Conversion from Warehouse to Apartments Not Subject to Substantial Rehab Requirements

Tenants sued landlord, claiming that their building was subject to rent stabilization. Landlord claimed that the building was unregulated. The court ruled for landlord and dismissed the case. Tenants appealed and lost. Between 1924 and 1999, the building, a complex consisting of several interconnected buildings, was a commercial warehouse. When the building became vacant, landlord bought it, obtained permission to rezone as residential, and converted it to residential use as 100 loft units. Landlord also replaced all the systems in the complex except for the interior stairways and sewer waste line that led to the street. Tenants argued that landlord must prove that the building was substantially rehabilitated after Jan. 1, 1974, in accordance with DHCR rules in order to qualify for exemption from rent stabilization. They claimed that landlord hadn’t replaced 75 percent of building systems, but that tenants had done some of the work. However, since the building had been a commercial warehouse, the DHCR’s substantial rehabilitation rules didn’t apply because the Rent Stabilization Code provisions and DHCR rules concerning substantial rehabilitation applied only where a landlord was rehabbing an existing residential building.

Bartis v. Harbor Tech, LLC: 2016 NY Slip Op 08831, 2016 WL 7445502 (App. Div. 2 Dept.; 12/28/16; Mastro, JP, Chambers, Dickerson, Connolly, JJ)