August 4th, 2011
Over eight million people reside in the City of New York. Residential living space is severely limited. Intense demand for residential living space has driven the price of a tiny studio apartment in Manhattan well above $2,800. per month. The solution for many to obtain a reasonable amount of space at an affordable rent is to seek out “loft-type” space in commercial buildings in the outer boroughs.
Areas of Brooklyn, in particular, lend themselves to this type of use. Substantial square footage in these areas can often be obtained for a modest rental thereby providing struggling artists, as well as middle class tenants, an apparently ideal solution to their housing needs. Not surprisingly, a cottage industry of entrepreneurs has developed to capitalize on this phenomenon. Some have leased entire floors in commercial buildings, converted the space to multiple individual apartments, often at substantial expense, and then reaped substantial profits from the residential leasing of these apartments.
Although owners of commercial buildings could collect higher rents if they directly rented residential space in those buildings, they are often unwilling to engage directly in this lucrative practice for fear of the possible consequences. The legislative enactment of the “Loft Law” in 1982(*) has had a chilling effect. Prior to the enactment of the “Loft Law”, owners of commercial buildings could rent space in these buildings for residential use, raise the residential rents without restriction, and could refuse to renew residential leases without the tenants having any actual recourse. The “Loft Law” changed all of this. The “Loft Law” required owners to convert their commercial buildings, at great expense, to lawful residential dwellings. The “Loft Law” also bestowed upon their “illegal tenants” the protections of the “Loft Law” and subsequently the Rent Stabilization Law.
Many owners who are unwilling to lease their commercial premises for residential use often ignore when one of its commercial tenants, under a purely commercial lease, converts portions of the building to residential use. These owners believe that they can deny knowledge of the residential use and thereby avoid the consequences of the illegal use of the building.
Recently, due to the growing practice of illegally converting commercial rental space to residential use, the attention of various government agencies in New York City has become focused on these buildings. There have been exhaustive inspections by various New York City agencies to determine the location of these illegal residential spaces, and the seriousness of the health and safety hazards that they present. As a result, both landlords and tenants have been forced to re-evaluate these living arrangements. Landlords and tenants are now concerned about the consequences of these situations and how will they will be affected by them.
There are many reasons why the residential use of commercial rental space is prohibited by law. One reason is the safety of the occupants of residential premises. In order to protect these tenants, various safety standards have been imposed upon residential premises by New York City under the Building Code, Multiple Dwelling Law, Housing Maintenance Code, Health Code and various other sections of local and state law. For example, the safety of tenants in the event of a fire is of critical concern. Entry doors to residential apartments are required to be self-closing to prevent the spread of smoke and fire throughout a building.
The Fire Rating Standard, or ability of a material to withstand a fire, is higher for the doors and partitions in a residential dwelling unit. Multiple dwellings (i.e., buildings containing three or more residential units) are generally required to have two avenues of escape in the event of a fire, and the building must either have sprinklers or a fire escape. Another example of higher safety standards in residential premises are the requirements for light and ventilation in residential apartments to be provided by windows and mechanical ventilation. These standards were imposed to ensure a healthy living environment.
Many commercial premises fall far short of meeting the requirements for residential living quarters. However, when enforcing the various local codes and regulations, New York City officials often balance the housing needs of the residential occupants against the safety concerns arising from the residential use of the premises. The result has been that New York City officials pursue or require evictions only in the more serious situations.
What happens if a landlord of a commercial space seeks to evict a tenant who is residing in that space? The answer is that both the landlord and the tenant will be navigating through a legal minefield. A skilled landlord/tenant attorney will often be the guide through the minefield, and the most important factor in determining whether the landlord or the tenant will prevail.
The landlord must first select the proper court in which to pursue the eviction proceeding. A summary eviction proceeding in the Civil Court of the City of New York under the Real Property Actions and Proceedings Law (”RPAPL”) is the first choice. In Brooklyn, Part 52 (Commercial Landlord/Tenant Part) of the Civil Court has been assigned to hear and determine commercial eviction proceedings based upon a breach of the lease and/or the failure to pay rent. However, various cases stand for the proposition that where the landlord has leased commercial premises for residential use, the landlord cannot proceed in the Commercial Landlord/Tenant Part to seek the tenant’s eviction. Of critical import in determining whether the proceeding is to be heard in the Commercial Landlord/Tenant Part or in the Housing Court is both the actual residential use of the premises and the landlord’s knowledge thereof.
