Landlords May Not Collect Rent From Loft Law Tenants During Legalization

       After a long hiatus, I am returning to my idle blog.  To my loyal readers, I hope you haven't abandoned me.

       As I have previously discussed, the New York City Loft Law was enacted to remedy hazardous, illegal residential occupancies of commercial units by requiring landlords to obtain certificates of occupancy for such residential use.  The statute, Multiple Dwelling Law Article 7-C (the "Loft Law"), encourages landlords to expeditiously legalize such units by limiting their right to collect rent from tenants who are subject to the Loft Law.  MDL Section 302 (1) (b) thus provides:

"No rent shall be recovered by the owner of such premises for said period [i.e., the  legalization period], and no action or special proceeding shall be maintained therefore, or for possession of said premises for nonpayment of such rent."

       While MDL Sec. 302 (1) (b)'s language sounds unforgiving to landlords, its apparent blanket prohibition is not without exception.  MDL Secs. 284 (1) and 285 provide that landlords of buildings subject to the Loft Law (known as "interim multiple dwellings") may be permitted to collect rent during the legalization process despite the lack of a certificate of occupancy if they comply with certain applicable legalization timetables.  

       Without getting into too much detail, there has been much litigation over this statutory scheme, particularly where both the landlord and the tenants have alleged that the other has impeded the legalization process.

       In the recent case Jo-Fra Props., Inc. v. Leland Bobbe, --- N.Y.S.2d ---, 2010 WL 5113189, N.Y.L.J., Dec. 23, 2010, at 35, col. 1 (1st Dep't, 2010), the Appellate Division, First Department had the opportunity to revisit this statutory scheme.  In Jo-Fra, the landlord brought an ejectment action against Loft Law covered tenants of several buildings it owned on West 28th Street in Manhattan.  The landlord also sought alleged past due use and occupancy from the tenants and attorney's fees.  The tenants moved to dismiss the use and occupancy claim by summary judgment arguing that the landlord was barred from collecting use and occupancy pursuant to MDL Secs. 302 and 285 (1) because it had not completed legalization of the building within the timetables set forth under the Loft Law.

      On the landlord's appeal of the lower court's dismissal of its use and occupancy claim, the Appellate Division, First Department unanimously affirmed.  The Court found that during the 20-year period from 1984, when one the buildings was first registered with the Loft Board, until 2004, the landlord had not performed any of the required steps for legalizing the building.  While the tenants of the unregistered buildings did not file an application for coverage until 2004, and the landlord did not register the unregistered buildings until 2007, the Court held that there was no factual dispute that all of the buildings were at all times covered under the Loft Law, despite the lack of registration.

      The Appellate Division, First Department, went on to reiterate the long standing, well established requirement under the Loft Law that landlords are only permitted to collect rent from covered tenants during the legalization despite the lack of a certificate of occupancy if they comply with MDL Sec. 284 legalization timetables.  The fact that the owner had belatedly taken steps to legalize the building that did not meet MDL Sec. 284's deadlines, and that several of the buildings were not registered until 2007, was no basis to relieve the landlord of the strict rent collection prohibition.  As the Court stated, the Loft Law is not permissive in nature; it places a mandatory obligation upon a owner to legalize the building within the statutory timeframe upon pain of rent forfeiture.

     Thanks for reading.  Be well, and always know your rights.