability to collect, or obligation to pay, legal fees.
In Graham Court Owner’s Corp. v. Taylor, 2015 NY Slip Op 01482 (2015), the Court of Appeals resolved the conflict and concluded that the Bunny Realty language does trigger a tenant’s entitlement to legal fees. Of course, the flip side of this holding is that landlords are now clearly entitled to fees if they prevail in a Housing Court case against a tenant with Bunny Realty language. Nevertheless, it is now possible to counsel clients with greater certainty as to the financial benefits – and risks – of pursuing litigation.
It has always been one of the bedrock principles of the Loft Law that the law protects “occupants,” not just tenants. That is, if an individual could prove that they were in actual residential possession on the effective date of the law – June 21, 2010 for the 2010 amendments codified at Multiple Dwelling Law §281(5) – then he or she was protected under the law, whether they were a tenant, a subtenant, a roommate or other status. This has now changed.
In a series of three cases, including David’s case, Various Tenants of 357 Bowery, the Loft Board ruled that, if the tenant of record was in possession on the effective date, then any other occupants – including the tenant’s spouse or life partner – are not protected [though they may have succession rights if the tenant vacates]. As pointed out by Loft Board Tenant Represented Chuck Delaney in his dissent, this ruling upends twenty years or more or established Loft Board precedent.
Loft tenants and occupants with pending Loft Board coverage applications should consult their attorney about the possible impact of this holding on their cases.
It’s an increasingly common story throughout New York: a previously forgotten neighborhood becomes trendy. then the developers move in and the rent-regulated tenants must deal with the inconvenience and disruption of “luxury renovation,” which is often little more than thinly disguised harassment. Probably the first neighborhood to experience this upheaval was SoHo in the 80’s. Now, a generation later, it is still going on, as the few remaining middle-class tenants fight to preserve the quiet enjoyment of their homes amidst developers’ voracious profit-taking, as exemplified by the plight of David’s clients, Michele Varian and Brad Roberts, in the New York Times.
This story, thankfully, has a happy ending as David fought for Michele and Brad to get their home back after living for months with a gaping hole in their floor and exposure to potentially toxic construction dust.
In Matter of Wassman, after a nine-day trial, Administrative Law Judge Alessandra Zorgniotti found that David’s clients were protected by the Loft Law. In this case, in order to prevail David had to prove that a third unit in the building was residentially occupied by the deceased owner. The current owner claimed that the prior owner had lived in the basement and not his fully outfitted fourth-floor apartment. As a result of David’s efforts, including a successful cross-examination of the landlord’s witnesses, Judge Zorgniotti found the claim to be incredible while also rejecting the landlord’s attempted character assassination of his clients.
David has been recognized again as one of the top real estate attorneys in New York by the legal publisher Thomas Reuters. The listing is here.
David Frazer's case work for our loft law litigation was outstanding. His advice was right on target and his clear and focused approach helped relieve our anxiety. I was impressed with his concise, to-the-point briefs that always emphasized the important details and ultimately lead to resolution in our favor.

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