Residential eviction proceedings are heard by Housing Court Judges in Brooklyn who are assigned to either a Resolution Part or a Trial part. In order to maintain these statutory proceedings under the RPAPL, however, a landlord must comply with special pleading requirements. This is where the situation becomes tricky.
THE “DE FACTO”(**) MULTIPLE DWELLING LANDMINE
New York State’s Multiple Dwelling Law (”MDL”) SS4 (7) defines a multiple dwelling as: “a dwelling that is either rented, leased, let or hired out, to be occupied, or is occupied as the residence or home of three or more families….”
A building that is used as a “de facto” multiple dwelling must be registered as a multiple dwelling pursuant to New York City Administrative Code SS27-2098 (9) (1) & (2). The Civil Court Rules require that a petition, in a summary proceeding brought under the RPAPL, allege whether or not the building containing the premises at issue is a multiple dwelling. If the building is a multiple dwelling, the petition must set forth the Multiple Dwelling Registration number obtained when the building was registered as a multiple dwelling. Those petitions that fail to plead a proper multiple dwelling registration generally result in the dismissal of the proceeding. Where the landlord creates three or more residential dwelling units in a commercial building, which often occurs in Brooklyn, the landlord is thus required to register the building as a multiple dwelling and obtain a multiple dwelling registration number. However, many commercial landlords are often unable to obtain a multiple dwelling registration number because the residential use of the building is unlawful and cannot be readily legalized. This circumstance effectively precludes landlords from pursuing their eviction remedies in the Housing Court.
THE RENT BAR LANDMINE
From a tenant’s perspective, there are numerous defenses available in an eviction proceeding depending upon the particular facts of the case. For instance, Multiple Dwelling Law Sections 301 and 302 specifically bar landlords from collecting rent or maintaining court proceedings to collect rent where the landlord does not have a Certificate of Occupancy from New York City permitting residential use of the premises.
Furthermore, depending on the year that the residential units were created, a tenant may be able to claim protection under the “Loft Law” or then Rent Stabilization Law, both of which strictly regulate rent increases and lease renewal terms. Tenants also have numerous additional technical and statutory defenses which may be asserted.
THE DELAY LANDMINE
Courts often move slowly. Since tenants are in possession of the premises at issue, substantial delays of these proceedings often work to the tenant’s benefit and the landlord’s detriment, particularly where the courts are unable or unwilling to direct the tenant to pay rent while these proceedings continue, month after month. Represented by a skilled attorney, tenants can often live twelve or more months rent free.
THE LAST RESORT In many instances, where neither the Housing Court nor the Commercial Landlord/Tenant part of the Civil Court can provide any remedy, an action in State Supreme Court will be the next avenue of recourse. State Supreme Court, located at 360 Adams Street in Brooklyn, is a court of general jurisdiction where a landlord may seek to recover possession of a rented premises. The advantages of Supreme Court are that the RPAPL Statutory Pleading Requirements and Civil Court rules are inapplicable and the lack of a multiple dwelling registration number is not a bar to a landlord recovering possession of the premises. Moreover, Supreme Court decisions have softened the impact of Multiple Dwelling Law Sections 301 and 302, making it easier to collect rent. The problem with litigating in Supreme Court is that it is often a slower and more expensive forum than the Civil Court.
Although the New York State Legislature, politicians and judges are all familiar with the existence of residential tenancies in commercial buildings throughout New York City, no solution has been offered. Landlords and tenants confronted with litigation in this area have a minefield to navigate. The best advice I have is to seek the advice of an attorney experienced in this area of landlord/tenant litigation before commencing or defending any proceeding. Many times both landlords and tenants come to me only after the commencement of a lawsuit, only to find out that they could have done things quite differently and avoided substantial expense and adverse determinations had they only contacted me earlier. Don’t navigate the Landlord/Tenant minefield alone.
Douglas L. Fromme specializes in all aspects of landlord/tenant litigation.
Mr. Fromme can be reached at
* McKinney’s Consolidated Laws of New York Annotated, Multiple Dwelling Law, Chapter 61-A of the Consolidated Laws, Article 7-C – Legalization of Interim Multiple Dwellings.
** A “de facto” multiple dwelling is a building that, although not legally classified as a multiple dwelling, is being used as a multiple dwelling.