Estate of Loft Tenant Can Recoup Value of Tenant Improvements

Facts: Tenant moved into raw loft space in 1974 and was protected by the Loft Law. Tenant improved the space by installing a kitchen and a bathroom, and making other alterations worth over $40,000. Tenant died in 1997. When landlord found out in 1999, it sued to evict occupants. Landlord won that case in 2001. In 2001, landlord also asked the Loft Board for an abandonment order. Tenant’s estate executor claimed that, under Multiple Dwelling Law (MDL) Section 286(6), landlord couldn’t get an abandonment order until it reimbursed tenant’s estate for the value of fixtures and improvements. The Loft Board ruled against the estate, finding that it wasn’t entitled to the value of the improvements. The executor filed an Article 78 petition in court, claiming that the Loft Board’s decision was arbitrary and unreasonable. The court and appeals court ruled for tenant’s estate. Landlord then obtained permission to appeal to New York’s highest court.

Court: Tenant’s estate wins. Under MDL Section 286(6), a residential tenant can sell to landlord or to incoming tenant any improvement she made to or bought for the loft unit. Although the Loft Board had ruled that an estate wasn’t entitled to recoup the improvement costs, the court disagreed and wasn’t bound by the Loft Board’s interpretation of the statute. Section 286(6) was enacted to prevent landlords from receiving unearned enrichment after tenants paid for loft improvements. It would be unfair to deprive tenant’s estate of the value of property that tenant could have benefited from if she had lived.

Bikman v. New York City Loft Board: NYLJ, 4/2/10, p. 45, col. 3 (Ct. App.; Jones, J, Lippman, CJ, Ciparick, Graffeo, Read, Smith, Pigott, JJ