Phillips & Huyler Associates v. Flynn

OPINION OF THE COURT

Final judgment entered June 2, 1992 and order entered December 1, 1992 affirmed, with $25 costs.

This is a nonpayment proceeding where residential apartment premises were rented for commercial purposes in violation of the certificate of occupancy and applicable zoning resolution. The tenant leased the space for the practice of psychotherapy and was authorized to sublet to five additional occupants practicing in the same capacity. The issue framed for decision is whether landlord is precluded from collecting rent or maintaining summary proceedings for nonpayment in the circumstances presented.

In Abright v Shapiro (92 AD2d 452), the landlord sought to enjoin its medical lessees from continued use and occupancy of the apartments at issue for professional purposes after the Department of Buildings issued a violation because the professional use was in violation of the certificate of occupancy and zoning resolution. The First Department conditioned its denial of injunctive relief upon tenants’ paying all arrears and upon their continued payment of rent as it became due. The Court stated: "[Tenants] should not be entitled to continue occupancy of the premises without paying for its use” (Abright v Shapiro, supra, at 453).

Upon parallel facts, tenant herein should not be absolved of his fundamental obligation to pay rent. It is clear that the parties contemplated a commercial use only, and landlord made no representation in the lease that the use was in compliance with the certificate of occupancy. Tenant took possession, practiced out of the space without materially altering its residential character, and at no time surrendered possession or sought rescission after ceasing to pay rent. In such circumstances, a dismissal of the petition, as argued for by the tenant, would result in unjust enrichment.

(dissenting). I respectfully dissent and vote to dismiss the nonpayment petition.

The record evidence establishes that the professional use was unauthorized under the existing certificate of occupancy, *349and that the applicable zoning resolution does not permit a professional use on the sixth floor of the multiple dwelling. A proceeding for nonpayment of rent may not be maintained if performance under a lease will necessarily entail a violation of the building codes, and the illegal condition is not capable of correction (Elkar Realty Corp. v Kamada, 6 AD2d 155; Thirty-Five Forty Thirtieth St. Corp. v Straub Delivery Co., 41 Misc 2d 948; see, Hart v City Theatres Co., 215 NY 322, 325-326).

Nor should landlord herein recover use and occupancy under the "balancing of the equities” analysis invoked in Abright v Shapiro (92 AD2d 452, 453). It was not revealed that the certificate of occupancy did not authorize commercial use of the apartments until after tenant took occupancy, with the result that tenant was effectively precluded from subletting to other psychotherapists as contemplated by the parties. At the trial, landlord did not come forward with any evidence that it had complied with an Environmental Control Board violation by legalizing the use. Thus, tenant was placed in an untenable position of being deprived of the beneficial use of the premises, or subjecting himself to money damages for breach of lease by vacating before the end of the term. Landlord, which took no affirmative steps to alleviate or remedy the unlawful occupancy, should not be rewarded for its (in)action by receiving payment for the period in dispute.

Broader considerations of public policy also dictate that landlord not succeed on the petition. It is manifest that what occurred here was a transparent device to convert residential space to business use, at a presumably higher rental to the owner.* In a period of housing scarcity, no public purpose is served by sustaining contracts which contribute to the impermissible diminution of the housing stock and which encourage the violation of the housing laws. In such circumstances, a court is warranted in leaving the parties to an illegal agreement where it finds them and in refusing to lend its aid to any party.

Parness, J. P., and McCooe, J., concur; Glen, J., dissents in a separate memorandum.