Loft Board Should've Let Tenants Withdraw Loft Law Coverage Application

Four tenants applied for Loft Law coverage in 2014. In 2015, landlord and tenants signed a settlement agreement, submitted to the Loft Board, providing that tenants would withdraw the coverage application and landlord would recognize tenants as rent stabilized, register the units with the DHCR, and wouldn't increase tenants' rents until landlord obtained a Certificate of Occupancy (C of O) for the building. Landlord agreed to use reasonably diligent efforts to obtain a new C of O.

The Loft Board rejected the agreement as well as tenants' request to withdraw their application, finding it against public policy. The Loft Board found it illegal for tenants to live in the building unless they obtained protection under Multiple Dwelling Law Section 283, which permits residential use in an IMD before a residential C of O was issued. The Loft Board found that tenants didn't have such protection because they agreed to withdraw their coverage claims. In 2017, the Loft Board denied tenants' requests for reconsideration. Tenants then filed an Article 78 court appeal.

The court ruled for tenants, finding the Loft Board's decision to refuse permitting tenants to withdraw their application irrational. The Loft Board appealed. The appeals court ruled that the Loft Board should have permitted tenants to withdraw their application, at which point the Loft Board had no authority to supervise and approve the building's legalization process. The court sent the case back to the Loft Board for a reconsidered decision. The appeals court noted that since the building was a rear building that adjoined a front building already subject to rent stabilization, it was probably part of a horizontal multiple dwelling and subject to rent stabilization in that way.

Callen v. NYC Loft Board: Index Nos. 156504/17 et al., 2020 NY Slip Op 00368 (App. Div. 1 Dept.; 1/16/20; Acosta, PJ, Renwick, Manzanet-Daniels, Singh, JJ)