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Mixed-Use Brooklyn Building Declared Not Subject to Rent-Regulation After Adam Leitman Bailey, P.C. Demonstrates at Trial That Building Contained Fewer Than Six Residential Units

For a landlord, the difference in collectible rents, building value, and other rights between a non rent-regulated residential building and a building subject to rent-regulation can be enormous. In New York, with certain exceptions, buildings that contain six or more residential units may be subject to rent-stabilization, while buildings that contain fewer than six residential units may be exempt from rent-stabilization.

A landlord recently purchased a three-story building in Brooklyn believing that the building—and its residential units—was not rent-regulated because it contained only four residential units and two commercial units. Soon after the purchase, the landlord was shocked when one of the residential tenants claimed that their apartment and tenancy was rent-stabilized. The tenant claimed that the building, at some recent time, contained six residential units. The tenant claimed that, in addition to the four existing residential units, there had recently been two more residential units on the ground floor behind the commercial spaces. The tenant claimed that she had personal knowledge of people living in these alleged ground-floor residential units and that she had other witnesses to corroborate her story. Specifically, the tenant claimed that there had been various families living behind the ground-floor commercial space on the left side of the building and that there was a lady who operated a clothing store in the right side commercial space but also lived in the back of the store. Thus, the tenant claimed that at some point after the enactment of the rent-regulation laws, the building contained a total of six residential units, that the tenant’s apartment was therefore rent-stabilized, and that the landlord could not evict the tenant or charge market-level rent. 

The landlord turned to Adam Leitman Bailey, P.C., for help.

The team at Adam Leitman Bailey, P.C., immediately undertook a detailed and comprehensive investigation into the history of the building dating back over a century. The team obtained records from the Department of Housing Preservation and Development, the Department of Finance, the Department of Buildings, the Division of Housing and Community Renewal, and other agencies.

Adam Leitman Bailey, P.C.. also located the prior owner of the building, who owned it from 1970 until 2013. We conducted detailed factual interviews with the prior owner and obtained the prior owner’s records.

In the course of Adam Leitman Bailey, P.C.’s investigation, Adam Leitman Bailey, P.C. learned that there was a similar court proceeding in this building fifteen years ago (which never proceeded to trial) and that the prior owner had retained an architect at that time to inspect the building and prepare a report regarding its layout and its use. Adam Leitman Bailey, P.C. was able to locate the architect, interview him, obtain his pictures and report, and secure his testimony for the trial in this matter. The architect’s insight was invaluable because he had inspected the building precisely during the time that the tenant alleged the clothing store owner was living in the back of the store.

Adam Leitman Bailey, P.C.’s investigation revealed that there may have been a fifth residential unit behind one of the ground floor commercial spaces at some time, but not a sixth. Adam Leitman Bailey, P.C. was able to locate DHCR records from the early 1970s, which demonstrated the existence of five residential units. But, there was no record of a residential unit on the right side of the ground floor. Adam Leitman Bailey, P.C. was also able to locate the original contract of sale of the building to the prior owner in 1970, which was admitted at trial as an ancient document, and which also did not show a residential unit on the right side of the ground floor at that time.

With the help of the architect and records from various agencies, Adam Leitman Bailey, P.C. learned that there was never a toilet inside the right side of the ground floor space, that there was no gas service to the right side space, and that any shower facilities had long been disconnected and not in use. These findings were crucial because one of the requirements of a legal residential unit in New York is the presence of a sanitary and cooking space within the unit.

The matter proceeded to a hard-fought trial.

The tenant testified that, before the current owner purchased the building, there were six simultaneous residential occupants of the building, including the lady who allegedly lived in the back of the clothing store. The tenant’s witness—a prior occupant of the building who has since moved out—seemed to corroborate the tenant’s story.

The trial team at Adam Leitman Bailey, P.C., faced a tough battle.

First, Adam Leitman Bailey, P.C. demonstrated, with documentary evidence, that the public records did not show the existence of a sixth residential unit after the enactment of rent-stabilization laws. Then Adam Leitman Bailey, P.C. demonstrated that the space on the right side of the ground floor could not have been a legal residential unit, because it did not contain sanitary facilities or lawful cooking space. The tenant argued, based on a recent line of case law, that even if space is illegal, it could be considered living space if an owner permits or allows residential occupancy of the space. However, Adam Leitman Bailey, P.C. was able to enlist the testimony of the prior building owner who confirmed that there was never any permission or knowledge of the alleged residential occupancy of the space in the back of the right side ground floor commercial unit.

Crucially, Adam Leitman Bailey, P.C. was able to elicit testimony from the tenant herself and the tenant’s witness that the tenant was never present inside the back of the clothing store, and that the space in the back of the clothing store was not a separate apartment, but was rather one continuous space, separated only by a curtain. Adam Leitman Bailey, P.C. also able to elicit testimony from the tenant’s own witness (as confirmed by the architect’s pictures) that there was no bed inside the space in question, and that the room which the tenant claimed was the lady’s bedroom, was actually used by the lady as a dressing room for store customers.

At the conclusion of the trial, both sides submitted detailed memoranda of law. Ultimately, the court ruled that the landlord carried its burden of proof to demonstrate that there were not six residential units in the building during the operative times, that the space in the back of the right side ground floor commercial space was not legal living space, and that the tenant failed to prove that the landlord knew about or permitted alleged residential use of the space behind the clothing store.

Therefore, the court found that the tenant’s apartment, and the building was not subject to rent-stabilization and issued a final judgment of possession of the tenant’s apartment for the landlord.

Christopher Halligan and Vladimir Mironenko of Adam Leitman Bailey, P.C., represented the landlord.

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