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As we informed you in our April 2011 newsletter, the New York Wage Theft Prevention Act (WTPA) was enacted December 2010 and became effective on April 9, 2011. As a reminder, among other new employer obligations and penalties, the WTPA requires that employers provide to all their employees written notice of their pay rate and pay dates, at the time of hire, on or before February 1 of each year, as well as every time there is a change in the employee’s pay. Employers must obtain signed acknowledgement of receipt of this notice from each employee.

To assist New York employers with compliance, the NY Department of Labor has issued form notice templates that employers may use to satisfy the WTPA notice and acknowledgement requirements. For your convenience, we have posted web links for the template notices, broken down by several employee categories.

The disclosures must be provided in English and in the primary language identified by the employee, so long as the New York Department of Labor has provided a notice template in that language. Currently templates in Spanish, Chinese, and Korean are available on the NYDOL website, with plans to add Creole, Polish, and Russian versions soon.

We’d like to note a few more provisions of the act that all employers should be aware of.

• The WTPA applies to all private sector employers.
• If you have employees who work outside of New York State, they are not covered.
• The Act requires employers to notify employees in writing of any change to the information in any notice at least seven days prior to the change.
• The pay notice can be distributed electronically, but there must be a system in place where the employee can acknowledge the receipt of the notice as well as print out additional copies.
• New-hire notices must be provided to employees hired on or after April 9, 2011 before they perform any work.
• Annual notices must be provided to all employees between January 1 and February 1, beginning in 2012.
• Employers are required to keep copies of the notices and acknowledgments for six years and must be able to provide them upon request.
• If an employee refuses to acknowledge the notice, the NYDOL has instructed employers to still provide the notice and to note the employee’s refusal to sign.

New York employers should review the below template notices and arrange to implement wage notices that are compliant with the WTPA. Employers who create their own wage notice forms, rather than use the standard DOL templates, may want to consult with counsel to ensure that their forms are compliant.

• Pay Notice for Hourly Rate Employees
• Pay Notice for Multiple Hourly Rates
• Pay Notice for Employee Paid a Weekly Rate or Salary for a Fixed Number of Hours (40 or fewer in a week)
• Pay Notice for Employees Paid a Salary for Varying Hours, Day Rate, Piece Rate, Flat Rate or Other Non-Hourly Pay
• Pay Notice for Prevailing Rate and Other Jobs Pay Notice for Exempt Employees
• Pay Notice for Exempt Employees

By Patrick McCormick

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
$4,600
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.

The Equal Employment Opportunity Commission “EEOC” issued its final revised Americans with Disabilities Act “ADA” regulations and accompanying interpretive guidance, the ADA Amendments Act “ADAAA”, which will become effective on May 24, 2011. The expanded regulations were designed to simplify the determination as to when employees qualify as disabled.

The Amendments Act retains the ADA’s basic definition of “disability” as an impairment that substantially limits one or more major life activities, a record of such an impairment, or being regarded as having such an impairment. However, it changes the way that these statutory terms should be interpreted in several ways, therefore necessitating revision of the prior regulations and interpretive guidance.

Based on the statutory requirements, the regulations set forth a list of principles to guide the determination of whether a person has a disability. For example, the principles provide that an impairment need not prevent or severely or significantly restrict performance of a major life activity to be considered a disability. Additionally, some short-term impairments may qualify as a disability if they substantially limit major life activities.

“Major life activity” is now defined under the rules to encompass not only those activities formerly included (caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, interacting with others, and working), but several more such as “interacting with others.” Inclusion of the activity of “interacting with others” will pose a continuing challenge for employers confronted with claims that problematic employee conduct caused by mental disabilities is protected.

The ADAAA also added the operation of a major bodily function as a major life activity, and the EEOC added to the statutory definitions to include virtually every physiological function. Thus, major life activities now include the functioning of the immune, musculoskeletal, neurological, brain, genitourinary, circulatory, and reproductive systems, and all major organs.

Whether an impairment is a disability should be construed broadly, to the maximum extent allowable under the law. The principles also provide that, with one exception (ordinary eyeglasses or contact lenses), “mitigating measures,” such as medication and assisting devices like hearing aids, must not be considered when determining whether someone has a disability. Furthermore, impairments that are episodic (such as epilepsy) or in remission (such as cancer) are disabilities if they would be substantially limiting when active.

