Tenants Needn't Pay Use and Occupancy Until Building Legalized

Facts: Landlord rented commercial loft spaces in several adjacent buildings to tenants who converted the lofts into residential units. The buildings weren't registered as multiple dwellings and had C of Os for manufacturing only. Landlord later sued tenants for breach of their leases and sought use and occupancy payments. Tenants agreed to pay while the case was pending. The court then ruled that the buildings were horizontal multiple dwellings and were rent stabilized. Tenants stopped paying use and occupancy. Landlord then asked the court to hold tenants in contempt for violating their agreement. Court: Landlord loses. Under the Multiple Dwelling Law, landlord can't collect rent or use and occupancy because the buildings didn't have proper C of Os. So tenants aren't in contempt. Landlord can't collect use and occupancy until the buildings are legalized with residential C of Os. However, landlord doesn't have to refund use and occupancy already paid by tenants. The law just bars landlord from suing to collect what isn't paid.

Gloveman Realty Corp. v. Jefferys: NYLJ, 5/5/04, p. 21, col. 3 (Sup. Ct. Kings; Clemente, J)