Halprin v. 2 Fifth Avenue Co.

Order of the Supreme Court, New York County, entered July 19, 1979, granting plaintiffs’ motion for summary judgment and declaring paragraph 3 of Rider C, annexed to their respective leases, unconscionable and unenforceable, reversed, on the law, and the motion denied, without costs, and judgment is directed to be entered declaring paragraph 3 of Rider C to be a valid and enforceable obligation. The facts are substantially undisputed. Plaintiffs are all rent stabilized tenants in an apartment building owned by defendant 2 Fifth Avenue Company (a partnership) and managed by defendant Rudin Management Co., Inc. Plaintiffs entered into their respective leases and took possession of their apartments subsequent to November 25, 1974 and prior to December 15, 1977. On November 25, 1974 defendants made application to the Conciliation and Appeals Board (CAB) for an 18.38% increase in rents, based on hardship, under the provisions of the Rent Stabilization Law (Administrative Code of the City of New York, § YY51-6.0) and the Rent Stabilization Code adopted pursuant thereto. By order of the CAB dated December 15, 1977, an increase of 14.01% was granted retroactive to January 25, 1975. By stipulation entered into by defendants with some of the tenants, this increase was reduced to 11% to become effective January 1, 1978. Plaintiffs were not tenants at the time the application was made. When they executed their respective leases they were not notified of the pendency of the hardship increase proceeding. However, by the terms of paragraph 3 of Rider C annexed to each of their leases, they agreed to be bound by any increase and to pay it in the manner set forth by the CAB. Paragraph 3 of the lease Rider C provided the tenant with an escape clause in the event of a hardship increase. It permitted him, within 30 days after receipt of a copy of the CAB order, to cancel his lease upon 60 days’ written notice to the owner. During this period the tenant canceling his lease would be permitted to remain in possession at no increase in rent. Plaintiffs refused to join in the stipulation executed by the other tenants although they were free to do so. Instead, they brought this action to declare Rider C null and void; to declare it unconscionable and unenforceable against them under section 235-c of the Real Property Law; to recoup the "excess” rent collected from them since January 1, 1978; to recover compensatory and punitive damages in the sum of $100,000 for the fraud alleged to have been practiced upon them in failing to disclose the pendency of the hardship rent increase application; for counsel fees and for damages not otherwise denominated in the sum of $500,000. Following discovery, plaintiffs moved for summary judgment. Special Term granted the motion, holding that the failure of the landlord to notify plaintiffs of the pendency of the hardship rent increase application prior to the execution of the leases entered into by them deprived plaintiffs of any meaningful choice. This, he held, rendered the riders unconscionable and unenforceable. It is clear that, absent some statutory requirement or regulation, a tenant is not 566 deprived of any constitutional right by an application for a rent increase without notice to him* (Wasservogel v Meyerowitz, 300 NY 125; Bedford Bldg. Co. v Beanie, 38 NY2d 729; Matter of Johnson v Joy, 65 AD2d 701). While the doctrine of unconscionability may have application even in the absence of a constitutional violation, there must be a coincidence of two elements to give it viability. On the one hand there must be an absence of meaningful choice; on the other, the terms of the agreement must be unreasonably favorable (Blake v Biscardi, 62 AD2d 975). The issue is properly one of law to be determined by the court (Euclid Ave. Assoc. v City of New York, 64 AD2d 550), particularly where, as here, the facts upon which the claim is based are fully developed by discovery. Although the choice open to plaintiffs may have been less than desirable, that absence of choice derives from the nature of a controlled market—controls from which tenants generally have benefitted. However, there is here nothing to indicate that Rider C was unreasonably favorable to defendants. It gave them no more than the right to seek relief from the public agency vested with the duty to insure that tenants are not unfairly treated. That the relief was not lightly granted is evidenced by the fact that more than three years passed between application and order. In these circumstances, it cannot be said that paragraph 3 of Rider C is unconscionable. Accordingly, defendants are entitled to a declaration that it is valid and enforceable. Concur—Sullivan, Markewich and Bloom, JJ. Footnotes [*] No such requirement existed in statute or regulation either at the time of the institution of the proceeding before the CAB or at the time of its disposition. However, on June 28, 1979, approximately 18 months after disposition of the CAB proceeding and some four years and seven months after its institution CAB, by resolution, amended its "Information and Instruction Booklet for Comparative Hardship Applications” to include a requirement of notice to those who became tenants after commencement of the proceeding by insertion of certain information into the lease.