Rosario v Diagonal Realty, LLC
2007 NY Slip Op 05780 [8 NY3d 755]
July 2, 2007
Pigott, J.
Court of Appeals
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, August 22, 2007

Sonia Rosario et al., Respondents, et al., Plaintiffs,
Diagonal Realty, LLC, et al., Appellants, et al., Defendants.

Argued May 31, 2007; decided July 2, 2007

Rosario v Diagonal Realty, LLC, 32 AD3d 739, affirmed.

{**8 NY3d at 760} OPINION OF THE COURT

Pigott, J.

We hold that a landlord's determination to accept federal "Section 8" rent subsidy payments is a "term and condition" of a lease executed with a rent-stabilized tenant, within the meaning of Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1), so that a renewal lease must continue with that term and condition. Moreover, 42 USC § 1437f (d) (1) (B) (ii) does not preempt a rent-stabilized tenant's right to a renewal lease that includes the landlord's acceptance [*2]of a Section 8 subsidy.

Respondent Sonia Rosario has lived in a rent-stabilized apartment in New York City, owned by appellant Diagonal Realty, LLC, for over 30 years.[FN1] For most of that time, she has received Section 8 benefits from the New York City Housing Authority (NYCHA). The Section 8 system (Tenant Based Assistance: Housing Choice Voucher Program) is a federal program that provides housing assistance to eligible low-income families by giving subsidies to landlords who rent apartments to them (see 42 USC § 1437f). Once NYCHA has issued a Section 8 voucher to an eligible family, and the family has found a landlord willing to accept it, the landlord and NYCHA must sign a Housing Assistance Payments (HAP) contract (see 24 CFR 982.451). The{**8 NY3d at 761} HAP contract specifies the terms of the landlord's participation in the Section 8 program. Section 8 tenants make rental payments based on their ability to pay, and NYCHA issues subsidy payments to the landlords to cover the balance of the agreed rent.

In February 2003, Diagonal informed NYCHA that it no longer wished to participate in the Section 8 program with respect to Rosario, and refused NYCHA's subsidy payments for her apartment. It then commenced a proceeding in the Civil Court of the City of New York to evict Rosario for nonpayment of rent.

Rosario and several other similarly situated plaintiffs commenced these actions against their respective landlords in Supreme Court, seeking a declaration that defendant landlords may not opt out of the Section 8 program. Supreme Court consolidated the actions and granted summary judgment in plaintiffs' favor, declaring that defendants "are obligated to continue accepting [plaintiffs'] section 8 rent subsidies and are not permitted to opt out of the federal section 8 rent subsidy program" (9 Misc 3d 681, 704 [2005]).

The Appellate Division affirmed, and then granted Diagonal's motion for leave to appeal to this Court. We now affirm.

New York State's Rent Stabilization Code requires that landlords provide renewal leases requested by rent-stabilized tenants (9 NYCRR 2522.5 [b] [1]), and that every renewal

"shall be on the same terms and conditions as the expired lease, except where the owner can demonstrate that the change is necessary in order to comply with a specific requirement of law or regulation applicable to the building or to leases for housing accommodations subject to the RSL, or with the approval of the DHCR" (9 NYCRR 2522.5 [g] [1] [emphasis added]).

Diagonal does not claim that any of the exceptions apply, and the first question before us therefore is whether a landlord's prior acceptance of a Section 8 subsidy is a term of a lease that must be continued on a renewal lease. We hold that it is. [*3]

Landlords who accept Section 8 payments are required to include, in the leases that they sign with Section 8 beneficiaries, a "tenancy addendum" prescribed by the United States Department of Housing and Urban Development (HUD) (see 24 CFR 982.305 [a] [3]; 982.308 [b] [2]) or, if the landlord uses its own lease form, a "word-for-word" addition of the addendum's text{**8 NY3d at 762} (24 CFR 982.308 [f] [2]). The tenancy addendum must specify, among other things, that "[t]he owner is leasing the contract unit to the tenant for occupancy by the tenant's family with assistance for a tenancy under the Section 8 housing choice voucher program" and that "[t]he tenant is not responsible for paying the portion of rent to [the] owner covered by the . . . housing assistance payment." By requiring such a tenancy addendum, the code makes acceptance of Section 8 subsidies a term of every lease that a landlord signs with a Section 8 tenant. Consequently, the obligation to accept Section 8 subsidy payments must continue in a renewal lease, as required by Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1).[FN2]

Diagonal suggests that this section of the Rent Stabilization Code is inapplicable because, when Rosario first signed a lease, she was not a Section 8 beneficiary. But 9 NYCRR 2522.5 (g) (1) makes no mention of a tenant's initial lease. It requires that a renewal lease "be on the same terms and conditions as the expired lease"—not necessarily the original lease. "Expired lease" means the lease that will have just expired when the renewal lease is to become effective.[FN3]

Diagonal further argues that the Rent Stabilization Code protections are preempted by federal law, citing 42 USC § 1437f. Section 1437f restricts the ability of landlords receiving Section 8 subsidies to evict tenants. It provides that "during the term of the lease, the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause" (42 USC § 1437f [d] [1] [B] [ii]). The phrase "during the term of the lease" was added on October 21, 1998 (effective permanently) (Pub L 105-276, 112 US Stat 2461, 2607).[FN4] Before that date, landlords participating in the Section 8 program could not evict a tenant without establishing [*4]good cause, even if the tenant was at the end of a lease term; this was commonly referred to as the "endless lease rule." Diagonal contends that the 1998 amendment allows landlords receiving{**8 NY3d at 763} Section 8 subsidies to terminate a tenancy without cause when the lease term is over, and that it preempts New York law requiring landlords to renew—with the same terms and conditions—rent-stabilized tenants' leases.

