Philadelphia Skyline

A Story About the Practical Implications of the Protections of the New Owner’s Use Rules Under the HSTPA of 2019

July 5, 2019

The Story

I hesitated over writing this story. Why? Well, it’s long. And, frankly, I am proud of this particular work. We saved a person’s home. So, it just seemed like this story deserved better than my usual blogpost sarcasm. Thus, this post-idea remained on my “to be written” list for over six months. Why write the story now? Now, it is very timely, in the wake of the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”). 

I represented the Rent Stabilized tenant, a single, middle-aged adult in a small building in one of the boroughs.[FN1]  It was an “owner’s use” case. The landlord asserted that she was taking over the apartment for her daughter, who would function as the building’s superintendent. 

By the time the case got to me (I was substituted in for tenant’s original lawyer), it had been going on for years and was in the post-deposition stage. A year before I was hired, landlord and tenant had put on the record in open court their intention to reach a settlement, and the case was marked off calendar for that purpose. Thereafter, there ensued almost a year of the parties’ lawyers going back and forth on the details, never agreeing on a final draft or entering into a settlement agreement. Nevertheless, based on the transcript of the court record, the landlord’s attorney somehow managed to obtain a warrant of eviction. 

Landlord’s position was that what had been put on the record a year ago, while tenant was represented by experienced counsel (not me at that point), was the settlement, and that the drafting and execution were mere details. The tenant’s (my new client’s) position was that no deal had been reached. Moreover, my client had discovered that the daughter whom the apartment was allegedly being taken for was a medical doctor and she had accepted a position at a hospital in another state. It is difficult to be located in New York City, shoveling snow, plunging toilets, and taking out the garbage, typical superintendent tasks, while simultaneously functioning as a full-time physician far away in another state. (And there’s the sarcasm…) Still, the matter would likely turn on what did, or did not, constitute a settlement when parties go on the record in open court, each represented by counsel, outlining broad parameters of a deal. 

An “agreement to agree” which leaves material terms for future negotiation, is unenforceable. 2004 McDonald Ave Realty, LLC v. 2004 McDonald Avenue Corp., 50 AD3d 1021, 1023 (2nd Dept 2008). In the case that is the subject of this story, there were a number of essential issues which were not discussed on the record, all of which were material. Counsel agreed that a stipulation would have to be drafted, finalized, and executed by the parties. That never happened. In subsequent email exchanges, in fact, landlord’s counsel was suggesting that tenant should agree that the DHCR rent history was not inflated, a position with which tenant did not agree. Furthermore, the parties could not come to any agreement as to what would happen if landlord’s doctor-superintendent-daughter never actually moved into the apartment. Again, no agreement on this important term was reached.

We won the motion seeking to open the case up (kudos to my husband and law partner, who argued it for me), vacate the warrant of eviction, and put the case back on the trial calendar. In the meantime, however, the over-confident landlord had transferred the building out of the name of the individual owner, into the name of a corporation. Only an individual (human) owner may petition the court for permission not to renew a Rent Stabilized lease on account of owner’s intended use. Therefore, landlord was now completely incapable of trying and winning the case, and, thus, the case was discontinued. But that wasn’t quite the end of the story.

The 2019 HSTPA Changes to the Owner’s Use Law

Thereafter, presumably hoping to come after my client again on yet another owner’s use case, landlord transferred the building from the new corporate owner, back into the name of the former individual owner. Really! Perhaps next time, the owner would put forward another adult child who was not working in another state. Maybe the owner hoped that my client, who would not have qualified for Legal Aid, would weary of paying my (or any) lawyer’s fees for more years of litigation. 

Here is where the HSTPA of 2019 comes in. The HSTPA changes NYC Admin Code § 26-511(c)(9)(b) by limiting the owner to a single unit of rent regulated housing stock for use by owner or owner’s immediate family. 

In this matter, owner had previously evicted at least two other Rent Stabilized families from other apartments in the tenant’s building, on the grounds of owner’s use, although at the time this matter was pending, neither of those apartments were being used by owner’s family. 

This case was a prime example of how the owner’s use provision of the law was often being misused. To give you an idea of the problem with the owner’s use jurisprudence pre-dating the HSTPA, below I offer my standard response, which I developed over the years, to landlords asking me about doing an owner’s use case:

Owner’s use cases are tough, and you need to know these things about them:
(1) Most importantly – Owner’s use is a temporary exemption. Temporary. The next tenant you install is legally Rent Stabilized. There is no getting around that. Owner’s Use does not liberate you from regulation. 
(2) You must own the building in your own name. Not in an LLC. Get extra insurance. 
(3) The only way you have a prayer of the case succeeding is if you are being 100% absolutely honest. I will not work on a case where the landlord is making it up. The tenant will get to depose you under oath and whichever family members and their spouses who you claim are moving into the tenant’s apartment. Then everyone will have to testify again, credibly and consistently, at trial. Before I take one of these cases I make sure to interview all the witnesses. If you cannot convince me, you will not be able to convince the court.
(4) You can ONLY start these cases in the Renewal Period – between 90 and 150 days before the end of a Rent Stabilized lease. Therefore, the lease must have been properly renewed and you must wait to get within that period.
(5) If the tenant or her spouse is over 62 years old, then you must relocate the tenant upon putting yourself or your family into the apartment. You must relocate them to ANOTHER Rent Stabilized apartment at the same rent in the same neighborhood. If you cannot do that, the eviction will not happen.

Those problems existed for landlords everywhere, before the new law, yet these barriers never resulted in a shortage of illegitimate owner’s use cases. Now that we are adding the “only one apartment” objection to the list, I think you will see fewer fraudulent cases. This new barrier is not one of proof or procedure. It’s a clear one-bite-of-the-apple for a landlord in a building where this kind of case has never been used before, and an absolute prohibition for any other case like this where owner’s use has previously been employed. 

What’s the Lesson?

What’s the lesson? The lesson is that here we were dealing with a landlord who was clearly abusing the owner’s use provision of the law in order to evict Rent Stabilized tenants from her building. Through good lawyering, I was able to help my tenant-client dodge that bullet, this time. The other Rent Stabilized families previously evicted on owner’s use cases where the owner never used the unit for her family, were not so lucky. Indeed, the transfer of the building back into the name of the individual owner, demonstrated that landlord was gearing up for another try against my client. 

I know the HSTPA is controversial. And this post is not intended to be an exhaustive discussion of the topic. But this particular provision regarding owner’s use cases is going to justly protect a lot of tenants, including my client. 

Suggestions for Individual’s Legitimately Looking to Buy, Renovate, and Live In a Small Apartment Building as a Single Family Residence

Let’s balance this post out a little. 

For those prospective owners who are legitimately looking for a small apartment building, such as a converted townhouse, to occupy as a single family home, greater care will have to be taken to ensure that:

(a) there is no more than one Rent Stabilized tenant in the building (as always, I suggest Rent Stabilization Due Diligence for small buildings; see FAQ #14); and/or

(b) that there have not been any owner’s use cases filed by previous individual owners. Here, I would suggest an extensive litigation search, and drafting representations about this kind of thing into a sales contract (and having such representations survive closing). 

Keep in mind, however, that I am not a transactional lawyer, and that last idea will need to be hammered out by the closing attorneys. 

Respectfully submitted,

Michelle Itkowitz

FN1. Some of the details have been muted or changed to protect the innocent.

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