The simple answer is YES.
Courts, for a long time, were split on this issue. As most seasoned landlord-tenant attorneys know, the Nassau County District Court has traditionally held that so long as the property is being used in conformity with its certificate of occupancy, a landlord may recover rent. Eviction actions based on non-payment of rent in Nassau County were generally not dismissed even where the rental was in violation of the certificate of occupancy, but the Court would simply not award a monetary judgment in such cases, granting only possession.
In Suffolk County, however, the District Court has traditionally taken a much stricter approach to illegal rentals. Where a town ordinance prohibited renting without a rental permit, the absence of such a permit by the landlord would generally lead to the dismissal of a non-payment action. The districts were split in their application of this rule, however, with the Second District (which covers the Town of Babylon) holding strictly that the absence of a rental permit required the dismissal of a non-payment action; and the Sixth District (which covers the Town of Brookhaven) taking the more liberal approach by generally not dismissing non-payment actions, unless the rental unit at issue was located in a place where occupancy is prohibited under some other regulation, e.g., basements or garages.
Recently all of this changed when the Supreme Court, Appellate Term, Second Department, decided the case of Pickering v Chappe, 2010 NY Slip Op 20326 (29 Misc 3d 6) on August 2, 2010. This case began as a small claims action, in which Yolanda Pickering sought to recover, among other things, a security deposit in the amount of $850.00 that she paid Eric and Maria Chappe, her former landlords. The Chappes counterclaimed for, among other things, unpaid rent for three months. The evidence in that case established that the parties entered into an agreement in which the Chappes had agreed to forgive the rent for January and February 2007 and to refund Pickering’s security deposit if she moved out by March 1, 2007. The small claims court found that Pickering had failed to prove that she moved out by that date, but nonetheless awarded her the return of her security deposit and dismissed the Chappes’ counterclaims on a finding that rent could not be recovered because the apartment was “an illegal apartment in a one-family house.” The Chappes appealed from the award to Pickering of the security deposit.
The Appellate Term held that contrary to the small claims court’s ruling, “there is no bar to the recovery of rent when a dwelling that has a certificate of occupancy as a one-family dwelling contains an illegal apartment. It is only in the Multiple Dwelling Law that the Legislature has seen fit to impose a forfeiture of rent as a penalty.” The Multiple Dwelling Law is a statutory body that applies to buildings occupied as a residence by three or more families living independently of each other (see Multiple Dwelling Law § 4 ).
In this appeal, while there was proof that the one-family house contained an illegal apartment, there was no proof that it constituted a multiple dwelling. In other words, there were less than three families living there and hence no violation that would trigger the forfeiture provisions of the Multiple Dwelling Law. The Appellate Term held that the Chappes were not precluded from recovering rent for the months in which Pickering resided in the apartment and that the Chappes were entitled to retain the security deposit as a setoff against the rents owed. The judgment of the small claims court was reversed. The Appellate Term further made clear in its opinion that even the absence of a certificate of occupancy does not bar a landlord from recovering rent in a non-payment action, provided that there are less than three families living in the premises.
As a result of the decision in Pickering v Chappe, supra, there is no longer any disparity or misunderstanding of the relationship between the legality of the premises to the collection of rent, and the impact of town ordinances on landlord-tenant proceedings. From time-to-time you will still see an inexperienced lawyer or pro se litigant attempt to raise the defense that the non-payment action must be dismissed because the apartment is illegal; those lawyers and parties generally get a rude awaking to the new state of the law.
As a final note, the Pickering case does not stand for the proposition that it is okay for landlords to violate town ordinances by renting illegally. Landlords can still be convicted of violating town ordinances and can be fined heavily for renting illegally. It just means that there is no bar to collecting rent and no grounds for dismissal of a non-payment action based on the illegality of the premises being rented.