Court Opinion

ID: 5701915
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:41:49.821812+00
Date Added: 2024-06-11T08:40:21.065590
License: Public Domain

Andrias, J. (dissenting).
On March 1, 1995, the parties to a rent-stabilized lease entered into a renewal lease with a rider. As pertinent to this appeal, article 2 of the rider provides that plaintiffs are entitled in perpetuity to automatic two-year renewal leases with rent increases to be fixed according to the percentages periodically set by the New York City Rent Guidelines Board. The issue presented is whether the parties’ agreement is void as against public policy because it effectively deregulated the apartment.
The majority concludes that the parties’ agreement was an attempt to circumvent the rent stabilization laws because plaintiffs agreed to pay $1,700 a month in rent whereas their rent under the expiring lease was $1,529 and the lawful increase for 1994 to 1996 would have been $1,590 instead of the $1,700 agreed to by the parties. Overlooked, however, is the fact that, as found by the motion court, and specifically set forth in the agreement itself, the lease and rider were the culmination of extensive, arm’s length negotiations to settle a dispute arising out of defendant’s alleged failure to timely offer plaintiffs a renewal lease as well as outstanding claims involving the rent, repairs and renovations to the apartment and certain appliances in the apartment.
The parties specified in the rider that the lease and rider incorporated and constituted a settlement regarding approximately $6,676 in costs and expenses relating to various renovations made to the apartment in 1992. Article 6 of the rider provides, in pertinent part, that “[t]he agreed Base Rent *44provided for under the Lease incorporates any amounts to which Landlord may otherwise have been entitled with regard to the cost and expense relating to the foregoing . . . and no additional amounts will be payable to the Landlord with regard to the foregoing.”
Unless public policy is affronted, settlements are favored and encouraged and, absent any evidence of bad faith or overreaching, I perceive no basis for disturbing the parties’ arm’s length agreement (cf. Merwest Realty Corp. v Prager, 264 AD2d 313 [1999]) or declaring article 2 of the rider unenforceable as against public policy.
The lease and rider were entered into at a time when there was a pending application by defendant to the Division of Housing and Community Renewal (DHCR) for a determination that the apartment was not subject to rent stabilization because the building contained fewer than six apartments. A year later, DHCR denied defendant’s application. Thus, the apartment continued to be rent stabilized and plaintiffs’ lease was renewed in 1996, 1998 and 2000, and the rent increased, pursuant to the terms of the rider, in accordance with the percentages permitted by the Rent Guidelines Board. Thereafter, in 2002, after the rent on plaintiffs’ apartment was more than $2,000, defendant sought luxury decontrol of the apartment and, in response, plaintiffs commenced this action, which seeks a declaration that the lease and rider are enforceable and an injunction barring defendant from applying for luxury decontrol, and moved for summary judgment. Defendant cross-moved for summary judgment granting him luxury deregulation of the apartment and declaring article 2 of the rider unenforceable and contrary to public policy.
The motion court granted that portion of plaintiffs’ motion for summary judgment declaring the parties’ lease and rider enforceable. In so ruling, the court found that defendant failed to cite any authority for the proposition that the Rent Stabilization Code would bar the parties from contractually agreeing to abide by certain provisions of the Code even if the premises are not otherwise subject to regulation or, as in the instant case, the premises become deregulated through “regular, officially authorized means.” It further found that no public policy is implicated in the enforcement of such a contract and held that the lease and rider, including plaintiffs’ right under article 2 of the rider to renewal leases for two-year terms with increases in accordance with the increases set by the Rent Guidelines Board, are *45enforceable and remain in effect notwithstanding the luxury-deregulation of the premises.
Initially, defendant’s argument that article 2 of the rider is unenforceable as being violative of public policy since it required plaintiffs to pay rents higher than the lawful rent-stabilized rent on the apartment at the time is raised for the first time on appeal and should not be considered (see District Council 37, Am. Fedn. of State, County & Mun. Empls., AFL-CIO v City of New York, 22 AD3d 279, 284 [2005]; Devlin v Video Servs. Acquisition, 188 AD2d 370 [1992]). In any event, aside from being contrary to defendant’s position below, where he contended that he was entitled to raise the rent based on renovations to the apartment, such argument is without merit.
The issue framed by defendant in his cross motion for summary judgment was whether a lease provision entitling plaintiffs to an unconditional renewal lease “in perpetuity” is enforceable and whether such provision exempts plaintiffs from “luxury deregulation.” His position was not that the rider was void because plaintiffs waived their rights, but that nothing in the rider waived his right to apply to DHCR for luxury deregulation.
