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TITLE III

REGULATORY LAWS

CHAPTER XIII

The Defense of “Unjust” and “Unreasonable” Rental

and “Oppressive” Agreement. We come now to a consideration of the regulatory provisions of the emergency laws.

THE EMERGENCY DECLARATION

These provisions were originally enacted by Chapter 136 of the Laws of 1920. This is the law which contained the Legislative declaration of the existence of an emergency. This declaration is repeated in the present amended form of the law, Chapter 434 of the Laws of 1921, and is in the following language:

"A public emergency existing in the judgment of the legislature by reason" of "unjust, unreasonable and oppressive agreements for the payment of rent having been and being now exacted by landlords from tenants under stress of prevailing conditions whereby the freedom of contract has been impaired and congested housing conditions resulting therefrom have seriously affected and endangered the public welfare, health and morals in certain cities of the state.

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THE DEFENSE THAT THE RENT IS UNJUST AND UNREASONABLE

AND THE AGREEMENT OPPRESSIVE

The Legislature by the same law created a new defense, in the following language;

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"It shall be a defense to an action for rent accruing under an agreement for premises in a city of the first class or in a city in a county adjoining a city of the first class occupied for dwelling purposes that such rent is unjust and unreasonable and that the agreement under which the same is sought to be recovered is oppressive."

1

WHEN DEFENSE AVAİLABLE This defense is available only to tenants occupying premises for dwelling purposes 1 when located in the cities of New York, Buffalo, Rochester, Yonkers, Mt. Vernon, White Plains or New Rochelle.

A room or rooms in a hotel containing 125 rooms or more, and lodging or rooming houses occupied under hirings of a week or less, are expressly excepted from the operation of the laws allowing the defense of unreasonable rent. Occupants of such hotels, lodging or rooming houses cannot question the reasonableness of the rent they are called upon to pay.

New buildings which were in the course of construction on September 27, 1920, or commenced thereafter, do not come within the protection of these laws. Therefore tenants who reside in buildings of this character cannot question the reasonableness of the rent paid or agreed to be paid.

In effect, the Legislature sought to secure for the landlord a reasonable rent and to prevent him from getting more than that. It sought to prevent landlords from using their property for purposes of oppression and to provide pro

1 For explanation of what is understood by the expression "dwelling purposes," see supra, page 61.

a § 10 of Chap. 434, Laws of 1921. For interpretation of the word "hotel" as employed in this statute, see supra, page, 110.

og 12, Chap. 434, Laws of 1921.

tection to tenants against unjust and unreasonable demands. 4

At the same time the Legislature has not forbidden landlords and tenants making their own agreements.5

Chapter 136 was amended and re-enacted as amended at the Special Session of the Legislature in September, 1920, in Chapter 944, which in turn was further amended and reenacted in 1921 by Chapter 434 of the laws of that year.

This statutory defense is available to a tenant even though the term of his lease extend beyond November 1, 1922, the date fixed by the existing law for the expiration of the emergency statutes. “The length of the term specified in such agreement—whether a month, or a year, or five years is of no special significance.” 6

NATURE OF LAWS RESTRICTING LANDLORDS TO REASONABLE

RENTALS

Laws regulating rentals and restricting landlords to reasonable rentals constitute an interference by the community with the economic laws of demand and supply and with the freedom of contract between landlord and tenant. Such laws secure for the tenant better terms than mere competition would give him. Instances of interference of this character are, however, not entirely novel and not infrequent in legislation on this subject.?

In upholding this special defense created by the emergency laws, which “temporarily fixes reasonableness as the

* Stewart v. Schattman, 187 N. Y. Supp. 445 (App. Term, 1st Dept.); Elvira Realty Co. v. Bracegirdle, 115 Misc. 197, 187 N. Y. Supp. 518 (App. Term, 1st Dept.).

5 Elvira Realty Co. v. Bracegirdle, supra.
. Murphy v. James, 188 N. Y. Supp. 743 (App. Term, 1st Dept.).

7 See “Recent Tendencies in the Reform of Land Tenure,” by Prof. Edward P. Cheney, where attention is called to the following instances:- Irish Land Acts of 1870 and 1881, Scotch Crofters Acts of 1885 and 1886, and Allotments Act of 1886.

standard of rent in order to prevent oppression,” Judge Pound, in his opinion in the case of People ex rel. Durham Realty Corp. v. La Fetra,' says:

“Changing economic conditions, temporary or permanent, may make necessary or beneficial the right of public regulation (German Alliance Ins. Co. v. Kansas, 233 U. S. 389). Housing in normal times may be and often is a competitive business; landlords may in the lean years and in periods of oversupply be unable to secure a fair return on their investments. Competition will then regulate rents more effectively than legislation can. An historical justification of liberty of contract between landlord and tenant is not a demonstration that the system must survive every exigency. When it temporarily ceases to be adapted to the demands of the present it may be modified, if the best interests of society are thereby served. An earnest conflict of serious opinion' may arise as to whether such interests have been wisely served or whether the legislation is anything more than another example of misdirected zeal in dealing with a crisis. But that argument does not address itself to the court. The scope of judicial inquiry in deciding the question of power is not to be confused with the scope of legislative considerations in dealing with the matter of policy' (Chicago, B. & Q. R. R. v. McGuire, 219 U. S. 549, 569; German Alliance Ins. Co. v. Kansas, supra).

On the question of the policy of the law the following from the report of the Select Committee on Reconstruction of the United States Senate 9 is in point:

“An interesting recent development in New York furnishes a striking illustration of the fact that interferences with the law of supply and demand, while perhaps permissible as a stop-gap, are wholly undesirable as a remedy. A year ago office space in

8 230 N. Y. 429, 446.

• Presented by Senator William M. Calder, Chairman of the Committee, on March 2, 1921.

New York was almost unobtainable, $6, $7, and even $8 a square foot being quoted for choice locations on long leases. Demand was made for legislation to restrict rents on business buildings as had been done in dwelling houses. No restriction, however, was placed because, perhaps, of the doubtful constitutionality of such action. Capital immediately flowed into office buildings, hotels were converted into suites of offices under the stimulus of the high prices offered, with the result to-day that office space in New York exists in quantity much greater than the visible demand, and new leases for office space are being made at figures much below those quoted a year ago."

The law has been properly enacted 10 and it is for us now to consider the proper application and construction thereof.

LEASES MADE BEFORE APRIL 1, 1920 No leases made before April 1, 1920, the date when the first emergency laws were passed and became effective, are affected by these laws; and, consequently, no actions or proceedings based upon rent under leases made before April 1, 1920, are subject to the defenses which the statute permits. 11

In the recent case of Orinoco Realty Co. v. Bandler, 12 Judge Greenbaum, writing for the Court, says:

“In affirming Paterno Investing Co. v. Katz (supra), which held that chapter 136 of the Laws of 1920 does not apply in the case of

10 It has been declared constitutional by the Court of Appeals in this State in the case of People ex rel. Durham Realty Corp. a La Fetra, supra. The question has not been finally passed on by the Supreme Court of the United States, but argument has been fixed for November, 1921.

11 Paterno Investing Corp. v. Katz, 112 Misc. 242, 184 N. Y. Supp. 129, affd. 193 App. Div. 897, 183 N. Y. Supp. 954; Sylvan Mortgage Co. v. Stadler, 115 Misc. 311, 188 N. Y. Supp. 165; Orinoco Realty Co. v. Bandler (App. Div., 1st Dept.), 189 N. Y. Supp. 855.

12 (App. Div., 1st Dept., May, 1921), 189 N. Y. Supp. 855.

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