Court Adjudicates Claim of Tenant and Counterclaim of Landlord
Emily Pickens filed a small claims action in Civil Court against Terry Lane seeking return of a security deposit in the amount of $2,825 on a market-rate, residential apartment that she leased after vacating the premises about a year before the expiration of her two-year lease.
Lane asserted a counterclaim against Pickens for the rent due between the time when she vacated the apartment and when he was able to re-rent the apartment, plus the expenses incurred to re-rent the apartment.
The Court held a nonjury trial over two days (in person and then virtually) at which both Pickens and Lane testified and the Court found that:
Pickens and her husband John Bayard Pickens entered into a written lease with Lane for non-rent stabilized apartment No.2 located at 231 Lenox Avenue in New York. The lease was for two years, beginning April 1, 2021 and ending March 31, 2023, with a monthly rent of $2,825 in the first year, and $2,925 in the second year. The lease required a security deposit in the amount of $2,825.
Lane credibly testified that he had paid a broker’s commission of $5,085.00 for the rental of the apartment to Pickens, that was corroborated by an invoice and a receipt from a broker.
Pickens credibly testified that, in January 2022, she and her husband informed Lane that they were moving out of the apartment because they had bought an apartment of their own. They moved out of the apartment and surrendered the keys on March 11, 2022.
By letter dated March 22, 2022, Lane wrote to Pickens:
“Dear Mr. and Mrs. John Bayard Pickens, This letter is to formally inform you that you have broken your lease at 231 Lenox Avenue, New York, NY 10027. You signed a lease for two years . . . . You texted me on March 14, 2022, informing that you have moved out of the apartment.
Given that you broke the lease (with more than one year remaining), left the apartment with holes in several walls, broken electrical plates, and because I must repair the apartment and pay real estate broker to re-rent the apartment, I will not return you a security deposit”
Lane credibly testified and a certificate of mailing establish that Lane mailed the March 22, 2022 letter on March 24, 2022, to the Pickens at 231 Lenox Avenue.
Pickens credibly testified that she received the March 22, 2022 letter by email on April 12, 2022. And testified that, when she moved out of the apartment, she did not give Lane a forwarding mailing address, but Lane had hers email and phone numbers. And Pickens stated that she later texted Lane with a forwarding address on April 11, 2022.
The parties offered conflicting testimony as to whether Lane agreed to let Pickens terminate the lease early. She testified that he agreed to let her out of the lease and submitted text messages between them. Lane testified that he did not agree to let Pickens break the lease.
On March 8, 2022, Pickens texted Lane: “Hi Terry, we’d ask that you consider pro-rating for the month of March as we would be able to vacate the premises by this weekend and don’t know if we’ll be able to cover paying for both places. Do you think there’s a way we can come to an agreement?”
Lane responded, “Good morning, I cannot prorate the rent for this month. As you know, you signed a two-year lease and you were breaking the lease”.
Pickens then texted, “Hi Terry, we understand that and appreciate you letting us out of our lease early. . . “
Lane then texted back, “Hi. As you know, legally, you’re responsible for the rent until the end of the lease. The caveat is, if I am able to rent it prior to the end of the lease term, you would only be responsible for the period that is unrented. If I were you, I would move out prior to the end of the month, allowing me time to refreshments [sic] the unit so that I can get it ready by April 1. The longer you extend, the more you are responsible for covering the rent and the longer it takes me to re-let the apartment.
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I’ve never had any intent holding you responsible for the balance of the lease, as I know that you are a young family purchasing a new home. I have been agreeable, even in accepting the monthly rent in two installments. If you remain until the end of the month, that will delay getting the place rented, and I will have to hold you accountable. Please advise me if and when you plan to move out. You still have almost a year remaining on your lease. Please know that I will be delighted if you remain until the end of your lease”.
When there is conflicting evidence, a credibility determination is necessary.