The regulations also make clear that, as under the old ADA, not every impairment will constitute a disability. The regulations include a list of various conditions that “in virtually all cases” meet the definition of disability based on certain characteristics associated with these impairments. The list includes autism, cancer, cerebral palsy, diabetes, epilepsy, HIV infection, multiple sclerosis, muscular dystrophy, major depressive disorder, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia. This includes workers who previously had the conditions and don’t show evidence now.

Businesses with 15 or more employees have to comply and must make reasonable accommodations for disabled employees unless such steps would pose an undue hardship. Accommodations can include restructuring a job, part-time schedules or granting leaves of absence, and making work areas more accessible. Although these regulations do not apply to the employment practices of businesses with fewer than 15 employees, such businesses, if they are considered places of public accommodation, are required to comply with the ADAAA’s changes to the definition of disability with respect to the goods and services they provide to the public.

By Patrick McCormick

Yellowstone injunctions — an injunction to stay the available cure period provided in a commercial lease and in the landlord’s notice to cure while the merits of the alleged default are litigated — have been commonplace since the Court of Appeals’ decision in First Nat. Stores v. Yellowstone Shopping Center, 21N.Y.2d 630, 290 N.Y.S.2d 721 (1968).

Two recent Appellate Division cases from the First and Second Departments remind us of the consequences of failing to promptly seek and obtain a Yellowstone injunction.

In Goldcrest Realty Company v. 61 Bronx River Owners, Inc., 2011 WL 1206171 (2d Dep’t 2011) the plaintiff sponsor of the subject cooperative and holder of unsold shares allocated to 15 apartments, moved by order to show cause for both a Yellowstone injunction and a preliminary injunction. The motion was made after receipt of 15 separate default/cure notices, after the expiration of the cure period and after receipt of termination notices but before the date set in the termination notices for the termination of the respective leases. The Court held in these circumstances that neither a Yellowstone nor preliminary injunction was available.

In an attempt to avoid the requirement that an application for a Yellowstone injunction be made before the termination of the lease and before the expiration of the cure period set forth in the lease and cure notice, the sponsor unsuccessfully argued that the rule did not apply to owners of unsold shares of a cooperative. While this creative argument may be the subject of a future blog, what is important here is the Court’s discussion of the need for prompt action after receipt of default/cure notices.

In reaffirming its prior holdings (see e.g. Korava Milk Bar of White Plains, Inc. v. PRE Props., LLC, 70 A.D.3d 646) the Court explained that once the cure period expired, the Court was powerless to revive a lease. The Court once again explained that the request for a Yellowstone injunction must be made both before the termination of the lease and before the expiration of the cure period set forth in the lease and cure notice. In so doing, the Court restated its express rejection (as previously stated in Korava Milk Bar of White Plains) of any prior decision “fixing a different or longer period of time in which an application for Yellowstone relief must be made.” The Appellate Division held that the Court below improperly granted the Yellowstone injunction “since the plaintiff did not seek Yellowstone relief within the cure period . . .” In addition, the Appellate Division also held, in agreement with the First and Third Departments, that a motion for a preliminary injunction “must also be made prior to the expiration of the cure period.”

In 166 Enterprises Corp. v. I G Second Generation Partners, L.P., 81 A.D.3d 154, 917 N.Y.S.2d 143 (1st Dep’t 2011) the plaintiff commercial tenant sought a Yellowstone injunction one day before the cure period was to expire. A temporary restraining order (TRO) was issued but the Court ultimately denied the motion holding that the tenant failed to demonstrate it was ready and able to cure the defaults alleged (failure to pay rent and late fees and procure the required amount of liability insurance). As there was one day left in the cure period when the motion was decided, the lease terminated the next day.

After expiration of the lease, tenant moved to renew and reargue, conceding its initial motion failed to address its ability to cure the claimed insurance default. The Court below granted the motion to renew/reargue and granted the Yellowstone injunction. The case eventually went to trial and tenant was found to have breached the insurance provision but the trial judge determined that the Yellowstone injunction had been granted nunc pro tunc as of the date of the original Yellowstone application and that therefore tenant still had one day to cure the default.

The Appellate Division, First Department, held that the trial Court “improperly concluded that Tenant still had the right to cure its breach.” The Court reasoned that after the initial motion for a Yellowstone injunction was denied, because the motion to renew/reargue was brought after the cure period expired, the Court did not have the power to grant Yellowstone relief. The Appellate Division also held that, while in certain extremely limited circumstances retroactive relief was possible, those circumstances did not exist in this case and that giving retroactive effect to the Yellowstone injunction upon the motion to renew/reargue was improper.

