SIDEBAR: WHEN RENTERS GO TOO FAR

May a rent-controlled tenant living in a co-op use her apartment as a bed-and-breakfast establishment?

Norman Peck owned shares and held the proprietary lease for a rent-controlled apartment at 325 West End Avenue in Manhattan. The renter, Lily Lodge, ran a business called Oldest Daughter Enterprises. Lodge booked "affordable" accommodations for out-of-town visitors in the homes of its Manhattan "clients." She used her apartment as one of these "homes," claiming the guests were friends or roommates.

When the board found out, it contacted Peck, advising him that Lodge was operating a bed-and-breakfast in violation of his proprietary lease. The co-op informed Peck that Lodge's stream of transient tenants was compromising the safety of the other residents, and that he had to remedy the violation or possibly lose his $1.5 million worth of shares as well as his leasehold interest in the premises.

Peck took his renter to landlord-tenant court and, after a hearing, the renter, Lily Lodge, lost and had to give up the unauthorized business or be evicted.

Eviction from a rent-regulated apartment is warranted, says attorney Richard Siegler, a partner at the law firm of Stroock & Stroock & Lavan, "only where the violation of such a substantial obligation — i.e., use of a residential rent-controlled or rent-stabilized apartment as other than a private dwelling — is significant."

Here, the court held that the evidence produced by Peck established that Lodge's use of her apartment as a bed-and-breakfast greatly diverged from the character of the residential building; seriously threatened her landlord Peck's $1.5 million in shares and his lease; and significantly disturbed the building's other tenants in the peaceful use of their apartments.

"The facts of this case led the court to conclude that the defendant was operating a bed-and-breakfast establishment in a co-op, which is inimical to the underlying purpose of a co-op enterprise," Siegler notes. "Transient occupancy involves a commercial enterprise, which has no place in a building designed to provide housing for its shareholders. The courts invariably frown upon such operations."

— Tom Soter