Legal Question in Landlord & Tenant Law in New York

Long story short - recently they sent me a certified letter stating they are not renewing the lease and included half payment for August rent.

I rent to a family of 3. In May the wife told me she would be late with the rent because she was laid off from her job. The husband had been laid off the previous year and exhausted all unemployment benefits. They have only her one income which is now unemployment benefits. The also have 1 child who is disabled. Lease is under the wife's name as tenant with husband and child as co-occupants.

I used the security deposit for May's rent instead of waiting for late payment and to cut them a break. In June she paid me half and the same for July with the intention that once she is working again she will pay everything in full or leave when lease expires in September. I spoke to a friend at work and she told me that I wasn't suppose to use the security towards rent. I notified my tenant of this and told her since she hasn't found a job in 3 months, maybe it's better she pays me everything now and leaves.

She replies that she doesn't have it and that the kitchen sink cannot be used at all now due to plumbing issues. This is true, I had a plumber look at it in September 2010 but was quoted too much to fix and he recommnded getting everything brand new. She reminded me that she called the housing inspector in Feb. for the plumbing issues and the mold in the bedroom. I know about the plumbing problems and went to see but it cost too much so I didn't fix them. What looks like mold is in their bedroom but I don't have resources to know if in fact it is mold. It costs too much to hire a mold expert.

On 8/1/2011, I sent her a 30 day notice to terminate lease by certified mail and called her the next day because she had received it. I told her that I am coming for the keys to the house and mailbox. She told me she is not home but on the way to social services to make arrangements to find a place or go into a family shelter. 8/7/2011, Yesterday I received a certified letter from her saying she is not renewing the lease due to unlivable conditions and will vacate on or prior to when lease expires September 2011. She also sent her half payment for the last month of rent and notice that the housing inspector was at the apartment in August for the second time in 2011. On the same day I sent her a 3 day notice to pay rent since she only paid half for June & July. I didn't mention anything about May because I don't want any fines.

I don't know what is going to happen now. Should I get a lawyer and what type of fines am I going to be looking at. Thank you for any help.

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