Pitfalls in leasing an illegal apartment.

Mario and Filomina Runco, the owners of a two-family house in Yonkers, NY, rented a cellar apartment to Amelia Bartolomeo at a rental of $670 per month. Before agreeing to the rent, the tenant specifically asked the owner if the cellar apartment was "legal" and was assured by the Runcos that the apartment was legal.

In reliance upon Runco's representation of legality, the tenant signed a one-year lease which was to expire on October 30, 1994. All went well for a period of about six months, when the landlords received a notice from the Bureau of Housing and Buildings of Yonkers that the use of the cellar apartment for residential occupancy was in violation of the Fire and Building Code of the City of Yonkers; and thus it was an illegal apartment.

In order to cure these violations, the Yonkers Building and Housing Bureau ordered the landlords to have the tenant vacate the cellar apartment. The tenant was forced to vacate on April 29, 1994 and paid $674 to a moving company to remove her possessions. Ms. Bartolomeo, the tenant, sued the landlords for damages by reason of landlord's false assurance of the apartment's legality.

The case was heard by City Judge Thomas A. Dickerson, who reviewed the facts of the case as well as the underlying housing problems in the City of Yonkers. He stated the widespread rental of illegal apartments is a serious problem in Yonkers, as it is elsewhere. Illegal apartments have been the subject of considerable litigation, primarily within the context of non-payment of rent actions brought on by landlords. As a general rule, the failure to have a proper certificate of occupancy or otherwise comply with fire and building codes prevents a landlord from prosecuting a rent n on-payment action. This, the Judge stated, is primarily to discourage landlords who would ignore building restrictions and offer illegal apartments to unsuspecting tenants. On the other hand, the Judge observed that if a tenant knowingly occupies an illegal apartment, he may not seek the refund of paid rents. Nor may tenants seek a refund of paid rents when they purposely prevented the landlord from making repairs necessary to obtain a certificate of occupancy.

In this case, the tenant entered into a year-long lease to occupy an apartment which the landlord represented to be a legal apartment. She paid the required security and the agreed upon rent while in possession. The tenant fulfilled her obligations under the lease. The landlords, on the other hand, forced the tenant to vacate the apartment six months prior to the expiration of the lease.

The Court ruled that the landlords had a duty in common-law and by statute to rent Ms. Bartolomeo a legal apartment which complied with the requirements of the Housing and Building Code of the City of Yonkers. A residential landlord is obligated to obtain a proper residential certificate of occupancy and to remove building violations for the protection of tenants.

The landlords also had a duty to deal fairly and in good faith with the tenant. The landlords breached that duty will fully and in a manner as to strike at the very heart of the transaction. The Court ruled that the defendants are liable for all appropriate damages flowing from their breach of the lease, including the tenant's moving expenses and the aggravation and discomfort the tenant experienced by being forced to vacate her cellar apartment.

Also, as a consequence of landlord's failure to follow the applicable regulations of the Yonkers Bureau of Housing and Buildings, the landlords were liable for all the appropriate damages flowing from their breach of the warranty of quite enjoyment contained in the lease.

In addition, Judge Dickerson ruled that landlords' actions were deceptive and unfair business practices prohibited by the General Business Law [section] 349. The statute provides that if a consumer is victimized by a deceptive or misleading practice, the aggrieved party could recover treble damages. By representing that the cellar apartment was legal, the landlords engaged in a misleading and deceptive practice.

Ms. Bartolomeo was also victimized by the landlord's fraud perpetrated against her. She justifiably relied upon the representation of the landlords that the apartment was legal, since the apartment was created out of a re-modeled cellar in which a kitchen and bathroom were installed. Since the tenant relied upon the landlord's misrepresentation and entered into the lease and was forced to vacate the cellar apartment six months later, the tenant sustained damages as a result of the landlords' fraud, and was entitled to damages resulting therefrom.

The Court then discussed the appropriate damages to be assessed against the landlords. Judge Dickerson stated that he found the landlords liable to the tenant for breach of contract, breach of warranty of quiet enjoyment, performing a deceptive and unfair business practice prohibited by law, as well as fraudulent misrepresentation. The Court awarded the following damages to the tenant; (i) $674 reimbursement for the moving expenses incurred; (ii) although the court could have awarded three times the $674 in treble damages sustained by the tenant, the Judge awarded $326, raising the recoverable damages to $1,000; (iii) $250 for the tenants suffering of aggravation, annoyance and harassment sustained by Ms. Bartolomeo and (v) for the landlord's misconduct and fraudulent misrepresentation that the apartment was legal, punitive damages of $250.

It could have been a lot worse for the landlords.