Illegal Subtenant Becomes Rent-Stabilized Tenant

LVT Number: #22622

Landlord sued to evict prior rent-stabilized tenant for illegal subletting in 2002. Tenant’s legal rent was $812 per month. Tenant gave up the apartment, and landlord signed a settlement agreement in court with subtenant. Landlord gave subtenant a deregulated lease because the new “legal regulated rent” was over $2,000 per month. Landlord also gave subtenant, now new tenant, a preferential rent of $1,800 per month. Landlord renewed new tenant's lease once, but then refused to renew a second time.

Landlord sued to evict prior rent-stabilized tenant for illegal subletting in 2002. Tenant’s legal rent was $812 per month. Tenant gave up the apartment, and landlord signed a settlement agreement in court with subtenant. Landlord gave subtenant a deregulated lease because the new “legal regulated rent” was over $2,000 per month. Landlord also gave subtenant, now new tenant, a preferential rent of $1,800 per month. Landlord renewed new tenant's lease once, but then refused to renew a second time. New tenant sued landlord in 2005, claiming that he was subject to rent stabilization and that he hadn't waived his rights under the Rent Stabilization Law by signing the settlement agreement in court. He also claimed a rent overcharge.

The court denied landlord’s request to dismiss the case, and an appeals court ruled that the settlement agreement was void as against public policy and the Rent Stabilization Law. Landlord then claimed that since the settlement agreement was void, the parties should be restored to the positions they were in previously and landlord should be allowed to seek eviction of new tenant as an illegal subtenant.

The court ruled against landlord. The appeals court had voided only the settlement agreement, not the lease that landlord gave new tenant after settling the case. And the lease itself didn’t refer to the settlement agreement, but was freestanding. The settlement agreement also didn’t compel landlord to renew tenant’s lease, which landlord did in 2004. There was an overcharge of $12,000, including triple damages, and landlord must pay tenant attorney’s fees totaling $30,500.

Jazilek v. Abart Holdings, LLC: NYLJ, 4/22/10, p. 32, col. 5 (App. Div. 1 Dept.; Andrias, JP, Sweeny, Renwick, Abdus-Salaam, Manzanet-Daniels, JJ)