ROSENBERG & ESTIS GAINS POSSESSION OF LOW-INCOME APARTMENT FROM STOCKBROKER TENANT WITH MILLIONS IN ASSETS

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Precedent-Setting Case Enables Owners to Evict without Notice to Cure

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Rosenberg & Estis, P.C. has successfully regained possession of a low-income apartment, unit 9L at 312 11th Avenue in Manhattan, whose tenant committed fraud in reporting income and household composition.

Through a creative and aggressive approach, the firm avoided the need to serve a "notice to cure" and set a precedent for property owners of low-income apartments whose tenants submit false reports to the landlord. The ruling provides a new way to protect property owners and sends a powerful message to low income tenants.

Howard Kingsley, member with Rosenberg & Estis, represented DD 11th AVENUE LLC before Judge Jack Stoller of the Civil Court of the City of New York for New York County: Housing Part H. The respondent was David Sans, tenant at 312 11th Avenue, a luxury apartment building in Chelsea developed using low income housing tax credits and the 421-a tax credit program.

Pursuant to his rent stabilized lease and the terms of the Low Income Housing Tax Credit Program, Sans was required to file truthful and accurate annual certifications about his household composition, income and assets. When he applied in 2012 for the $722-per-month two-bedroom apartment, Sans' income was eight times greater than he claimed and far in excess of the income limits for low-income housing.

A recent New York State Controller audit of the New York State Housing Finance Agency revealed that Sans, and tenants in other buildings, had made false statements on income and household composition. In fact, Sans has approximately $1 million in assets, an investment property in upper Manhattan and earns more than $200,000 per year.

Developers of low-income housing are required by the Housing Finance Agency to review tenants' income and household make up annually. If a tenant makes false statements regarding these items, the developer can lose the low-income tax credits, which could have devastating effects.

Rosenberg & Estis commenced a holdover proceeding against Sans seeking possession of the apartment on the grounds that he had committed fraud in his reporting. Sans claimed that the owner's failure to serve a notice to cure prevented the owner from seeking to evict him. Rosenberg & Estis argued that Sans' occupancy was illegal and that it subjected the landlord to civil or criminal penalties and was in violation of law of contracts with governmental agencies.

In other cases where the tenant falsified its certifications, the landlord served a notice to cure, claiming that the tenant breached the lease by doing so. In this case, a different procedural approach was used.

Rosenberg & Estis, argued that Sans' tenancy was illegal because he made false certifications and, thus, no "notice to cure" was required under Rent Stabilization Code section 2524.3(c). Judge Stoller agreed with Rosenberg & Estis and granted its motion for summary judgment, awarding possession of the apartment to the owner. This is the first time section 2524.3(c) of the Rent Stabilization Code has been successfully applied to a case of this type.

"This stands as a case of first impression, eliminating the need to issue a notice to cure when a 'low-income' tenant falsely certifies its household income, assets or composition," Kingsley said. "This ruling provides owners with an avenue to act swiftly when false statements by low-income tenants jeopardize valuable low-income housing tax credits."

Kingsley said that while this is an unprecedented decision of first impression, there may be immediate broad implications. The 2017 State Controller report is part of a broader enforcement effort by City and State government officials regarding affordable housing compliance. Proceeding against ineligible tenants who misrepresent their household income now provides owners with an option in court, without providing the tenant with an opportunity to attempt to cure their original misrepresentation. This should prove to be a powerful tool for affordable housing owners seeking to enforce the affordability rules as they apply to tenants.