Stabilization Protects SRO Occupants, Panel Rules

by Brendan Pierson
New York Law Journal
April 17, 2013

A person who lives in a single-room occupancy building for at least six months becomes a permanent tenant protected by rent stabilization, regardless of whether he has a lease or pays rent, a unanimous state appellate panel ruled yesterday, reversing a lower court.

The Appellate Division, First Department, ruled in Branic International Realty v. Pitt, 570284/10, that an SRO tenant does not need to have a landlord-tenant relationship with the SRO owner, aside from living in the SRO for at least six months, in order to be a "permanent tenant" under New York's Rent Stabilization Law.

Justice Darcel Clark (See Profile) wrote the opinion, joined by Justices Richard Andrias (See Profile), David Friedman (See Profile), Rolando Acosta (See Profile) and Helen Freedman (See Profile).

The underlying lawsuit was filed in 2010 by Phillip Pitt, who was living in an Upper West Side SRO at the time. Pitt moved into the SRO in 2003. His rent was paid by New York City's Human Resources Administration through a program designed to house the homeless. The HRA had a "memorandum of understanding" with Branic International Realty Corp., the owner of the SRO, under which the HRA would place people in the building and pay their rent.

In 2007, HRA told Branic that it would stop paying Pitt's rent because Pitt was no longer living there. But actually Pitt was still living there and he continued to live there without paying rent. Branic initiated a holdover proceeding in Manhattan Civil Court, but Judge Gerald Lebovits (See Profile) denied the petition, ruling that Pitt was protected by the Rent Stabilization Law because he had lived in the SRO continuously for more than six months.

Branic's only remedy, Lebovits ruled, would be to initiate a non-payment proceeding against Pitt.

Separately, Branic filed a lawsuit against the HRA seeking to compel the agency to continue paying Pitt's rent, and was ultimately successful. However, Branic continued to press its claim that Pitt had no rights as a tenant and could be evicted for any reason.

Branic appealed to the Appellate Term, First Department, which reversed Lebovits.

Pitt then appealed to the Appellate Division. In 2012, he left his apartment voluntarily, rendering his own case moot. Branic moved to dismiss the case as moot, but yesterday's panel disagreed, saying that the issue it presents affects a large number of city SRO residents.

"This matter presents an issue of substantial public interest that is likely to recur and evade review," Clark wrote. "Specifically, this Court must address the question of what constitutes a legal tenancy under the Rent Stabilization Code, and what rights are vested in a person occupying premises under the contract between a landlord and a social service agency. This is an issue that affects a large number of New Yorkers who declare permanent tenancy in an SRO."

The Rent Stabilization Law has a section specifically defining a "permanent tenant" in a hotel, or SRO, as "an individual or such individual's family members residing with such individual, who have continuously resided in the same building as a principal residence for a period of at least six months."

That section also says that references in the Rent Stabilization Law to "tenants" include "permanent tenants" of SROs.

Branic argued that a "permanent tenant" must also qualify as a "tenant" with some kind of landlord-tenant relationship like a lease or regular rent payments. It said that Branic had no agreement with Pitt, only with the HRA, and that Pitt was merely a licensee of that agreement.

Clark, however, wrote that the Rent Stabilization Law clearly creates a category of "permanent tenants" in hotels and SROs separate from ordinary tenants, and that Pitt qualified because he had lived in his apartment for over six moths.

Branic also said that its SRO should be exempt from rent stabilization because the Rent Stabilization Law exempts dwellings that are leased by a government agency. It said that its agreement with the HRA was such a lease.

Clark wrote that Branic could not rely on the agreement because it was not introduced into the record before appeal.
Furthermore, she wrote, "even if Branic were permitted to rely on the agreement, it was not a lease."

Martha Weithman of the non-profit SRO Law Project called the ruling a "great decision," and said it has "potential far-reaching effects on SRO tenants throughout the city," most of whom do not have leases.

Weithman said that, in the wake of the Appellate Term's decision, SRO owners had tried to evict tenants, some of whom she represented.

Pitt is also represented by Jim Provost of Manhattan Legal Services.

Ronald Rosenberg of Rosenberg Calica & Birney, who represents Branic, said he would seek leave to appeal.

The decision, he said in an email, "stands for the untenable proposition that squatters who illegally occupy a room in New York City for more than six months, without paying any rent, without having a lease, and without having any agreement or landlord-tenant relationship with the building owner, can transform their illegal squatting into permanent legal rights of endless legal possession and become a 'permanent tenant' under the Rent Stabilization Law."