The Newly Expanded Loft Law - Who is Covered

The definition of an interim multiple dwelling (a building covered by the Loft Law) under the "old" Loft Law is that it is a building:

1. located in a city of more than one million persons (e.g., New York City);
2. which was at any time occupied for manufacturing, commercial or warehouse purposes;
3. which lacks a Certificate of Occupancy issued pursuant to Multiple Dwelling Law Section 301 (e.g., a residential certificate of occupancy);
4. was occupied by three or more families living independently of one another during a certain period of time (generally referred to as the window period).

As you probably know, the owner of an interim multiple dwelling (IMD) building is obligated to obtain a residential certificate of occupancy pursuant to Multiple Dwelling Law Section 301. Covered tenants enjoy a regulated rent and protection against eviction.

The New York State legislature recently expanded the definition of the Loft Law by changing the window period to twelve consecutive months during the period January 1, 2008 to December 31, 2009. It has been reported that this change may include 300 new interim multiple dwelling (IMD) buildings.

The new Loft Law also provides that a building can qualify as an IMD if only two or more families live independently of each other in the area bounded by West 27th Street at the north, West 24th Street at the south, 11th Avenue at the west and 10th Avenue at the east.

Certain buildings and certain types of units are excluded from Loft Law coverage.

Buildings located in New York City industrial business zones are excluded from Loft Law coverage, except for the following industrial business zones:

• Williamsburg-Greenpoint,
• North Brooklyn, and
• parts of the Long Island City industrial business zone.

For more information about industrial business zones, visit the following web site: www.nyc.gov/html/imb.

If an occupant of the building is engaging in certain activities which are incompatible with residential use in the same building, the building may be excluded from Loft Law coverage. These activities fall into use groups 15 through 18 of the New York City Zoning Resolution. However, the use must be "actively and currently pursued" as of the effective date of the new Loft Law, and the Loft Board must determine, in rules and regulations which have not yet been drafted, that the use is "inherently incompatible with residential use in the same building."

The new Loft Law also excludes:

• units located in a basement or cellar,
• units that do not have at least one entrance which does not require passing through another unit,
• units that do not have at least one window opening onto a street, lawful yard or court, and
• units that are less than 500 square feet.

There is a deadline for owners wishing to register their buildings or tenants wishing to file coverage applications with the Loft Board: six months from the date the Loft Board adopts rules and regulations implementing the new Loft Law.

My next blog will deal with legalization deadlines set by the new Loft Law, and penalties for failure to timely take steps toward legalization.

Governor Signed Loft Law, But It Is Being Amended

At about 11:30 pm on Monday June 21, 2010, the Governor signed the Loft Law, creating a new window period: twelve consecutive months from January 1, 2008 to December 31, 2009.

Mayor Bloomberg, however, urged the Governor to veto the Loft Law, unless it excluded buildings located in New York City's 16 industrial business zones. The powers-that-be arrived at a compromise which excludes buildings in 13 industrial business zones from Loft Law coverage, but includes buildings in the following 3 industrial business zones: Maspeth, Greenpoint-Williamsburg and North Brooklyn.

The current version of the bill (A11524) was reported out of the housing committee and referred to the codes committee today. It provides that a building cannot be considered an "interim multiple dwelling" (IMD) unless it was occupied by at least three or more families living independently from one another during the window period. In addition, the following units would be excluded from coverage:

• units located in a basement or cellar,
• units without an entrance that requires one to pass through another unit,
• units that do not have at least one window opening onto a street or lawful yard or court,
• units that are less than 550 square feet,
• units in buildings which contain a use "actively and currently pursued" in use groups 15 through 18 of the zoning resolution AND which, according to Loft Board rule or regulation, is "inherently incompatible with residential use in the same building."

The proposal to exclude such units indicates, to this blogger, that someone in Albany is actually aware of some of the difficult legalization problems which the Loft Board has faced over the past 28 years.

Additional amendments will be made to the Loft Law this week.

Guess What's On The Governor's Desk

The Loft Law will be renewed as soon as the Governor signs the bill which landed on his desk yesterday.

The proposed renewal statute (Assembly Bill A05667, Senate Bill S5881) would broaden the definition of an interim multiple dwelling (IMD) in a way that would include many additional commercial, manufacturing and warehouse buildings. Currently, the Loft Law provides that such a building must be residentially occupied by three or more separate individuals or families (in three or more separate units) during the "window period" of April 1, 1980 to December 1, 1981. The new law would provide that such a building must be residentially occupied by two or more individuals or families (in two or more separate units) for 12 consecutive months during the window period of January 1, 2008 to December 31, 2009.

The proposed law would cover the new generation of loft tenants currently living in neighborhoods such as Williamsburg, Greenpoint and Long Island City.

The proposed law also grants an extension of time to owners of buildings currently under the Loft Board's jurisdiction (about 300 buildings). These owners must comply with Multiple Dwelling Law Article 7-B on or before May 1, 2012 (extended from May 1, 2010) and obtain a residential Certificate of Occupancy by May 31, 2012 (extended from May 31, 2010).

Who Will the Loft Board Tag First?

