Illegally Converted Lofts May Be Protected by Rent Stabilization

Six loft tenants sued landlord and asked for a declaration that they were subject to rent stabilization. Landlord asked the court to dismiss the case without a trial. It was undisputed that tenants weren’t subject to the New York City Loft Law. Landlord claimed that the lofts were illegally converted to residential use, and not subject to rent-stabilization coverage. The court ruled for landlord. Tenants appealed.

The appeals court ruled for tenants and reopened the case. Rent-stabilization coverage may apply. In a prior case, the court ruled that rent-stabilization protection was available to tenants of illegally converted lofts not covered by the Loft Law if tenants can prove that landlord knew about and permitted the unlawful conversion at the expense of tenants, if the lofts otherwise could be used as residential under applicable zoning laws, and if landlord actually sought to legalize the loft units. In this case tenants claimed that prior landlord encouraged tenants’ residential use and conversion of the lofts at tenants’ expense for over 20 years. They also claimed that current zoning rules permitted their residential use. Landlord also admitted that it was trying to obtain a residential Certificate of Occupancy for the building. A trial was needed to determine whether tenants were rent stabilized.

South Eleventh Street Tenants Association v. Dov Land, LLC: NYLJ, 2/9/09, p. 33, col. 2 (App. Div. 2 Dept.; Florio, JP, Covello, Balkin, Leventhal, JJ)