Having observed the parties’ demeanor during their testimony and reviewed the documentary evidence, the Court credited Lane’s testimony over Pickens’ testimony and evidence. And the Court found that Lane did not agree to terminate the lease early.
First, there was no evidence that Pickens offered Lane any valid consideration for an early termination of the lease.
Lane texted to Pickens, “if I am able to rent it prior to the end of the lease term, you would only be responsible for the period that is unrented” and that he never intended to hold Pickens “responsible for the balance of the lease, as I know that you are a young family purchasing a new home”. When those two statements in the text message are read as part of the whole text message, the Court found that Lane did agree not to hold Pickens liable for one year’s worth of rent that might have been due under the remaining term of the lease. At the same time, Lane texted that Pickens would only be responsible for the period that is unrented. Such language would be meaningless if Lane had agreed to let Pickens go rent-free for breaking the lease early. Thus, the Court disagreed with Pickens’ interpretation that Lane had agreed to waive all rent altogether.
Lane credibly testified that he tried to show the apartment in the last 2-3 weeks before Pickens and her husband vacated the apartment, which Pickens also corroborated during her testimony on redirect. Lane testified that the damage to the apartment was not significant; the repairs consisted of painting the apartment and fixing holes, which Lane testified was “standard stuff” when tenants move out. Lane credibly testified that it “took a little time” to repaint and do repairs to apartment.
Lane credibly testified that he re-rented that apartment on May 15, 2022. And credibly testified that he paid a broker’s commission of $5,040, which was corroborated by an invoice and receipt from a broker.
Even in the relatively relaxed and informal atmosphere of a small claims action, Pinkens had the prima facie burden of proof at trial to establish, by a preponderance of the evidence, a basis for Lane’s liability. A judicial award, even one issued in the context of a small claims action, must rest upon competent evidence, and not mere inference or surmise.
Under General Obligations Law § 7-103 (1), it is black letter law that money deposited or advanced by a tenant on a lease agreement shall continue to be tenant’s money and shall be held in trust for the benefit of tenant until the lease is terminated and it is repaid or applied. The deposit is meant to cover the costs of repairing damages to the apartment.
The security deposit must be returned at the conclusion of the tenancy, absent proof, for example, that the tenant caused damage beyond that attributable to ordinary wear and tear. Where a landlord establishes that the tenant caused such damage, it is the landlord’s further burden to establish the reasonable value of any of the repairs allegedly made to the premises.
General Obligations Law § 7-108 (1-a) states, in pertinent part:
(b) The entire amount of the deposit or advance shall be refundable to the tenant upon the tenant’s vacating of the premises except for an amount lawfully retained for the reasonable and itemized costs due to non-payment of rent, damage caused by the tenant beyond normal wear and tear, non-payment of utility charges payable directly to the landlord under the terms of the lease or tenancy, and moving and storage of the tenant’s belongings. The landlord may not retain any amount of the deposit for costs relating to ordinary wear and tear of occupancy or damage caused by a prior tenant.
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(e) Within fourteen days after the tenant has vacated the premises, the landlord shall provide the tenant with an itemized statement indicating the basis for the amount of the deposit retained, if any, and shall return any remaining portion of the deposit to the tenant. If a landlord fails to provide the tenant with the statement and deposit within fourteen days, the landlord shall forfeit any right to retain any portion of the deposit.
By the plain terms of the statute only the obligations in subdivision (e) are subject to a penalty of forfeiture if they are not complied with.
Here, Pickens vacated the premises on March 11, 2022. Thus, Lane was required to provide her with an itemized statement and any remaining portion of the deposit by March 25, 2022.
Defendant mailed a letter to defendant on March 24, 2022, but the letter was sent to apartment that Pickens had vacated. Although Pickens testified that she did not provide Lane with a mailing address when she vacated the apartment, Pickens testified that Lane had her email address.
