Category Archives: New York

Can a Tenant Recover Attorney’s Fees From a Landlord if the Lease Does Not Provide for That Right?

Landlords are generally the parties that prepare the lease agreements into which their tenants enter. This unequal bargaining power typically allows landlords to insert language that requires tenants to pay the landlord’s attorney’s fees for any legal claims that arise out of their agreement, but does not require the landlord to pay the tenant’s attorneys fees for breach of the lease terms by the landlord. New York law requires there to be either a contractual or statutory basis for a prevailing party to collect attorney’s fees. But if there is no express language in a lease agreement allowing for tenants to demand attorney’s fees from landlords, does that mean tenants will not able to collect them?

This question was at issue in a recent New York case. Casamento v. Juaregui. Casamento v. Juaregui, 2011 WL 4090175 (2d. Dept. 2011). In the case, Luis Juaregui (“the tenant”) entered into a lease agreement for a Queens apartment owned by Dominic Casamento (“the landlord”). Paragraph 7 of the agreement required the tenant to receive the prior written consent of the landlord before making any alterations to his apartment. Paragraph 10 held the tenant liable for any damages or expenses incurred by the landlord relating to any neglectful act of the tenant. Additionally, paragraph 16 specifically referred to attorneys’ fees, stating that “[a]ny rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses” and including “reasonable legal fees” within the definition of “expenses.” Id. at 288.

In March 2007, the landlord alleged that the tenant had violated paragraphs 7 and 10 by making alterations to certain rooms without the landlord’s consent and also claimed the tenant was responsible, per the terms of the lease, for the landlord’s legal fees. He served a notice of termination and commenced a holdover proceeding.

The question for the court in Casamento was whether the lease at issue was covered by Real Property Law (“RPL”) §234. That law governs residential leases and addresses the imbalance resulting from the unequal bargaining power between landlords and tenants. It establishes an implied covenant that addresses when a tenant will be able to recover attorneys’ fees incurred in the successful defense of a summary proceeding to recover possession of a leasehold. If the court determines that the lease is covered by §234, the tenant should be able to collect attorney’s fees from the landlord.

Section 234 states that courts shall construe a lease to include this implied covenant whenever:

1)  a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of a tenant to perform any covenant or agreement contained in such lease, or

2) that amounts paid by the landlord therefore shall be paid by the tenant as additional rent

See RPL §234.

The Casamento Court determined that the outcome of any claim pursuant to §234 depends upon an analysis of the specific language of the lease provision at issue. In that case, it held that “Paragraph 16, thus, literally fits within the language of the first prong of section 234, since it does ‘provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of a failure of the tenant to perform any covenant or agreement contained in such lease.’” Additionally, the court found that construing the covenant in favor of the tenant is “consistent with the Legislature’s remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants.” The court said that RPL §234 helps avoid a situation where a landlord would have nothing to lose by instituting an eviction proceeding with a frivolous factual basis where there was  prospect of re- enting for a higher amount and the lease included a provision enabling the landlord to recover attorney’s fees. Because the Court determined that RPL §234 applied, it held that tenants can recover attorney’s fees from landlords.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Does The New York Prompt Pay Law Allow For a Private Right Of Action?

In January 2010, the New York legislature enacted Insurance Law § 3224(a) (“Prompt Pay Law”) to ensure that insurance companies paid their claims in a timely fashion. However, it was not clear whether the statute granted a party a private right of action. In a recent decision, the New York Supreme Court for Kings County held that it did. Maimonides Medical Center v. First United American Life Insurance Co., 2012 N.Y. Misc. LEXIS 701 (N.Y. Sup. Ct. Feb. 22, 2012).

The plaintiff in the case, Maimonides Medical Center (“Maimonides”), was a non-profit hospital that provided inpatient healthcare services. The cases stemmed from the hospital’s treatment of six patients, each of whom held Medigap policies issued by the defendant, First United American Life Insurance Company (“First United”). Some of the patients remained at the hospital for more than a year. Between the six, their stays at the hospital exceeded four years. Malimonides billed First United more than $19 million, but the insurance company paid them only $4,078,663.29. Consequently, Malinonides filed suit against First United, alleging breach of contract and violation of the Prompt Pay Law.

The Prompt Pay Law provides that, where an insurer is clearly liable to pay a healthcare claim, the health care provider or patient must be paid

a)      within 30 days of receipt of an electronically transmitted claim, or

b)      within 45 days of receipt of a claim transmitted by any other means.

See Insurance Law § 3224-a.

Additionally, where liability for a claim is not reasonably clear, the insurer must pay any undisputed portion and, within 30 days of receiving the claim, provide either written notification specifying why it is not liable or a written request for any additional information necessary to determine its liability. Id. This was not done.

The issue before the New York Court was whether the Prompt Pay Act gave Maimonides the ability to sue First United. When considering whether a statute implies a private right of action, courts will consider:

a) whether the plaintiff is one of the class for whose particular benefit the statute was enacted;

b) whether recognition of a private right of action would promote the legislative purpose; and  

c) whether creation of such a right would be consistent with the legislative scheme.

Sheehy v. Big Flats Community Day, Inc., 73 N.Y.2d 629 at 633 (1989).