The simple lesson to be taken from these two cases is that tenants must move quickly upon receipt of a default/cure notice and must obtain Yellowstone or other injunctive relief before the expiration of the applicable cure period and before the expiration of the lease. The Court cannot reinstate the lease if it terminates upon the failure to timely obtain a Yellowstone injunction.

In case you didn’t know, this is my first foray into the world of blogging. That being the case, I thought that I’d spend this month just explaining some of the more general concepts of Elder Law and Estate Planning; a general introduction to begin. Although they are pretty basic (at least to me), I’ve found that there are a large percentage of people that don’t know anything about these primary ideas.

The first concept is “What are Elder Law, Estate Planning, and Trusts and Estates?” Unlike tax law or criminal law or motor vehicle law, there is no one body of law that we (as attorneys) can go to. Instead, it’s a mixture of Social Security, Medicare, Medicaid, Tax, Estates, Trusts, Mental Hygiene and even torts (personal injury) and Penal Law (criminal). The idea is that we look at all these types of law and see how they apply to our clients.

Digging a little deeper there really are two main concepts, Estate Planning and Asset Protection, which arise out of Elder Law and come into play. Estate Planning is simply making sure that whatever you have when you die goes to whomever you want it to go to. This is typically done by way of a Last Will and Testament or a Trust or some type of corporate succession plan. Asset Protection is making sure that you have something to actually pass to those people you named in your estate plan.

Now, the immediate question that comes to my mind is “who am I protecting my assets from?” Two of the largest “takers” of your assets are the government and the cost of your long term care. The government reduces your assets mainly in the form of taxes. They could be in the form of income tax, capital gains tax, gift tax or estate tax, to name a few. Long term care is basically you paying for home care or nursing care after a traumatic medical event.

In the coming months, I’ll discuss the various ways in which we can try to minimize what the government takes from us and the numerous changes in the laws, along with the various ways of then keeping your assets from the cost of nursing care. Along with all of that, I’ll try to keep you abreast of the various ways to move your assets from you to your loved ones, both during your lifetime and after you’ve passed. And, with a minimum amount of headache and loss to both you and your loved ones.

By Patrick McCormick

Landlords routinely collect a security deposit from tenants at the commencement of a lease term with the deposit generally to be used to ensure the tenant’s compliance with its lease obligations. These obligations typically include the payment of rent or additional rent and payment for any damage to the leased premises caused by the tenant. While most experienced landlords understand and comply with GOL §7-103 as it relates to security deposits, some do not. As demonstrated by the following case, the failure to comply with GOL §7-103 can have harsh results.

Pritzker v. Park South Lofts LLC, 117192/09, NYLJ 1202475879547, at *1 (Sup., NY, Decided November 19, 2010) was an action brought by a residential tenant against his landlord for the return of his security deposit. The landlord refused to return tenant’s $84,000.00 security deposit because the tenant allegedly caused $36,404.06 in damage to the demised premises. Landlord also refused to return the entire deposit because it was incurring legal fees in connection with the repairs and with the action commenced by the tenant. The tenant alleged claims against the landlord for conversion, breach of the lease, violation of GOL §7-103 and attorneys fees. Landlord asserted counterclaims alleging damage to the apartment and attorneys fees.

In relevant part, GOL §7-103 (1) provides:

Whenever money shall be deposited or advanced on a contract
or license agreement for the use or rental of real property
as security for performance of the contract or agreement
or to be applied to payments upon such contract or agreement
when due, such money shall be held in trust by the person
with whom such deposit or advance shall be made and shall
not be mingled with the personal moneys or become
an asset of the person receiving the same
(Emphasis supplied)

GOL §7-103 (2) provides, in relevant part:

Whenever the person receiving money so deposited or
advanced shall deposit such money in a banking organization,
such person shall thereupon notify in writing each of the
persons making such security deposit or advance, giving
the name and address of the banking organization in which
the deposit of security money is made, and the amount of
such deposit.

The Court specifically held that “where a landlord has deposited a security deposit in a bank and fails to comply with the notice provision of GOL §7-103(2), a court may draw the rebuttable inference that the landlord has mingled that security deposit with the landlord’s own money, in violation of GOL §7-103(1). (citations omitted) Such commingling constitutes a conversion, as well as a breach of fiduciary duty [citation omitted] and regardless of any non-compliance by the tenant with the terms of the lease, it entitles the tenant to an immediate return of the deposit. [citations omitted]. In the event of such commingling, the landlord may not use any portion of the deposit even for otherwise legitimate purposes. (citations omitted).”