In deciding whether state law is preempted by federal law, the Court's "sole task is to ascertain the intent of Congress" (California Fed. Sav. & Loan Assn. v Guerra, 479 US 272, 280 [1987]; see also Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996]).

"Congressional preemptive intent may be discerned in three ways: (1) expressly in the language of the Federal statute; (2) implicitly, when the Federal legislation is so comprehensive in scope that it is inferable that Congress intended to fully occupy the 'field' of its subject matter; or (3) implicitly, when State law actually 'conflicts' with Federal law" (Drattel v Toyota Motor Corp., 92 NY2d 35, 42 [1998]; see also Guice, 89 NY2d at 39; Barnett Bank of Marion Cty., N. A. v Nelson, 517 US 25, 31 [1996]).

Diagonal's preemption theory is belied by the legislative history, which shows that no preemption was intended. Indeed, the Senate Committee on Banking, Housing, and Urban Affairs could not have made the point more clearly when it reported that it did "not anticipate that the repeal of [the 'endless lease' rule] will adversely affect assisted households because protections will be continued under State, tribal, and local tenant laws as well as Federal protections under the Fair Housing Act and the Americans with Disabilities Act" (S Rep 195, 104th Cong, 1st Sess, at 32; S Rep 21, 105th Cong, 1st Sess, at 36 [identical language in both Senate Reports] [emphasis added]). The intent of Congress was to "streamline and simplify the [Section 8] program by reducing the involvement of the Federal government" and housing agencies (S Rep 195 at 31-32; S Rep 21 at 36). In other words, the legislative intent was to remove federal obstacles to landlords' participation in the Section 8 program.

HUD, moreover, introduced regulatory language clarifying that "[n]othing in part 982 [the federal regulations governing the Section 8 program] is intended to pre-empt operation of State and local laws that prohibit discrimination against a Section 8 voucher-holder because of status as a Section 8 voucher-holder" (24 CFR 982.53 [d]). This language was added in direct response to the 1998 amendments (see 64 Fed Reg 26632, 26641 [1999]). Thus, no intent to preempt state law is expressed in 42 USC § 1437f; in fact, the contrary is evident.{**8 NY3d at 764}

Turning to the question of implied preemption, it is clear that federal law does not so occupy the field of housing law that there is no room for state regulation. To the contrary, the states "have broad power to regulate housing conditions in general and the landlord-tenant [*5]relationship in particular" (Loretto v Teleprompter Manhattan CATV Corp., 458 US 419, 440 [1982]). In this area, federal and state law depend on each other; neither excludes the other.

Finally, there is no conflict between federal and state law such as would suggest implied preemption. First, it is not impossible to comply with both federal and state law in this area; a law-abiding landlord receiving Section 8 subsidies will follow both 42 USC § 1437f (tenants in general will not be evicted without good cause during their leases) and Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1) (rent-stabilized tenants' leases will be renewed with the same terms and conditions). Second, Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1) is no obstacle to accomplishing and executing the purpose of 42 USC § 1437f. The state regulation applies only to landlords of rent-stabilized property. The effectiveness of 42 USC § 1437f—as amended in 1998—in encouraging free-market landlords to participate in the Section 8 program is unaffected by the state regulation. We conclude that it was not the intent of Congress, when it ended the so-called endless lease rule, to remove state and local law protections afforded to Section 8 recipients.[FN5]

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs. The certified question should not be answered upon the ground that it is unnecessary.

Chief Judge Kaye and Judges Ciparick, Graffeo, Read, Smith and Jones concur.

Order, insofar as appealed from, affirmed, etc.


Footnote 1: Her daughter and two grandchildren reside with her.

Footnote 2: The New York State Division of Housing and Community Renewal (DHCR) states in its amicus brief that it has abandoned the contrary view it expressed in Matter of Highland Management Corp. (No. QB10041RO, DHCR, Nov. 6, 2002).

Footnote 3: Rent Stabilization Code (9 NYCRR) § 2523.5 (a) uses the clearer term "expiring lease" in the same context.

Footnote 4: The phrase was first added on April 26, 1996, effective for fiscal year 1996 only (Pub L 104-134, 110 US Stat 1321, 1321-281).

Footnote 5: Diagonal receives a "J-51" tax abatement, pursuant to Administrative Code of the City of NY § 11-243. That section contains an antidiscrimination provision prohibiting landlords that receive J-51 abatements from discriminating against tenants who receive, or are eligible to receive, Section 8 assistance (see Administrative Code § 11-243 [k]). This local law is not preempted by federal Section 8 law for the same reasons that Rent Stabilization Code (9 NYCRR) § 2522.5 (g) (1) is not preempted (see especially 24 CFR 982.53 [d]).