COVID-19 has disrupted the ordinary course of dealing in both the residential leasing and sales sectors, with renters and buyers using COVID-related excuses and delays in attempts to avoid paying rent and close on sales in a fluctuating market. However, using a distinct combination of deep institutional knowledge about the Real Estate market, aggressive litigation tactics, and a familiarity with the Courts and practices throughout New York, Adam Leitman Bailey, P.C. has consistently helped its clients avoid such losses, and maximize their real estate values, even as the pandemic enters the latest phase. Indeed, in two recent examples, Adam Leitman Bailey, P.C. was able to successfully negotiate almost complete relief for a landlord seeking arrears from a rent-stabilized tenant, and to help sellers of a residential coop retain a contract deposit as damages from a defaulting purchaser.
Rent-Stabilized Tenant Unsuccessfully Uses Pandemic as Excuse to Avoid Paying Arrears and Providing Access
In the first case, Adam Leitman Bailey, P.C.’s client was the well-known landlord of a Manhattan residential rental property that had inherited a notoriously difficult rent-stabilized tenant. For more than two years before the pandemic, this tenant had refused to pay use and occupancy on his apartment, alleging the need for various minor repairs that purportedly diminished his enjoyment. After a series of contentious litigations and negotiations, the landlord was able to schedule inspections and repairs that would have entirely mooted the tenant’s complaints. However, using the COVID-19 pandemic as an excuse to avoid paying arrears and any use and occupancy for his apartment even beyond any relief that may have been provided in COVID-relief authorizations, the tenant not only refused to allow the landlord to conduct any inspections or repairs, he refused to even grant the landlord required access to his apartment to determine the veracity of his allegations.
Because the New York Landlord-Tenant Courts were hopelessly backlogged during this period, Adam Leitman Bailey, P.C.’s Landlord-Tenant and Supreme Court practice groups hit upon the novel idea of filing a complaint in the New York County Supreme Court – where cases were now moving at much faster pace – for, among other things, breach of contract and mandatory injunction, seeking arrears and access to the apartment. Adam Leitman Bailey, P.C. aggressively pursued early discovery and court intervention. As a result, the tenant was compelled to sit for a damaging deposition during which Adam Leitman Bailey, P.C. Supreme Court Practice Group Partner, Eric S. Askanase, forced the tenant’s admissions that, among other things, his sole reason for withholding U&O was based on the purported need for repairs to the apartment, but his refusal to provide access prevented any such repairs! Moreover, during the deposition, Adam Leitman Bailey, P.C. was able to secure the tenant’s agreement to provide access for repairs and sign necessary leasing paperwork that mooted part of the dispute. As the deposition ended, the tenant commented that he was utterly unprepared for the level of detail Adam Leitman Bailey, P.C. brought to the table.
As a result of this disastrous deposition and Adam Leitman Bailey, P.C.’s follow-up discovery demands exploring the tenant’s various admissions, tenant’s counsel promptly reached out Adam Leitman Bailey, P.C. to settle in full, with the tenant agreeing to pay off almost his entire arrears – including amounts due from both before and during the pandemic – in exchange for the landlord’s withdrawing the Supreme Court action.
Adam Leitman Bailey, P.C. Helps Seller Retain Purchaser’s Deposit in Contentious Litigation
In the second action, Adam Leitman Bailey, P.C. represented owners of a Manhattan cooperative apartment who contracted in June 2021 to sell the apartment to sophisticated buyers, securing a standard 10% deposit on signing. The purchase contract contained standard terms, including an unconditional approval from the sellers’ coop board. The apartment in question had previously been outfitted with central A/C and a laundry washer/dryer unit, which buyers were assuming. As required under the contract, buyers quickly obtained board approval permitting them to purchase the apartment in its present condition (including the central A/C and washer/dryer unit) with no conditions; and the board also noted that purchasers would – like every proprietary lessee in the coop – be subject to the house rules and any future rules or determinations, including unanticipated future determinations regarding A/C and washer/dryer policies.
Based solely on the unanticipated and speculative potential that a future board decision might impact their apartment’s A/C and washer/dryer status, the buyers sought to cancel the sales contract and demanded the return of their entire deposit, eventually filing suit in New York County Supreme Court on the same basis. Sellers were in a conundrum: although they plainly had the superior argument, the cost of litigating could quickly exhaust the full amount of the contract deposit; and even though the sales contract provided for reimbursement of attorneys’ fees to any party that prevailed in contract-related litigation, there was no guaranty that sellers would both win at trial and receive enough of their fees to come out ahead – and in the meantime, sellers, who had vacated the apartment, would be left paying nearly $6500/month in carrying costs on the apartment at the same time they were paying for costs related to their new home. Moreover, the litigation would impact sellers’ ability to market the apartment to another buyer, even at what was now a more than $200,000 COVID-related reduction in the market value of the property since the June 2021 contract.
Sellers turned to Adam Leitman Bailey, P.C. for a quick resolution; and in less than a month, Adam Leitman Bailey, P.C.’s Supreme Court Practice Group negotiated a stipulated dismissal of the buyers’ lawsuit under which the sellers retained 50% of the entire deposit, more than enough to cover carrying costs and legal fees, leaving some profit to offset diminished value in the property. These recent victories are only a two of the many favorable outcomes Adam Leitman Bailey, P.C. has achieved for our clients navigating the very challenging COVID real estate landscape.
Carolyn Rualo and Dov Treiman of the Landlord-Tenant Practice Group, and Eric S. Askanase of the Supreme Court Practice, represented the landlord in the action for arrears; and Eric S. Askanase, John M. Desiderio, and Courtney J. Lerias of the Supreme Court Practice Group represented sellers in the coop contract litigation.