General Obligations Law § 7-108 (1-a) (e) requires the landlord to “provide” the tenant with an itemized statement, which includes, but is not limited to mailing the itemized statement. Here, the letter was not emailed to Pickens until April 12, 2022, which was more than 14 days after she had vacated the apartment. Under those circumstances, Lane did not comply with the GOL.
Because Lane neither timely returned Pickens’ entire security deposit nor timely provided her with an itemized statement indicating the basis for retaining the deposit, Lane forfeited any right to retain any portion of the deposit.
Therefore, Pickens was entitled to recover from Lanet the full amount of the security deposit, i.e., $2,825.
Pickens was entitled to prejudgment interest on $2,825.00 at the rate of 9% per annum, from April 13, 2022, the earliest ascertainable date that the cause of action existed—i.e., the date when she was entitled to the full amount of the deposit and could therefore sue Lane for not returning the deposit.
Lane sought to recover from Pickens the amount of rent that he would have received from the time that she vacated the apartment until the time the apartment was re-rented, about 1.5 months. Lane also sought to recover the amount of the broker’s fee that was paid not only for re-rental of the apartment to a new tenant ($5040), but also the broker’s fee that was paid for Pickens’ rental ($5,085).
Lane did not agree to terminate the lease early. And where, as was the case here, Pickens vacated the premises before the end of the lease, Real Property Law § 227-e states:
landlord shall, in good faith and according to landlord’s resources and abilities, take reasonable and customary actions to rent the premises at fair market value or at the rate agreed to during the term of the tenancy, whichever is lower. If landlord rents the premises at fair market value or at the rate agreed to during the term of the tenancy, the new tenant’s lease shall, once in effect, terminate the previous tenant’s lease and mitigate damages otherwise recoverable against the previous tenant because of such tenant’s vacating the premises. The burden of proof shall be on the party seeking to recover damages.
The statute “clarifies that the doctrine of mitigation of damages is not an affirmative defense to be asserted by a tenant, but rather the burden is on a landlord to establish it took reasonable and customary actions to render the injury as light as possible.
Here, the unrebutted evidence at trial established that the apartment was re-rented on May 15, 2022. Thus, Pickens’ lease was terminated effective May 15, 2022.
The evidence that Lane submitted at trial and trial testimony of both parties established that he took reasonable and customary actions to mitigate his damages. Lane testified that he paid a real estate broker to find a new a tenant, and the apartment was shown to prospective tenants two to three weeks before Pickens vacated the apartment. Therefore, Lane was entitled to recover from Pickens the rent due in April 2022 and pro-rated for May 2022, i.e., $4,237.50 (1.5 months at $2,825/month).
Lane was also entitled to recover the broker’s fee that he incurred to re-rent the apartment. The cost to the landlord of mitigation is chargeable to the original tenant. If the attempt is reasonable, whether it proves successful or not, the injured party can recover for the expense or for the loss caused by lack of success Therefore, Lane was entitled to recover from Pickens the $5,040 that he paid to a broker.
And Lane was also entitled to prejudgment interest on $4,237.50 and $5,040 at the rate of 9% per annum, from May 15, 2022, the earliest ascertainable date that the cause of action existed.
However, there was no basis for recovery of the broker’s fee that Lane incurred to rent the apartment to Pickens, as it was apparently his choice to engage a broker to find a tenant for the apartment.
And, contrary to Pickens’ argument, Lane’s failure to comply with General Obligations Law § 7-108 (1-a) (e) did not bar him from asserting a claim for the rent due under Pickens’ lease before he was able to re-rent the apartment. The forfeiture triggered upon by a landlord’s noncompliance was the right to retain the security deposit; it wass not a forfeiture of all claims against the tenant. Lane would not have been entitled to withhold from the security deposit any of the damages asserted in his counterclaim.
Because there were awards on the claim and counterclaim in the same action, the Court must offset Pickens’ smaller recovery against Lane’ larger recovery, and then awarded a net judgment in Lane’s favor for the balance, plus interest.