No Illusory Tenancies Found in Transitional Housing Program

Apartment occupants, who were recipients of transitional housing and services for homeless individuals, were placed in landlord's apartments by the Dept. of Homeless Services (DHS) under the Cluster Transitional Residence Program. In 2015, DHS advised landlord that its building would no longer be used in that program. The occupants were informed that they would be transferred to other shelters. The DHCR also informed the occupants that it was terminating its relationship with We Always, a service provider at all of landlords' buildings. The occupants then sued landlords separately in court actions that were consolidated. They claimed that they had been deprived of the benefits of rent stabilization by an illusory tenancy scheme. They sought vacancy leases in their own names, and related relief. Landlords asked the court to dismiss the cases, claiming that there was no illusory tenancy. The court ruled for landlords and awarded them possession of the units occupied by the occupants. The court found that the occupants didn't have standing to seek vacancy leases because they were licensees, not subtenants. 

The occupants appealed and lost. Even if they were subtenants, the appeals court found that landlords showed that the prime tenancies weren't illusory. So they didn't have the rights of prime tenants under the Rent Stabilization Law and Code. The leases here didn't lack a legitimate purpose. The apartments were rented to, and by, service organizations to provide transitional housing in accordance with the terms of the Cluster Transitional Residence Program run by the city. The leases specified that they were for the sole purpose of providing transitional housing and services to occupants in connection with the DHS agreement. The organizations leased unspecified units in particular buildings, the number of which would increase or decrease depending on the extent of the needs of DHS to provide transitional housing.

Sapp v. Clark Wilson, Inc.: Index No. 12230/15, 2018-14930, 2018-14969, 2022 NY Slip Op 04184 (App. Div. 2 Dept.; 6/29/22; Duffy, JP [dissenting in part], Connolly, Iannacci, Chambers, JJ)