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Q&A: On The Loft Law

By: Dov Treiman

April 7th, 2015

The Loft Law and several related laws set procedures to protect and preserve residential occupancies in buildings that were originally built for commercial use by ensuring renovations to these buildings to bring them up to the safety standards that are normal in apartment buildings. Not all commercial buildings qualify for this process. Those that do are called “interim multiple dwellings” (IMDs).

Once the legalization process for an IMD is completed—which can take 10 to 20 years, the affected units come under the Emergency Tenant Protection Act of 1974 (ETPA). While rent stabilization needs a building to have six or more residential units to come into effect for a particular building, ETPA buildings that were IMDs can have as few as three units. However, ETPA buildings use the same Rent Stabilization Code as rent-stabilized buildings.

Here are answers to some frequently asked questions about the legalization process for IMDs under the Loft Law.

Q: Are there ways to remove an IMD from the IMD process?

A: In spite of the fact that it has not yet been legalized by the issuance of a Certificate of Occupancy, an IMD can be taken out of the process if:

  1. The owner has purchased all rights to all the IMD units;
  2. Under certain circumstances, the owner has purchased the improvements to the units;
  3. The Loft Board has declared the IMD units abandoned; or
  4. The owner has filed a Declaration of Intent form for each IMD unit indicating the owner’s intent to convert all of the IMD units in the building back to commercial use.

Q: If the owner purchases the improvements from a tenant, does that exempt the unit from rent stabilization after conversion?

A: Throughout NYC, if the number of residential units in the building is fewer than six, then for such a unit, the purchase of the improvements removes the unit from potential rent stabilization coverage. In Manhattan, if there are more than six residential units in the building, then such units will not be subject to the Loft Law, but will be subject to rent stabilization when the legalization process is complete. In Brooklyn and Queens, such units will be unregulated.

Q: Does a new owner of an IMD get any special consideration for noncompliance with the legalization deadlines?

A: Where title to the IMD was conveyed to a new owner after the code compliance deadline has passed, the new owner may file an extension application for the passed deadline within 90 calendar days from acquiring title. In order to qualify as a “new owner,” it must be an unrelated entity or unrelated natural person to whom ownership interest is conveyed for a bona fide business purpose and not for the purpose of evading the law. However, such applications are not granted automatically.

Q: Does a tenant have to cooperate with the legalization process?

A: This largely depends on what one means by “cooperate.” The law sets forth several circumstances where the tenant has to provide access to the dwelling. While there are procedures for compelling that access, those procedures take time. Further, the actual legalization procedures, even if they were to proceed apace, take years to complete, but subtle lacks of cooperation are impossible to prosecute, and so the process can drag on for years.

Q: If someone disagrees with a Loft Board Order, is there any right of appeal?

A: If there is a written ruling by a staffer of the Loft Board, there is a right of appeal to the full Board. A disagreeing party with an order of the full Loft Board can take an appeal to New York State Supreme Court. The court usually sides with the Loft Board.

Q: Who hears adversarial administrative proceedings under the Loft Law?

A: Most of these proceedings are before the New York City Office of Administrative Trials and Hearings (OATH), although some may be heard by the Environmental Control Board. The rules of procedure before those bodies are their own and not unique to the Loft Law.

Q: What are harassment proceedings in an IMD?

A: Both the courts and the Loft Board have jurisdiction regarding harassment in an IMD. For purposes of the Loft Law, harassment means anything done by the landlord or its agents that interferes with or disturbs the comfort, repose, peace, or quiet of an occupant in the occupant’s use or occupancy of its unit if such conduct is intended to cause the occupant to vacate the building or unit, or to surrender or waive any rights of such occupant under the occupant’s written lease or other rental agreement or the law. This definition of “harassment” does not include the landlord making buyout offers and, in fact, the Loft Law encourages buyout offers. Nearly unique to the Loft Law, if the Loft Board finds the complaint to be filed in bad faith, the Loft Board may assess a penalty against the tenant. If the Loft Board finds that there has been harassment, the owner is disqualified from buying out IMD rights and can be subjected to a fine. The courts may award damages or an injunction.

Q: Is there a hardship procedure allowing for escape from the IMD process?

A: There is such a procedure, but it is nearly never successful and is simply not worth pursuing.

Q: Can a landlord buy out of the IMD process?

A: A landlord can completely buy a tenant’s IMD rights under the procedures set forth in the Loft Regulations. The Loft Regulations also specifically call for the owner buying the tenant’s improvements if the tenant is moving out. Such a purchase removes that unit from Loft Law protection. However, in Manhattan, it does not remove the unit from ultimate rent stabilization if the building has six or more residential units, while it does do so in Queens and Brooklyn. All of these procedures require filings with the Loft Board.

Q: Does the owner have to buy the improvements at the price set by the tenant?

A: The owner can decline to buy the improvements at all, or it can contest the tenant’s price, in which case, a proceeding before the Loft Board will set what the proper price should be.

Q: Can a landlord evict a tenant who is in a protected unit in an IMD?

A: A landlord can evict a tenant from a protected unit in an IMD on the following grounds:

  1. A tenant can be evicted on grounds of nonprimary residence, provided the tenant’s lease is expired.
  2. The tenant is committing or permitting a nuisance in his or her unit; or is maliciously or by reason of gross negligence substantially damaging the building; or his or her conduct is such as to interfere substantially with the comfort and safety of the landlord or of the other occupants of the same building or of adjacent buildings or structures.
  3. The premises are being used for illegal purposes.
  4. The tenant renders a smoke detector inoperative.
  5. A tenant sublets the premises without following the proper procedures.

Q: Does a tenant have succession rights similar to succession rights in rent stabilization?

A: The succession rights in a loft unit are essentially the same as in rent stabilization.

Q: What happens if the tenant abandons the unit?

A: With certain procedures before the Loft Board, the Loft Board can declare a unit abandoned by the tenant. If there is such a finding, it is the same legal effect as if the landlord bought the tenant out.

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