Landlord Can't Evict Tenant for Operating Daycare Center in Apartment

Landlord sued to evict HUD tenant, claiming that tenant violated her lease by operating a daycare center in her apartment. Landlord and tenant, both represented by attorneys, signed a settlement agreement in court. Tenant agreed that the daycare center generated only "incidental business income," and that she would give landlord proof that she had premises liability insurance. Landlord later brought the case back to court, claiming that tenant violated the agreement. Landlord said that tenant was operating the daycare as her primary source of income. The court ruled against landlord. New York State public policy supports the operation of daycare in residences. Other courts have ruled that tenants could operate daycare centers in rent-stabilized apartments. Federal HUD regulations similarly provide that tenants could engage in legal profit-making activities that are incidental to the primary use of the HUD apartment as a residence. The HUD Handbook also states that tenants who conduct incidental businesses in their units and receive incidental business income don't violate their lease. Tenant also submitted a 2001 HUD memorandum that supported home daycare. Tenant had lived in the apartment for 35 years and certified her income annually. So landlord knew or should have known that tenant generated her primary income from the daycare at the time she signed the settlement agreement. Landlord argued that the court should interpret "incidental business income" referred to in the agreement to bar primary income from the daycare. But the meaning of this term was unclear and therefore interpreted in tenant's favor, since landlord's attorney drafted the agreement.

Riverdale Osborne Towers Housing Associates, LLC v. Keaton: 2013 NY Slip Op 23279, 2013 WL 4405035 (Civ. Ct. Kings; 8/16/13; Scheckowitz, J)