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Appeals Court breaks strike, tenants must pay $250,000.

Appeals Court breaks strike, tenants must pay $250,000

An Appellate Court ruling has broken the back of a two-year-old rent strike in an Upper East Side apartment building and enabled the property owner to recoup nearly $250,000 in back rent.

Fourteen tenants at 50 East 78th Street, a 12-story luxury apartment building just east of Fifth Avenue, began a rent strike in July, 1989, alleging that the building lacked a valid Certificate of Occupancy (C of O).

The tenants charged that the owner had violated the C of O by allowing an art gallery to occupy the basement of the building. Under the Multiple Dwelling Law, an owner is forbidden to collect rent if a C of O is invalid.

During the protracted trial, the Civil Court repeatedly denied requests by the owner for payment of use and occupancy costs. In November 1990, the court decided that the C of O was invalid and that tenants had no legal obligation to pay rent.

The owner retained Rosenberg & Estis, P.C., a Manhattan real estate law firm, to appeal the case. Managing partner Gary M. Rosenberg argued the appeal.

On Nov. 26, 1991, the Appellate Division unanimously held that the certificate was valid, thereby reversing the Civil Court decision. Justices Stanley S. Ostrau, Xavier C. Riccobono and Edith Miller concluded that the presence of the art gallery in the basement "neither adversely affected the structural integrity of the building nor rendered residential occupancy unlawful."

The court also ordered the tenants to pay all back rent due since Sept. 1, 1990, a total of almost $250,000. Tenants will continue to pay rent as further non-payment proceedings pend in Civil Court.

According to Rosenberg, the ruling establishes a key precedent for property owners - that landlords are entitled to receive use and occupancy payments during rent strikes.

"The appeals court realized that landlords need rent money to provide essential and required services to tenants," Rosenberg said. "The court correctly held that tenants cannot live rent-free while a non-payment proceeding is being tried."

Added Jeffrey Turkel, a Rosenberg & Estis partner who participated in the appeal, "We saw this case as an opportunity to challenge those Civil Court judges who consistently deny use and occupancy in rent strike proceedings. The Appellate Term has given these judges a clear message that courts should not tolerate a situation where an owner is denied rent for an extended period of time while the case is being tried."
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Title Annotation:50 East 78th Street, Manhattan
Publication:Real Estate Weekly
Date:Jan 8, 1992
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