BY STEPHEN C. SHULMAN, ESQ
BORAH GOLDSTEIN ALTSHULER SCHWARTZ & NAHINS, PC

Clients are always approaching me with problems relating to tenants are utilizing their rent stabilized apartments improperly. Often the problem is that the tenant either has too many roommates or their roommates are paying excessive rents.
The Standard Real Estate Board lease restricts occupancy of a residential apartment to members of the tenant's immediate family and roommates as defined in Section 235 (f) of the Real Property Law. There are many landlords, however, who either do not use this Real Estate Board lease, which in my opinion, is not advisable for the reasons stated in this article or, have tenants who commenced occupancy before 1985. These other leases restrict occupancy to immediate family members only.
Real Property Law Section 235 (f) entitled, "Unlawful Restrictions On Occupancy, also more commonly known as the "roommate law," defines who may occupy a residential apartment. This law provides that a residential tenant who enters into possession shall also be permitted to have, in addition to their family live in the premises, one additional occupant and the dependent children of the occupant, provided the tenant occupies the premises as their primary residence. If the apartment is leased to two or more tenants, the law allows for one additional occupant for each one of the tenants that occupies the premises, along with their immediate family members. Situations arise where a tenant who either cannot afford the rent in the apartment or uses the apartment to make a profit will have more roommates occupying the apartment than the law allows, or charges the roommates a sum of rent in excess of the lease rent. In the past, a landlord would have brought a holdover proceeding on the grounds that the tenant is violating the roommate law based upon the excessive number of roommates violating Section 235(f). (No restriction existed on how much rent the roommates were charged, however.)
Recently, the Appellate Division struck down the landlord's ability to evict a tenant for violating Section 235(f). The Appellate Division was very clear in stating that while the roommate law was designed solely as a measure or guide to the number of occupants that may live in an apartment, that nothing in the statue entitled the landlord to recover possession for its violation.
Because the roommate law became effective July 30,1985, no lease before this date incorporated Section 235(f) into the use section, usually found in paragraph (1) of the lease. After 1985, some leases have adopted Section (f) into their lease.
Since the Appellate Division's decision, a theory on evicting a tenant for excessive roommates also has emerged. The cases argue that the tenant's violation of the roommate law is not a violation of the statute. They argue that the use is a violation of paragraph (1) of the lease.
Unfortunately, this type of holdover proceeding against a tenant who is violating the roommate law cannot be brought against a tenant whose lease does not have Section 235(f)-use provision in the lease. The prohibition to this type of lawsuit would also apply to every single lease that was entered into prior to July 1,1985. Even a renewal lease entered into after 1985 that may have adopted this provision might be void under the Rent Stabilization Laws which prohibit the landlord from changing any material terms of the lease after the initial Lease.
Which regard to excessive rent charges to roommates, until December 20,2001 there was no provision of the law that would otherwise create any restriction on the payments the tenant received from their roommates.
With the changes made to the Rent Stabilization Code last year, Section 2525.7 entitled, Occupancy by Persons Other Than Tenant of Record o Tenant's Immediate Family, was enacted. Sub-section (a) states: " Housing accommodations of Section 235 (f) of the Real Property Law".
The Rent Stabilization Code now permits the use provision of a lease which includes Section 235(f) of the Real Property Law shall not exceed such occupant's proportionate share of the legal regulated rent charged to and paid by the tenant for the subject housing accommodation."
This means that a tenant who has one roommate and whose legal rent is $1400 per month may not charge that roommate more than $700 for the apartment. The statute further states, "In dividing the legal regulated rent by the total number of tenants named on the lease and the total number of occupants residing in the subject premises, the landlord shall not include the tenant or the occupant's spouse or any of the tenant or occupant's immediate family member or dependent children's.
The most important part of the statute, however, is the last sentence; it states, "the charging of a rental amount to an occupant that exceeds the occupant's proportionate share shall be deemed to constitute a violation of this code".Clearly, then the thought that would embrace a landlord's mind is what would the remedy be for the tenant who violates this portion of the code and charges an improportionate share of rent to the occupants? (Other than the roommate suing at the DHCR to recover the overcharge).
Since the substantial obligation of a tenancy, in this author's opinion, includes complying with the provisions of the Rent Stabilization Code, then an argument could be made that overcharging occupants is a violation of a substantial obligation of the tenancy. The violation of a substantial obligation of a tenancy is grounds to commence a holdover proceeding. This theory, however, has not been tested. This law has recently been enacted, and I have not found any published opinions by any courts as to whether this creates a viable cause of action to commence a holdover proceeding. Since the purpose of the Rent Stabilization Code is to regulate tenancies and the restrictions that are placed upon tenants and landlords are enforceable by the DHCR and by the courts, who have concurrent jurisdiction, then such a cause of action could exist.
Assuming that a holdover proceeding could be maintained, would this "profiteering" by the tenant be curable? Ordinarily, in a holdover proceeding based upon a violation of a lease, there is a right to cure after trial. Interestingly, however, in that an illegal sublet holdover proceeding (which is curable) the courts have routinely stated that where a tenant has been profiteering during the sublet period, they lose their right to cure and the landlord may evict them!
One practical tip for owners/managers may be to amend the terms of their standard leases to require the tenant specifically to comply with Section 2525.7 of the Rent Stabilization Code and to state that the tenant's breach of this provision is a breach of a substantial obligation of their tenancy.

Stephen C. Shulman is a member of the law firm Borah, Goldstein, Altschuler, Schwartz & Nahins, P.C. and can be reached at (212) 965-2765.

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