In its recent decision in Islands Heritage Realty Corp. v. Joseph, LT-002642-10, NYLJ 1202492662252, at *1 (Dist., NA, Decided April 28, 2011), Judge Scott Fairgrieve, in deciding a motion brought on by order to show cause to vacate a judgment of possession and warrant of eviction, determined that a month-to-month tenancy had been created by the parties’ conduct after they executed a settlement stipulation, even though the tenant agreed to vacate the demised premises no later than September 30, 2010.

Shortly before the day tenant agreed to vacate, Landlord’s agent signed an agreement dated September 9, 2010 that provided:

This 9 September 2010
Balance due to Pierre Borga [petitioner’s agent] for Court stipulation account $1500.00
expiring 9/30/2010.
New agreement if possible will be:
Starting October 1st 2010
2,300.00 Oct. 1st to Oct. 30, 2010
2,300.00 Security Deposit
Peirre C. Borga

Respondent/Tenant submitted proof of payment under the “agreement” by two receipts — the first for $1,500.00 dated November 5, 2010 “toward the monthly amount due of $2,300.00 for the period of October 1, 2010 to October 31, 2010″ and the second dated December 20, 2010 for $800.00 “reducing the balance due to zero for the period of October 1, 2010 to October 31, 2010.”

Respondent argued the agreement and payments created a month-to-month tenancy requiring that the judgment and warrant be vacated. Petitioner argued that the agreement did not create a month-to-month tenancy and even if such a tenancy was intended, Respondent failed to fulfill the terms of the new agreement because the $2,300.00 security deposit was not paid and no other monthly payments were made.

The Court rejected Petitioner’s arguments and found that a month-to-month tenancy was created “by Petitioner accepting rent for October of 2010 in the sum of $2,300.00.”

The Court, in holding that “Petitioner may commence a new summary proceeding,” cautioned that “A landlord cannot maintain a nonpayment proceeding against a month-to-month tenant for rent which accrues after the lease expires and after the month-to-month tenant stops paying rent. The landlord’s sole remedy is to bring a holdover proceeding for the fair and reasonable value of past and present occupancy.”

Landlords are thus cautioned that acceptance of payment after a proceeding is settled (even if a written agreement in which a tenant agrees to vacate the demised premises is executed) will likely result in the creation of a month-to-month tenancy, the termination of which will require the commencement of a new holdover proceeding after the requisite notice is served.

Attorneys Fees Awarded Even Though Not Specifically Authorized by Sublease

In Access.1 Communications Corp. v. Shelowtz, 107939/2010, NYLJ 1202491389246 at *1 (Sup., NY, Decided April 11, 2011) the Court discussed numerous issues in an action by a sublandlord against a subtenant (a law firm) to recover rent accruing under the parties’ sublease after subtenant vacated the premises. While several issues worthy of discussion here were addressed, the award of legal fees to the sublandlord stands out.

The main Lease which, pursuant to the sublease, was controlling provided:

Tenant [subtenant] shall pay to Landlord {sublandlord] an amount equal
to the costs that Landlord [sublandlord] incurs in instituting or prosecuting
any legal proceeding against Tenant [subtenant].

While acknowledging the general rule that “attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rules,” the Court was persuaded that the clause in question permitted such recovery.

The Court held that while the lease “does not specify ‘legal fees,’ ‘attorney’s fees’ or ‘counsel’s fees,’ the only interpretation that would meet the intent of the parties is that the costs incurred by [sublandlord] in instituting or prosecuting a legal proceeding have to necessarily include reasonable attorney’s fees, because Access.1, which is an incorporated entity, may not commence and conduct legal proceeding (sic) and is required to appear by attorney under CPLR 321(a).” In determining the parties’ intent, the Court referenced a prior settlement stipulation entered into by the parties to settle a prior summary proceeding in which sublandlord reserved its right “to seek attorney’s fees against [subtenant] for its commencement and prosecuting of [the Civil Court] action.”

While the prior settlement stipulation might demonstrate an intent that subtenant be liable for sublandlord’s legal fees incurred in the prior summary proceeding, it is not clear how the Court concluded that the parties also intended that subtenant be liable for sublandlord’s legal fees in the subsequent action.

Landlords and tenants are both cautioned to take care in drafting settlement agreements (and leases) and in particular any clause that relates to liability for legal fees. Both the lease and settlement clauses at issue were sufficiently vague to result in motion practice over their meaning and intent and it is not at all certain how an appellate court will resolve the issues should an appeal be taken.