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(This story, in slightly different form, originally appeared in the New York Law Journal.)

NEW YORK CITY-A stipulation in which a couple agreed to pay higher-than-legal rent in return for their landlord allowing them to remain in a rent-stabilized apartment that was not their primary residence was declared void and unenforceable yesterday by the Court of Appeals. The 1996 apartment stipulation stated that tenants Victoria Munroe and Eric Saltzman would pay $2,000 a month for their rent-stabilized apartment at 155 Riverside Dr. on Manhattan’s Upper West Side, or $675 a month more than the legal rent on the dwelling. The apartment, actually three adjacent apartments consolidated into one by the tenants, was then to be held by the tenants “regardless” of the fact their primary residence appeared to be in Cambridge, MA.

In 2000, the apartment was deregulated. Under the terms of the stipulation, the tenants were offered renewal leases every two years with rent increases of 8%, according to the Court’s decision, which was written by Judge Robert S. Smith. When a new manager took over the building for its owners, Riverside Syndicate, eviction proceedings were begun in 2004 to have the 1996 stipulation declared void and contrary to the public policy of the Rent Stabilization Code.

The Court yesterday unanimously held that §2520.13 of the code states that a tenant may only be allowed to “waive the benefit” of the city’s Rent Stabilization Law as part of an agreement to withdraw a complaint before the state Department of Housing and Community Renewal. No such complaint before the agency existed, the Court noted.

“The application of this regulation to this case seems uncomplicated,” Judge Smith wrote in Riverside Syndicate v. Munroe, 16. “The agreement is, on its face, one to ‘waive the benefit’ of rent stabilization, and is therefore void.”

An agreement such as the one over the units at 155 Riverside Dr. are contrary to the public policy considerations underpinning the rent stabilization system, the Court held. “It is the policy of the rent stabilization laws that apartments should either be rented at no more than the legal maximum or deregulated,” Judge Smith wrote. “Deregulation, when the conditions for it are met, serves public policy by increasing the availability of housing on the open market. Agreements like the one at issue here distort the market without benefiting the people the rent stabilization laws were designed to protect.”

Civil Court Judge Saralee Evans had approved the stipulation in 1996. In Supreme Court, Acting Justice Judith J. Gishe also sustained the agreement, but she was reversed unanimously by the Appellate Division, First Department, which held in Riverside Syndicate v. Munroe, 39 AD3d 256 (2007), that it was illegal to waive the benefits of rent stabilization as provided for in the stipulation.

Jeffrey Turkel, who represented Riverside, says in an interview that it was not a “close or difficult case” to decide against the validity of the stipulation. “I think that anyone who practices in the rent-regulation field would understand that an agreement whereby a tenant agrees to pay a rent overcharge in exchange for a landlord looking the other way for a non-primary residence is illegal and unenforceable,” says Turkel, of Rosenberg & Estis.

Not every stipulation a tenant and landlord make would be void under rent stabilization, says Turkel. For example, no one would object to an arrangement where a landlord who owes money to a tenant agrees to have an apartment painted every two years instead of three years to make up the difference.

Eric Hecker of Emery Celli Brinckerhoff & Abady represented Munroe and Saltzman. He did not immediately return a call seeking comment Thursday.

Joel Stashenko can be reached at [email protected].

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