Although it is well settled that landlords and tenants are prohibited, on public policy grounds, from making private agreements to effectively deregulate rent-stabilized housing units (see 390 W. End Assoc. v Harel, 298 AD2d 11, 16 [2002]), as the motion court correctly found, no violation of public policy is implicated in the enforcement of the parties’ agreement inasmuch as nothing in the agreement explicitly or implicitly deregulated the apartment in question. The motion court specifically found that the issue of whether the apartment should be luxury decontrolled is a question for DHCR and, in fact, while the cross motions were pending before the court, DHCR granted defendant’s application and luxury decontrolled the apartment on October 31, 2003.
Thus, the apartment having been deregulated, not by the parties’ agreement but by DHCR, the only question remaining before the motion court was whether the landlord of a previously rent-stabilized apartment may agree to offer his or her tenant renewal leases in perpetuity with rent increases that coincide with the amount of rent increases set by the Rent Guidelines Board for apartments that are still subject to rent stabilization.
Contrary to the majority’s opinion, there is simply nothing in the rider to the parties’ lease that indicates a waiver by the *46plaintiffs of any protection offered by the lawful stabilized rent established for their apartment and their right to timely renewal of their lease. In fact, the lease has been renewed and its terms ratified by the defendant three times (1996, 1998 and 2000) prior to the commencement of this action.
Moreover, even if the provision for increased rent were found to violate the rent stabilization laws or offend public policy, the other terms of the lease and rider would still be enforceable since paragraph 18 of the lease contains the standard proviso that “[i]f a term in this Lease is illegal, the rest of this lease remains in full force.”
The immediate threat to the rent stabilization scheme perceived by the majority of wholesale use by other parties of such settlement agreements as a subterfuge to abrogate regulatory controls and its argument that there is no reason to depart from established policy in this case is unpersuasive. It is well settled that landlords and tenants are prohibited, on public policy grounds, from making private agreements to effectively deregulate rent-stabilized housing units. Nevertheless, despite a prohibition in the rent control law identical to Rent Stabilization Code (9 NYCRR) § 2520.13 (which provides: “An agreement by the tenant to waive the benefit of any provision of the [Rent Stabilization Law] or this Code is void”), this Court has twice upheld negotiated settlements surrendering possession of rent-controlled apartments where such settlements, as here, were freely negotiated at arm’s length (see Merwest Realty Corp. v Prager, supra; Eckstein v New York Univ. 270 AD2d 208 [2000], lv denied 95 NY2d 760 [2000]; see also Kent v Bedford Apts. Co., 237 AD2d 140 [1997]).
Nor is there any support for the majority’s conclusion that a result of the enhanced rent, which clearly included the $6,676 amount agreed to by the parties as part of their settlement, has been to prematurely subject the premises to luxury decontrol. In fact, defendant argued before the motion court that, to the extent plaintiffs sought to challenge the rents set forth in the parties’ 1995 lease, they were barred by the four-year statute of limitations in the Rent Regulation Reform Act of 1997 (L 1997, ch 116, § 34, amending CPLR 213-a) from challenging the registered rents for the apartment beyond May 1998, i.e., four years prior to the commencement of this action.
Likewise, the majority’s fear that the higher rent presently paid by plaintiffs may result in a future tenant having to pay more than the legal stabilized rent for this unit is totally *47unfounded. There is simply no question that the apartment in question has been luxury decontrolled by DHCR. Any future tenant will, as plaintiffs have already done, negotiate a fair market rent for the unit without recourse to the rent stabilization laws. While unlikely, if market conditions were to change, such fair market rent could conceivably be lower than its previous rent stabilized rate. Nor would an affirmance result in the widespread bad faith use of negotiated settlements in housing court. Presumably, any future disputes about similar settlements would have to be decided, as this one must, on their individual merits, which would necessitate, in addition to any legal analysis, consideration of such issues as good faith and credibility. There is no claim here that either party to this transaction acted in bad faith or that there was a collusive effort to avoid or abrogate the rent stabilization scheme.
Accordingly, since the parties’ agreement, by its terms, clearly did not deregulate the apartment, I dissent and would affirm the order granting plaintiffs’ motion for summary judgment declaring the lease and rider enforceable.
Mazzarelli and Gonzalez, JJ., concur with Tom, J.P; Andrias and Friedman, JJ., dissent in a separate opinion by Andrias, J.
Order, Supreme Court, New York County, entered March 8, 2004, reversed, on the law, without costs, plaintiffs’ motion for summary judgment declaring the lease and rider enforceable denied and defendant’s cross motion seeking to declare article 2 of the subject lease rider unenforceable granted.