By Brendan Pierson
The widespread property damage and power failures after Hurricane Sandy have opened uncharted legal territory for both residential and commercial landlords and tenants, who will likely be wrangling over who is liable for what for some time, attorneys say.
The most straightforward issue is that of rent abatements for residential tenants.
A spate of lawsuits seeking such abatements on various grounds have already been filed. One of the most ambitious is a proposed class action filed last month in Manhattan, Adler v. Ogden Cap Properties, 650292/13. The suit, which targets three landlords but seeks to add potentially hundreds of others, alleges that the landlords, including major landowner Ogden Cap Properties, owe a rent abatement because their tenants did not have electricity and other basic services after the storm. The case, still in its early stages, has been assigned to Supreme Court Justice Shirley Kornreich (See Profile).
Barbara Hart of Lowey Dannenberg Cohen & Hart, who represents the plaintiffs, said the case will be limited to particular circumstances where there is an unambiguous breach of the warranty of habitability, a provision of New York law stating that tenants cannot be charged rent if they cannot live in their units. Hart said the potential class members have very clear-cut cases because they lacked heat, electricity, water and/or elevator service, all of which have been recognized as clear-cut breaches of the warranty of habitability.
“We believe that the strict liability provisions of the warranty of habitability under New York state law provides a very clean common question that would benefit tenants who were impacted by Sandy,” she said, adding that the suit could grow to encompass “tens of thousands” of tenants.
“I don’t think it’s a complicated dispute,” she said. “It’s very conducive to class certification.”
The dispute is further simplified by the fact that the warranty of habitability imposes strict liability, meaning that the degree to which landlords are or are not responsible for property damage is irrelevant.
“Residential tenants may claim breach of the warranty of habitability and refuse to pay rent,” said Scott Mollen of Herrick, Feinstein, who represents landlords. “Generally, landlords are responsible for habitability even where events were beyond their control.”
“The problem that some of these residential landlords are encountering is that it’s not really their fault, but it’s their responsibility,”said Damon Howard of Ephron-Mandel & Howard.
But Hart said that many more tenants fall outside the scope of her lawsuit because their problems are more ambiguous and fact-specific.
“There were buildings where tenants were left in unsafe conditions,” she said, sometimes with no lights in building hallways. Some apartments were affected by burst pipes or mold. But while those cases may involve breaches of the warranty of habitability, she said, they are too fact-specific and not clear-cut enough for class action treatment.
Real estate attorney Adam Leitman Bailey, who is handling several landlord-tenant cases, said the hardest-fought suits will arise when there is ambiguity about whether apartments are habitable.
“If you couldn’t move in, you get 100 percent rent abatement,” he said. “That’s a given. No one’s arguing that. No landlord in the city’s fighting that.”
Contentious issues, he said, arise when an apartment is partly usable—for example, if there is heat but no cooking gas.
Warren Estis of Rosenberg & Estis, who represents both landlords and tenants, shared a similar view.
“The fact that certain areas became inaccessible doesn’t automatically mean that the tenant would be entitled to an abatement,” he said. “You have that gray area where the tenant doesn’t want to be inconvenienced whatsoever. That’s where you’re going to find the fine line.”
“They’re not getting the same apartment back,” Howard said of such cases. “So even to the extent that the landlord has made the repairs, it’s not the same paint color, or it’s different carpet, or no carpet.”
“You can see the unique circumstance, where, if anything, it’s going to fall in the gray area—it’s possible the building could be occupied, but the people decided not to go in that direction,” Estis added.
COMMERCIAL LEASES
Murkier issues arise from damage to commercial property, since commercial tenants enjoy far less statutory protection than residential tenants.
“For residential landlords, the landlord’s always responsible. For commercial, you have to go to the lease,” Bailey said.
Most commercial leases, he said, do not entitle the tenant to a rent abatement in case of property damage.
However, Bailey said, commercial tenants may be able to argue that the damage to their space, if not repaired, constitutes constructive eviction.
Commercial tenants could argue that “if you couldn’t use your space 100 percent, you get a 100 percent rent abatement,” though he said it is not clear how that argument would fare in court since no such cases have been resolved.
“I think that constructive eviction supersedes the lease,” he said.
Assuming that the tenant does not claim constructive eviction, most commercial leases give the owner of a damaged property discretion to decide what to do with it. One common arrangement is for a tenant who wants to maintain a claim on an unusable space to pay $1 per month until the space is repaired, or until the landlord decides not to repair it and terminates the lease.
“The warranty of habitability does not apply to commercial tenants,” Mollen said. “Commercial tenants may claim breach of their lease and that they were constructively evicted if a landlord intentionally failed to timely repair the premises. Commercial lease provisions usually spell out repair obligations and the parties remedies if repairs are not or cannot be made within a specified time frame.”
Howard also said that some disputes have arisen when landlords have made repairs, but the tenants have alleged those repairs are inadequate.
Estis said that, like residential landlords, commercial landlords are trying to be accommodating, though within limits.
“What I’m finding is that most responsible and reputable landlords, to a certain degree, will try to help the tenant and be responsive, but it doesn’t necessarily mean they’re liable,” he said.
“They might be willing to give certain concessions,” he continued. “At times the landlord, because of the economic damages the tenant is suffering at the moment, might defer the current rent.”
Bailey said that, with both residential and commercial leases, it’s still too early to know what direction the cases will go, since they are still working their way through the courts.
The biggest surprise so far, he said, is that relatively few cases have been filed.
“I thought there’d be much more litigation than there is,” Bailey said. “Everybody has been reasonable. New Yorkers have been showing that they’re angels, that they’re reasonable and compassionate people.”
Howard too said he was surprised by how little litigation there has been, and “heartened to see the extent to which the parties have been able to come together.”
But Hart said that while some landlords had been accommodating, those of her clients clearly have not.
“There was the possibility that the landlords were going to do the right thing and the plaintiffs wouldn’t have to come after them to recoup the rent,” she said. “That’s not proven to be the case to date.”
@|Brendan Pierson can be contacted at [email protected].
Published by