RECENT TRENDS IN LANDLORD/TENANT LAW
BY STEPHEN C. SHULMAN, BORAH GOLDSTEIN ALTSHULER & SCHWARTZ
A federal Appellate Court has recently ruled that the Fair Debt Collections Practices Act (FDCPA) which governs the manner in which a consumer debt may be collected, applies to a written rent demand that is widely used as the predicate for the commencement of a summary non-payment proceeding in New York. The ramifications of the ruling are widespread, since the ruling effectively states that a demand for rent that is signed by an attorney representing the landlord is equivalent to a collection notice by a creditor’s agent. While the Real Property and Proceedings Law that governs requirements of a written rent demand requires only three (3) days notice for the tenant to pay the rent and does not specify who can sign the rent demand, the FDCPA requires the debt collector to give the debtor thirty (30) days to pay the debt before legal action can be commenced.
This ruling effectively nullifies the ability of the landlord’s attorney as well as the managing agent from signing the rent demand.
The genesis of this issue was a federal lawsuit commenced by a tenant against a law firm which commenced a summary non-payment proceeding with a written rent demand signed by one of the attorneys. The argument the plaintiff-tenant made was that because the rent demand was signed by the attorney, then it constituted a collection notice by an agent and the rent demand which required the payment of rent within 3 days violated the Federal Debt Consumer Protection Act. Judge Lewis Kaplan ruled that the obligation to pay rent under the lease to be a transaction that invokes the FDCPA. Therefore, the notice by the attorney, acting as agent for the landlord, in demanding the rent, was defective because it did not provide the tenant with the requisite 30 day period to pay the debt under federal law. Since Judge Lewis Kaplan’s decision, there has been litigation in the City Housing Courts on this issue. There have been some judges who in unreported decisions have handled this issue differently. One judge has ruled that a demand signed by an attorney that does not give the requisite 30 day notice makes the proceeding for the recovery of the apartment for non-payment of rent defective and requires dismissal. However, another Housing Court Judge has ruled that the failure of the landlord and its agent to comply with the Fair Debt Collections Practices Act only gives rise to a separate cause of action by the tenant in Federal Court but does not warrant the dismissal of the summary non-payment proceeding. To this writer’s knowledge, there has been no decision by any Appellate Court on this issue.
Given the enormous number of non-payment proceedings that are commenced in City Housing Courts each year, the effects of this Court of Appeals decision are significant.
For example, one analysis leads to the conclusion that a landlord must sign a rent demand personally. This leads to a complication where the landlord is not an individual, but is either a partnership or a corporation, or some other form of entity, including an estate. Many of you as managers know that landlord attorneys often deal with the management companies, who in turn deal with the principals. The efficiency and speed in which the summary proceeding can be commenced is compromised by this federal ruling since the process of starting the proceeding now may require the attorneys to forward each and every rent demand to the managing agent, who then has to obtain a principal’s signature. The complications in time delays are rather obvious, especially, for example, where the principal does not live in New York but may be out of the state or even out of the country. Since the original written rent demand must be attached to the petition when it is filed in court, there is added delay because of the necessity to mail these notices. For an owner who unfortunately has a steady diet of non-paying tenants, this could turn into a nightmare.
One other alternative is serving a rent demand with a pre-printed statement of the landlord with no signature. There have been some decisions, by some trial courts that a rent demand may not have to be signed as long as the requisite information is on the demand.
The final alternative that some landlords may wish to use is the oral demand, which is permissible under the Real Property Actions and Proceedings Law governing non-payment proceedings in Housing Court. The disadvantage in relying on an oral demand is that it requires the party making the demand to appear in court at a trial and testify as to the date, time and place of the demand. In the past, the submission of the affidavit of service has been sufficient so long as the tenant does not make a separate claim that the process server did not make proper service.
Managers and owners should therefore be concerned that their attorneys are following the federal law so as to avoid any detrimental court decision that may occur later in the proceeding.
Stephen Shulman is a partner in the law firm Borah Goldstein Altshuler & Schwartz. Steve can be contacted at 377 Broadway, New York, NY 10013, 212-431-1300.