The Loft Board will send out information about the Loft Board's new $1,000-per-day penalty regulation and registration renewal invoices to all IMD owners next week. At today's Loft Board meeting, the Executive Director said that, after owners receive this mailing, the Loft Board will serve official notices threatening a $1,000-per-day penalty upon fifty IMD owners. The fifty buildings will fall into one of these three categories:
(1) the owner received Loft Board certification of completion of the narrative statement process but failed to thereafter obtain a building permit;
(2) the building permit is expired; and
(3) the building obtained a temporary certificate of occupancy (TCO) but the TCO expired.

In order to avoid getting "tagged," owners should "take all necessary and reasonable steps" without any further delay!

Loft Board Adopts Tough New Regulation

The Loft Board just adopted a regulation that might as well be entitled "New York on $1,000 per day." That's the Loft Board's price tag for going nowhere with your efforts to legalize your IMD building.

The Loft Board's new regulation (adopted on April 15, 2010, effective on May 21, 2010) promises to impose penalties of $1,000.00 per day upon all IMD owners who fail to take "all necessary and reasonable action" to obtain a residential Certificate of Occupancy.

Beginning June 1st, all IMD owners who have not obtained a Certificate of Occupancy must file a monthly report with the Loft Board - or suffer a penalty of $1,000.00 for failure to do so. In addition, anything you say can and will be used against you in future Loft Board proceedings to impose penalties.

Penalties can be imposed without a hearing for certain types of infractions, such as failure to file a monthly report with the Loft Board.

This is only a very brief summary of the regulations. The regulations - which should be read by every IMD owner, IMD architect and IMD attorney - are posted on the Loft Board's web site.

Leaving the Loft Board's Jurisdiction? Three Things To Do ASAP

Congratulations! You have obtained a residential Certificate of Occupancy for your IMD building and the Loft Board has issued a final rent order. It's time to celebrate!

However, don't forget to have your lawyer do three things as soon as possible:
(1) offer the first rent-stabilized lease to the IMD tenants,
(2) register the building with the Department of Housing Preservation and Development (DHPD), and, after receiving a registration identification number from DHPD,
(3) register with the Division of Housing and Community Renewal (DHCR).

Taking these steps as soon as possible is in your best interest as a building owner. If you fail to register with DHCR and DHPD, then you will not be able to maintain a nonpayment proceeding or a holdover proceeding against your IMD tenant. You may say: "What's the hurry? If my IMD tenant stops paying rent, then I'll register with DHPD and DHCR and then start my case." The problem is that it takes three to four weeks for DHPD to process an IMD owner's first registration statement. As a result, your case will be delayed for three or four weeks.

There are many form leases available for purchase. What form lease do you offer to your tenants? Unfortunately, there is no form lease available for purchase which is tailor-made for rent-stabilized tenants who were formerly IMD (loft law) tenants. In the absence of a tailor-made lease, you can use the Real Estate Board of New York (REBNY) form rent-stabilized lease. If you offer this lease to your tenants - or any other form lease available for purchase - don't be surprised if your tenants' lawyer objects and demands certain changes to the form lease! For example, most tenant attorneys demand that a "rider" to the lease reflect the fact that the tenant has the right to sell improvements which the tenant made to the tenant's loft. If your tenants' attorney objects to the lease you have offered, be sure to get your lawyer involved.

The Loft Board's October 15, 2009 Meeting

At the October 15, 2009 meeting, Executive Director Lanny Alexander said that Chuck Delaney was correct: the Open Meetings Law requires that the Loft Board's minutes must be published within two weeks of the meeting. At the present time, the minutes generally contain a detailed recitation of what the various members say at each meeting. Ms. Alexander suggested that in order to meet the two-week deadline, staff should omit these details. She reminded everyone that the meetings are tape-recorded and members of the public could always ask to hear the tape recording. The Board voted to adopt Ms. Alexander's suggesting of streamlining the minutes.

Stay tuned to this blog: it may include "details" which will be omitted from the Loft Board's minutes.

Prior to the Board's October 15, 2009, Martha Cruz, Director of Hearings, prepared a proposed order concerning the Fogel case, regarding 93-99 Commercial Street. The proposed order was mailed to the parties.

Generally speaking, it has been the Loft Board's practice over the years to "close the record" after the proposed order is issued. In other words, if a party is offended by the Board's proposed order, and the party or his/her attorney writes a last-minute letter of protest, perhaps raising new issues, the Loft Board's staff ignores it, and refuses to distribute the late submission to the members of the Loft Board.

In the late afternoon or early evening of Friday October 9, 2009, the Loft Board received a submission from an attorney for one of the parties to the Fogel case. Martha Cruz and Lanny Alexander read the submission, decided that it raised significant legal issues, and, on the day before the Board's meeting, withdrew the case from the Board's calendar of cases for consideration on October 15, 2009. Delaney correctly noted the Loft Board's past practice of closing the record, and asked staff to report to the Loft Board, at the next meeting, on "the process that currently exists."

Practice pointer to all litigants before the Loft Board and their attorneys:
You will receive the Loft Board's proposed order days before the Board's scheduled meeting - sometimes even one day before! Your attorney should be ready to jump into action, write a letter of protest, raise new issues and hand-deliver the submission to the Loft Board. The worst that could happen is that the Loft Board could say no, we won't accept your last-minute submission. You'll never know unless you try.