F. Lofts Lofts

JurisdictionNew York

F. Lofts

Multiple Dwelling Law Article 7-C,606 commonly known as the Loft Law, was enacted in response to the large number of commercial spaces in New York City converted to mixed-purpose dwellings through their tenants' investments and sweat equity. Many landlords sought to capitalize on the increased value of the premises at the expiration of the lease by demanding increased rents607 or refusing renewal. The Loft Law was enacted to address the litigation that ensued and to legalize de facto multiple dwellings that were not up to code.608 Section 282 of the MDL provides for the creation of a Loft Board to promulgate regulations and handle controversies. 609

Under the Loft Law, buildings formerly classified as commercial or industrial that lack certification for use as a multiple dwelling610 but have been occupied by at least three independent families since April 1, 1980 (and were so-occupied on December 1, 1981) are entitled to rent-stabilized status as interim multiple dwellings (IMDs).611 In circumstances where the conversion takes place after this 1980–1981 window period, the building is not subject to stabilization if it is located in an area where the applicable zoning resolution does not permit residential use. 612

The Loft Law provides for incremental conversion to allow a "transition" of former commercial spaces into the rent regulatory system.613 Under the original Loft Law, enacted in 1982, landlords were permitted collect rent, even if they had not yet obtained a certificate of occupancy, provided that they performed the legalization steps established by the Loft Law timetable.614 Landlords who failed to comply were barred from collecting rent for the property.615 The Loft Law timetable was extended when the Loft Law was renewed in 1992, 1996 and 1999,616 but in 2001, the Legislature declined to extend the timetable for alteration applications and permits. The First Department has since held that landlords are barred from collecting rent from residential tenants in an IMD building that has not been legalized. 617

The Appellate Division is split over whether rent-stabilization protection can attach if the zoning resolution permits residential use. The First Department holds that the protection may attach.618 In the Second Department, rent stabilization may attach only if the owner acquiesced in the illegal conversion undertaken at the tenant's expense if the premises are eligible for residential use by reason of the applicable zoning laws, and if the owner actually sought to legalize the residential use.619 If a landlord purchases a tenant's rights to an apartment covered by the Loft Law, the apartment may revert to rent stabilization if it is used residentially.620 Portions of an IMD not in residential use during this window do not come within the Loft Law's protective aegis.621 For a unit to qualify as a covered residence under the Loft Law, "it must possess sufficient indicia of independent living to demonstrate its use as a family residence."622 Where only a small portion of a unit is devoted to residential use and residential amenities are lacking, the premises are not covered. 623

Section 286(6) of the MDL permits Loft Law tenants to make improvements to the unit and sell the improvements to an incoming tenant after first offering the improvements "to the owner for an amount equal to their fair market value."624 The estate of a tenant governed by the Loft Law is also entitled to profit from the sale of improvements made under MDL § 286(6). 625

Coverage under the Loft Law is "governed by statute and may not be created or destroyed by laches, waiver and estoppel."626 Landlords...

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