The Court found that Maimonides satisfied the first two prongs, but First Insurance argued that the hospital did not satisfy the third – namely, that creating a right for Maimonides to sue would go against the legislative scheme of the statute. First Insurance argued that “a private right of action would be inherently inconsistent with enforcement,” but the Court disagreed. “Although defendant argues that the Prompt Pay Law is predominantly a remedial statute, it clearly creates rights for health care providers and patients and affirmative duties for insurers,” the Court held. “Before the statute was passed, the only requirements for timely payment of health care claims were contractual.”

The statute “was enacted to protect health care providers and patients against insurance companies that fail to pay claims in a timely fashion.”

The Court concluded that Maimonides was a member of the class that the legislature intended to benefit by passing the law, particularly because the purpose of the law was interpreted to be preventing the delay in the payment of health care claims. Therefore it had a private right of action available to it.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Does a New York Contractor Need A License To Sue For Breach of Contract?

New York Contractors who perform work without the requisite license could find themselves lacking the necessary tools to bring legal action against residence owners they contract to do business with.

In a recent New York case, the parties entered into a written contract that required the plaintiff to renovate the defendant’s residence. This included, among other tasks, building a second-story addition to the master bedroom. Enko Const. Corp. v. Aronshtein, 2011 WL 5222881 (N.Y.A.D. 2 Dept.). The project became larger than originally planned, resulting in the demolition of most of the original structure of the defendant’s residence. After the plaintiff had performed extensive work but before he had completed the project, the defendant terminated his services. The plaintiff sued in New York Supreme Court to recover damages for breach of contract and in quantum meruit (the measure of value) for services performed. The defendant moved to dismiss the complaint, claiming the plaintiff was not a licensed home improvement contractor. The Court granted the defendant’s motion, and the plaintiff appealed.     

New York law provides that “no person shall own, maintain, operate, engage in or transact a home improvement business…unless he [or she] is licensed therefore.” Nassau County Administrative Code, § 21–11.2 CPLR 3015(e) states that a complaint that seeks to recover damages for breach of a home improvement contract or to recover quantum meruit for home improvement services is subject to dismissal if it does not allege compliance with the licensing requirement. “An unlicensed contractor may neither enforce a home improvement contract against an owner nor seek recovery in quantum meruit.” J.M. Bldrs. & Assoc., Inc. v. Linder¸ 67 A.D.3d 738, 741.      

The plaintiff conceded that it did not possess the requisite license. Instead, it argued that it did not need a license, due to a statutory exemption to the requirement that applies to the construction of new homes. However, the Appellate Division of the Second Department of the Supreme Court of New York concluded that “[t]he statutory exemption for ‘construction of a new home’ is limited to the creation of a structure, where none previously existed…Even if a dwelling is stripped to the frame and rebuilt, the work constitutes the renovation of an existing home, not the erection of a new one.” J.M. Bldrs. at 740. Because it was undisputed that there was an existing home on the property when the plaintiff began its work, the Court held that the plaintiff was engaged in “home improvement” and thus was required to have the requisite license for such work. Additionally, the Court held that the defendant’s home fell within the Code’s definition of buildings “used as a private residence or dwelling place” even though the homeowners moved out temporarily while the plaintiff performed the renovations. 

The Court’s decision highlights the importance that contractors engaged in “home improvement” in New York ensure that they have the requisite license to perform their work before taking on such tasks. Failure to do so might leave them without legal grounds to recover from parties who terminate their services while a project is ongoing.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Which state has jurisdiction when the sale of New Jersey real estate is handled by a New York law firm?

The Appellate Division of the New Jersey Superior Court  has refortified the commitment to holding persons responsible for actions they take in one state but knowing it will or might have a tendency to have an effect in another. Lee v. Rah, 2011 WL 2802794 (N.J.Super.A.D.,2011).

This case is about Rah, a New York attorney, who did not practice in New Jersey, but drafted documents for his clients regarding the ownership and sale of a piece of real estate in New Jersey. Rah performed all the work in his New York office. He also claimed that at all times the deed for the real estate was held in escrow in New York, and it was never recorded in New Jersey. Also, the fees for his services were paid by a New York Corporation. When the Lees tried to sell their real estate, the transaction went sour because the documents Rah drafted had not been recorded and, even if they had been, were improper because they were drafted on a New York form. Thereafter, the Lees sued Rah in New Jersey for malpractice.

Rah moved to dismiss the action on the grounds that he was not subject to the Court’s jurisdiction in New Jersey. The lower court agreed and dismissed the complaint on the grounds of lack of in personam (personal) jurisdiction. The Appellate Division disagreed and reinstituted the lawsuit. The Court held that Rah provided legal services for the transfer and sale of a New Jersey property. Although all of Rah’s activities occurred in New York, he was handling a New Jersey transaction for New Jersey residents. Therefore, even though Rah had no presence in the state of New Jersey, he “was well aware that his legal activities ‘would have direct consequences in New Jersey’”. Id. at 5.  This meant that Rah could not avoid a New Jersey lawsuit by remaining in New York to do work related to New Jersey real estate. Any malpractice attributed to him regarding the real estate would have a predictable impact in New Jersey and, thus, New Jersey was well within its rights to exercise its judicial authority over Rah.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC