Loft Unit Exempt from Rent Stabilization After Sale of Prior Tenant's Rights and Improvements

Landlord sued to evict loft tenant. The court granted tenant's request to dismiss the case without trial, finding that the loft unit was subject to rent stabilization. Landlord appealed and lost before the Appellate Term and Appellate Division. Landlord then appealed to New York's highest court. The question presented was whether a loft unit located in an interim multiple dwelling (IMD) covered by the provisions of the Loft Law but exempt from the rent regulation provisions of that statute by operation of a sale of the prior tenant's rights and improvements is otherwise subject to rent stabilization.

The Court of Appeals ruled that the unit was not subject to rent stabilization. The Court held that the unit was covered by the Loft Law and exempted from that law's rent stabilization provisions by operation of a sale of a prior tenant's rights and improvements. The loft unit therefore wasn't subject to the rent stabilization provisions of the ETPA. The prior landlord purchased rights and improvements of the particular unit in the Loft Law-eligible building, removing that unit from the Loft Law's rent regulation provisions, entitling landlord to charge a market rent and, pursuant to Real Property Law Section 232, to recover possession of the loft in a holdover eviction proceeding.

Aurora Assocs. LLC v. Locatelli: 2022 NY Slip Op 00958, NYLJ 2/16/22, p. 19, col. 2 (Ct. App.; 2/15/22; Garcia, Singas, Cannatero, Wilson [dissenting], Rivera [dissenting], JJs)