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Iris House Provides Valuable Reminder to Landlords About Non-Profit Renters

Iris House Provides Valuable Reminder to Landlords About Non-Profit Renters

Recently, the Supreme Court, Appellate Term, First Department, handed down a decision affirming the lower court in 2363 ACP Pineapple, LLC v. Iris House, Inc, 2017 NY Slip op 27047. As the attorney on this case, Michael D. Cappozi, partner in Ingram's Landlord-Tenant group, confirms the importance of this decision for real estate landlords and tenants alike. According to Mike, it corrects a common misconception about non-profit tenants’ rights that many owners often overlook.

The Facts of the Iris House Case

In June 2012, the landlord’s predecessor served non-renewal notices upon Iris House, Inc., who was the tenant of record for four apartments in the building. The nonrenewal notices alleged that the units were exempt from rent stabilization because they were “rented to a corporate business tenant not as their primary residence.”

The Civil Court dismissed the proceedings to evict the tenants because the notices misrepresented that the apartments were exempt from rent regulation. The notices were also devoid of any facts about the primary residence of the particular occupants of the apartments; on appeal, the Appellate Term affirmed the dismissal of the cases.

Months later, the landlord tried commenced consolidated holdover proceedings after serving a 30-day notice alleging that the apartments were not subject to rent stabilization of the grounds that the apartments were “rented to you, a corporation and an institution operated for charitable purposes on a non-profit basis, for occupancy by persons affiliated with your institution.” The landlord essentially argued that the tenant, because it was rented by a member of a non-profit, was exempt from rent stabilization. The Court again dismissed the action, and in it’s February 22, 2017 decision, the Appellate Term affirmed the dismissal.

Lessons Learned from Iris House

Rent Stabilization Code Section 2520.11(f) exempts the following types of housing accommodation owners from rent stabilization:

  • Hospital
  • Asylum
  • Public institution College or school dormitory
  • Monastery
  • Convent

Under Rent Stabilization Code Section 2520.11(f), these kinds of owners must use the property for a charitable or educational purpose that has a nonprofit basis to be exempt. When the tenant’s occupancy is contingent upon the affiliation with an above institution, then it is excluded from rent stabilization. However, what is commonly misunderstood is that if the owner of the housing accommodation is not affiliated with the non-profit, then the exemption does not apply.

Iris House reminds landlords that although there is an exemption for non-profit organizations under this section, it does not apply where the tenant is a non-profit entity. Instead, the section is intended to provide a benefit to certain types of non-profit landlords to help them when they actually run or provide the housing accommodations to occupants whose occupancy is contingent upon their affiliation with the non-for-profit landlord.

As an experienced lawyer, Michael D. Capozzi provides services to both landlords and tenants, which allows him to have a unique perspective that provides insights that both sides can use to their advantage. Experience with cases like Iris House provide invaluable insight to his landlord-tenant clients. If you have a landlord-tenant issue, Mike can help.