Loft Board Incorrectly Permitted Tenants to Withdraw Coverage Applications

Landlord operated a paper waste disposal plant on a loft building's first floor. Residential tenants sought interim multiple dwelling (IMD) status in 2014. Landlord argued that the building's hazardous operation was incompatible with residential use. Landlord and tenants signed a settlement agreement, which permitted tenants to remain in the building as rent-stabilized tenants in the absence of a residential certificate of occupancy. Landlord agreed to shut down the paper waste disposal plant and gave a number of other concessions to tenants. Tenants then asked the NYC Loft Board for permission to withdraw their coverage applications.

The Loft Board rejected tenants' proposal, stating that their continued residency without a residential certificate of occupancy was illegal and against public policy. The Loft Board sent the coverage applications to the Office of Administrative Trials and Hearings (OATH) for a determination. The Loft Board denied landlord's request for reconsideration. Landlord filed an Article 78 court appeal, seeking to annul the Loft Board's orders. The court ruled for landlord and annulled the Loft Board's orders. 

The Loft Board appealed and won. The lower court should have confirmed the Loft Board's determination rejecting the tenants' proposed withdrawal of their coverage applications and remitting the coverage applications to OATH for adjudication. Contrary to tenants' claims, the Loft Board had jurisdiction over the coverage applications, and the coverage applications didn't become moot when tenants proposed withdrawing them. Tenants' proposed withdrawal of their coverage applications had the effect of waiving their Loft Law coverage claims and perpetuating an illegal occupancy. The Loft Board also should have deemed only those provisions of the settlement agreement that required tenants to withdraw their coverage applications to be unenforceable. 

Dom Ben Realty Corp. v. NYC Loft Board: 2019 NY Slip Op 08188, Index Nos. 2016-04682, 2016-10140 (App. Div. 2 Dept.; 11/13/19; Roman, JP, Hinds-Radix, Maltese, LaSalle, JJ)