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“The mere fact that the landlord is receiving from certain tenants a rent sufficiently high to afford him an adequate return upon his capital investment does not entitle the other tenants in the house to a reduction below the amount at which similar apartments in the same neighborhood are leased, and below the rate which, if generally applied throughout the apartment house, would afford the landlord a fair return on the whole property. A landlord may reasonably under proper circumstances enter into agreements of lease with various tenants at different rentals for similar apartments in the same house, and all these leases are enforceable in accordance with their terms, unless any particular tenant can show that he is actually injured by the landlord's use of his property and has been compelled to enter into a lease which is actually oppressive and unreasonable in its terms.
“Where a landlord does not obtain more than a reasonable return
upon his investment taken as a whole, and has acted reasonably in fixing the rates for the various tenants, and in spite of more or less widely varying rates has compelled no tenant to enter into a lease which is actually oppressive or unreasonable, the tenant paying the higher rent has suffered no injury for which the Legislature has attempted to provide a remedy, and, on the other hand, even though some of the leases may be at rates which the court could properly consider unreasonable, only the tenant who pays these rates is aggrieved thereby, and no other tenant in the same premises can compel the landlord to allow him to remain at a lower rental than would otherwise be reasonable, merely because the landlord will obtain a fair return upon his whole investment through the higher rates paid by other tenants. The landlord is not compelled to allow any tenant to remain in the premises unless such tenant is ready to pay the landlord either the rental which he has agreed to pay or a rental which is reasonable, and no rental can be considered as reasonable which is less than the amount which would be fixed by ordinary competition, and in addition is less than would afford the landlord a fair return upon his investment, if applied to all the apartments in the same house."
WHAT IS PROPER EVIDENCE?
Naturally, there are many questions constantly arising during the trial of actions as to what is and what is not proper evidence.
It is proper to admit proof as to the amount of rent paid for the premises one year prior to the making of the lease under which rent is sought to be recovered.76 That evidence is material on the point of the existence of the presumption created by subsection 3.77
Generally speaking, any evidence which has a bearing on the gross income or expenses of operation or which is an "element in determining the income derived by the landlord from the premises over and above the cost of maintenance,” is proper and should be admitted. 78
It is not proper to permit a defendant, when called as a witness in his own behalf, to read in evidence, in lieu of testifying formally, a statement of his defense, based upon hypotheses and conclusions unwarranted in law, as well as containing appeals to the sympathy of the court.79 The court said in a case where this subject came up:—"While some latitude in the presentation of a case is always granted a party who acts as his own attorney, the bounds of propriety were exceeded in this instance, and in our opinion to the prejudice of the landlord.”
It has been held that in an action to recover rent for the months of November and December, 1920, an allegation in the complaint that the defendant had paid rent for the
76 Graeber v. Nichols, 190 N. Y. Supp. 198.
78 George L. Walker Co. v. Matthews, 188 N. Y. Supp. 752 (App. Term, 1st Dept.).
79 Siegel v. Graham, 189 N. Y. Supp. 94 (App. Term, 1st Dept.).
month of October, 1920, was immaterial and should, on motion, be stricken out.80
This undoubtedly is a correct ruling on a matter of pleading, and that is all it would seem to be. However, it is not immaterial as a matter of evidence. On the trial it is competent to show that the tenant has paid the same amount of rent for previous months. 81
Where a tenant holds over after the termination of his lease and is sued for the reasonable value of the use and occupation of the premises, the agreed rent, although not conclusive on either party as to the reasonable value of the premises is, in the absence of other proof, some evidence of value.82
The second rule laid down in Hirsch v. Weiner,88 to-wit: “Determine the gross rentals demanded by the landlord,” requires no explanatory remarks.
We take up, therefore, the third rule:
OPERATING EXPENSES “Determine the allowable operating expenses for the past year.'
EXPENSES-GENERALLY It is difficult to frame in exact language a general rule as to what items are properly deductible from gross income. It may, perhaps, be said that items of expense which experi
80 Winter Holding Co. v. Peck, N. Y. L. J., March 1, 1921, p. 1849, Erlan
81 B. & S. Realty Corp. v. Wald, 115 Misc. 195, 187 N. Y. Supp. 436 (App. Term, 1st Dept.).
82 Dorb v. Waybright, 121 N. Y. Supp. 584; Lucina Realty Co, v. Flachner, 180 N. Y. Supp. 732.
83 App. Term, 2nd Dept., 190 N. Y. Supp. 111.
ence has demonstrated are regularly incurred each year in the proper management of a house ought in all fairness to be allowed. Such items as coal, heat, light, insurance, wages of employees, agents' commissions, would come under this category.
The items that are proper to consider, according to the decision in Hirsch v. Weiner,84 are stated in the opinion in that case as follows:
"These ordinarily consist of payments for taxes, water rates, insurance, janitor's services, necessary legal expenses made by the landlord incidental to maintaining his right to possession and necessary expenses actually paid out for collecting rents; also payments for necessary supplies incident to the use of the premises, such as coal, gas and electricity, and also necessary current repairs for the year. Allowance should also be made for loss of rents by reason of vacancies or tenants failing to pay. Allowance for annual depreciation if established by the proof should be made upon the fair market value of the buildings."
It is the duty of courts to scrutinize with care evidence offered in respect to expenditures and operating costs for the purpose of determining whether such expenses are reasonably necessary, in the first place, and, secondly, whether they should be charged in their entirety against the income for any one year. Repairs should be reasonably necessary for the general upkeep of the property.
On the subject as to whether repairs are properly chargeable against the income of a single year or should be distributed over a period of years, the court in Hirsch v. Weiner, 86 in holding the repairs properly chargeable in full against the
App. Term, 2nd Dept., 190 N. Y. Supp. 111. 86 Maitland v. Kerrigan, 187 N. Y. Supp. 495 (App. Term, 1st Dept.). Supra.
income of the year when they were incurred, has this to say:
“It also appeared in the evidence that the landlords had paid or obligated themselves to pay for repairs made to a boiler on the premises. Two sections of the boiler had become defective and were replaced by the landlords at an expense of $575. There was also included in the repair account a new floor on the roof at a cost of $400; new electric wiring, $773; awnings and window shades, $45, and new plumbing $925. Appellant claims that the items for boiler, awnings and window shades and new plumbing should be distributable against future earnings for “a period of years; that the item for new floor should be considered "a replacement chargeable against depreciation reserve; " and that the item for electric wiring should be considered an addition to investment and capitalized. We think all of these items were properly allowed by the court below as current repairs. There are of course instances where buildings are largely remodeled and rebuilt where the improvement should be charged to increase of capital, but the items here for review are not of that character. Nor is the court impressed with the argument that repairs should be spread over a period of years and charged against future income. If that were so repairs made in the past should be brought forward and charged to current income."
It is improper for the trial court to disregard expenses testified to by plaintiff as having been actually and properly disbursed in the care, operation, and maintenance of the building. Where such expenses have been disregarded, the Appellate Court may modify the judgment by increasing the sum allowed as rental value for use and occupation by a sufficient sum to take care of the items improperly disallowed in the lower court, or may set aside the judgment and send the case back for a new trial.87
87 Garrett v. Allard, 188 N. Y. Supp. 824.