Tenants of Illegally Converted Building Are Rent Stabilized

Building tenants sued landlord, claiming that they were rent stabilized and seeking correction of violations. When landlord bought the building in 2018, it contained eight residential units, including three SRO units. In 2019, HPD had issued notices of violations directing landlord to correct various unsafe conditions and also directed landlord to file plans an application to obtain a Certificate of Occupancy to legalize the conversion of the building from a single-family to a multiple-dwelling residence use if legally feasible. In October 2019, HPD issued a vacate order directing landlord to correct violations, including the lack of a second means of egress. At that point tenants sued, claiming that landlord itself caused the second egress to be blocked.

The court granted tenants a TRO to maintain the status quo. In November 2020, the court further directed landlord to comply with the vacate order and obtain the new C of O. Tenants later asked the court to hold landlord in contempt of that order, and landlord in return asked the court to dismiss the case and vacate the injunctive relief previously granted. The court ruled for landlord.

Tenants appealed, and the case was reopened. Landlord had claimed it couldn't obtain a C of O legalizing the conversion of the building and that tenants couldn't be rent stabilized because the building was illegally converted. But the appeals court ruled that, "The issue of whether a building is subject to rent stabilization turns on the function of the units as housing accommodations..., not the 'legality' of their usage in the absence of a certificate of occupancy[.]" The apartments at issue here weren't illegally converted basement apartments that were incapable of being legalized. And a 2019 DOB letter stating that it previously had approved a Letter of No Objection in 2008 for use of the building as three stories and a basement with six Class A apartments and two Class B units but now revoked that Letter, didn't refute tenants' claims.

Balay v. Manhattan 140 LLC and HPD: Index No. 160204/19, App. No. 15722-15722A, Case No. 2021-01863, 2022 NY Slip Op 02490, NYLJ 4/22/22, p. 18, col. 2 (App. Div. 1 Dept.; 4/14/22; Acosta, PJ, Kern, Gonzalez, Shulman, JJ)