Tenants Not Notified of Settlement Agreement

LVT Number: #21247

Facts: In 2006, landlord of a low- to moderate-income building announced its intent to withdraw from the Mitchell-Lama program. Tenants formed a tenants' association and sued landlord. Landlord and named tenants signed a settlement agreement in court in 2007. They agreed that landlord would withdraw from Mitchell-Lama in 2007, but that rent increases for current tenants would be capped at between 7 and 8 percent for nine years.

Facts: In 2006, landlord of a low- to moderate-income building announced its intent to withdraw from the Mitchell-Lama program. Tenants formed a tenants' association and sued landlord. Landlord and named tenants signed a settlement agreement in court in 2007. They agreed that landlord would withdraw from Mitchell-Lama in 2007, but that rent increases for current tenants would be capped at between 7 and 8 percent for nine years. To be eligible for the rent caps, a tenant had to be in occupancy as of May 24, 2007; had to be a member of the tenants' association; and had to sign the settlement agreement. Later, it was discovered that some tenants who were members of the tenants' association and named parties in the case didn’t sign the settlement agreement. Landlord sent these tenants lease renewal notices with rent increases of 40 percent or more. They sued landlord, claiming that they were improperly denied the benefit of the settlement agreement. Four other tenants, who moved in after the settlement agreement was signed, also sued landlord. They claimed that landlord fraudulently misrepresented to them that they were Mitchell-Lama tenants. Landlord asked the court to dismiss all tenants’ claims.

Court: Landlord loses. The tenants who joined the tenants’ association and participated in the case against landlord claimed that they never got notice of the settlement or the chance to sign the agreement. These tenants were entitled to the benefit of the settlement agreement, since it was no surprise to landlord that they intended to be part of the agreement but for a ministerial error. The four other tenants who moved in after May 27, 2007, weren’t entitled to join in the settlement agreement. Although landlord claimed that there was documentary proof of their unregulated status, these tenants claimed that landlord’s managing agent told them that they were subject to the Mitchell-Lama program. These tenants could go forward with a claim against landlord for fraudulent misrepresentation.

Kofin v. Court Plaza, Inc.: NYLJ, 5/28/09, p. 27, col. 3 (Sup. Ct. NY; Shafer, J)