In this case it was not disputed that the landlord deposited the tenant’s security deposit in an “agency account” of landlord’s managing agent and neither landlord nor its managing agent notified tenant of that deposit as required by GOL §7-103(2). Landlord produced certain banking records from the agent for a period surrounding the deposit of the tenant’s security deposit which records showed seven deposits into the account in addition to the deposit of tenant’s security. Landlord did not identify the sources of those other deposits and no proof was submitted that anyone other than the landlord may have owned any portion of the money in that particular account.

The Court held that “the mere fact that [tenant’s] security deposit was deposited in an agency account does not show that the deposit was not commingled with any of [landlord’s] own money.” A member of the landlord (an LLC) provided an affidavit that its agency account “is wholly segregated from [landlord’s] monies.” Notwithstanding such affidavit, the Court held “in the absence of any explanation of the sources of the many credits to [the agency] account, other than that of plaintiff’s security deposit, in the absence of a copy of such contract as [landlord] and [its agent] may have entered into, and in the absence of unambiguous evidence that the [agency] account does not include money belonging to [landlord]” the affidavit was not sufficient “to rebut the presumption that the security deposit was mingled with the personal monies [of the landlord] within the meaning of GOL §7-103.” Also troubling to the Court was the fact that, after the tenant vacated the apartment, the landlord determined that a portion of the security deposit would be used to repair damage allegedly caused by tenant. But, rather than return the excess security deposit, the landlord retained the entire security deposit to guarantee attorneys fees to which it believed it would be entitled in connection with the tenant’s action. The Court held that these facts demonstrated that the landlord exerted dominance over the security deposit and did not view it as segregated from its own money and therefore granted tenant summary judgment on its claims for conversion and violation of the General Obligations Law.

While the Court did find the tenant partially liable to landlord on landlord’s counterclaims for damage to property, the Court nevertheless granted judgment for the full amount of the security deposit of $84,000.00 to the tenant with interest from the end of the lease term.

While this result may be harsh, it could have been avoided had landlord or its agent provided tenant with notice in compliance with GOL §7-103(2) and produced sufficient proof in accordance with GOL §7-103 that the security deposit was not commingled with landlord’s personal funds.

The Appellate Term also recently considered a matter in which the tenant sued to recover his security deposit and the landlord sought to recover sums for certain unpaid charges. In awarding the tenant the return of his security deposit and reducing the amount awarded to the landlord, the Court focused on the specific terms of the lease. In Schlesinger v. Edwards, 2008-945 N C, NYLJ 1202474306192, at *1 (App. Tm., 9th and 10th Dist., Decided October 20, 2010), after a non-jury trial, the Court awarded the tenant, who had vacated the premises at the end of the lease term, a judgment in the sum of $4,300.00 representing the return of tenant’s full security deposit and awarded the landlord the sum of $553.54 on his counterclaim to recover sums for unpaid electric bills, water bills, carpet cleaning, cleaning and repair of bath and kitchen tile and for rekeying locks to the premises. On appeal, the landlord argued that a rider to the lease required the tenant to provide 60 days notice to landlord if tenant did not intend to renew the lease and that if tenant failed to do so landlord was entitled to retain the entirety of the security deposit. While the specific lease language is not reported in the case, the Court found that the landlord’s interpretation of the lease clause did “not appear to reflect the parties’ intention, as the lease was for a defined one-year term.” The Court interpreted the lease clause at issue to require the tenant, upon the expiration of the lease term, to provide 60 days notice to the landlord if tenant intended to remain in the premises after the expiration of the lease term and that if the tenant did not give such notice but nevertheless remained in the premises, his security deposit would be forfeited. Finding the lease clause ambiguous, the Court applied the doctrine of contra proferentem, construed the clause against the landlord, and granted the return of the security deposit because the tenant had timely vacated the premises upon the expiration of the one year term. The Court also reduced the monetary award to the landlord finding that the lease specifically provided that if the premises was not cleaned at the expiration of the term, the sum of $100.00 would be deducted from the security deposit but that landlord could collect more than $100.00 if the cleaning costs exceeded $100.00 and landlord provided itemized receipts for such cleaning. The landlord, despite claiming that the cleaning costs for the carpet and bathroom/kitchen tile exceeded $100.00, did not provide itemized receipts for such and thus reduced the landlord’s award for such cleaning costs to $100.00 reducing the entire award to $373.54. The very simple lesson here is that both landlord and tenant should specifically comply with the terms of their lease, which should be carefully drafted to properly memorialize their agreement.