80 Varick St. Group LPv.Nichols

Civil Court of the City of New York, New York CountyFeb 15, 2008
79092/07 (N.Y. Misc. 2008)
79092/072008 N.Y. Slip Op. 50267


Decided February 15, 2008.

Sallie Unger, Esq., KOSSOFF UNGER, Petitioner's Attorney.

Thomas L. Fleishell, Esq., THOMAS L. FLEISHELL ASSOCIATES, P.C., Respondent's Attorney.

According to the petition, the respondent is a month to month tenant, and "notwithstanding the fact that the unit in question can only be used for commercial use, this proceeding is brought in the Housing Court because, upon information and belief, the tenant of the subject premises has been using same as his residence." It further alleges that the subject unit is exempt from the Rent Stabilization Law (NYC Adm Code § 26-501; 9 NYCRR § 2520), because the respondent took occupancy after June 30, 1971, ( 9 NYCRR § 2520.6), and the building was converted from a facility devoted exclusively to manufacturing and storage to one with 42 Class A apartments and commercial use pursuant to a certificate of occupancy dated April 15, 1981. The conversion allegedly exempts the premises as a housing accommodation in a building completed and/or substantially rehabilitated as family units on or after January 1, 1974. ( 9 NYCRR § 2520.11.) Lastly, the petition alleges that the owner did not receive J51 tax benefits (NYC Adm Code § 11-243 [formerly J51-2.5]) for the subject unit. At the present time, the petitioner seeks summary judgment and use and occupancy ("u o"), and the respondent seeks summary judgment and summary disposition.

The petitioner states that it purchased the subject building on August 10, 1998, and at that time the building had been converted from a manufacturing and storage facility to a building containing 42 Class A apartments with commercial use. The prior owner received J51 tax benefits for the conversion, which in turn made the 42 Class A apartments temporarily subject to rent stabilization. According to the initial certificate of occupancy ("c/o") from 1965, the subject building was used exclusively for manufacturing, storage and office space. According to a temporary c/o dated April 1, 1981, and a permanent c/o dated April 15, 1981, there are 42 Class A apartments on floors 4 through 10, with commercial space on floors 1 through 3. According to a New York City Department of Finance J51 Abatement/Exemption History, the petitioner and its predecessor received J51 tax benefits for the residential units located on floors 4 through 10 on two occasions, 1981/1982 and 1984/1985, with the benefits expiring in 1993/1994. There is no dispute that the respondent's unit is located on the second floor commercial space, and the 42 Class A apartment on floor 4 through 10 became rent stabilized pursuant to the J51. By notice of motion, the petitioner argues that it is undisputed that the subject building was converted into family units on or after January 1, 1974, ( 9 NYCRR § 2520.11), and the expired J51 tax benefits do not apply to respondent's commercial space; therefore, the subject unit is exempt from rent stabilization, and the petitioner is entitled to summary judgment (CPLR 3212).

In opposition, the respondent alleges that his apartment is eligible for rent stabilized status, and he cross moves for summary disposition (CPLR 409) and summary judgment (CPLR 3212). The court will first address the respondent's summary disposition (CPLR 409) request. Article 4 of the CPLR was drafted so that there would be no need for a summary judgment motion in a summary proceeding because the trial/hearing on the petition, generally brought on by expedited procedure, is itself the functional equivalent of summary judgment. (Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 406.) CPLR 409(a) adopts the basic elements of CPLR 2214(c) for a trial/hearing on the pleadings; however, it does not include the last sentence of CPLR 2214(c), which restricts consideration only to papers served in accordance with motion practice. ( Id.) This is because CPLR 409 was not intended to be used as a basis for a written accelerated judgment motion similar to article 32 of the CPLR. This point is made clear by CPLR 409(b), which essentially acknowledges that as all summary proceedings do not go to trial quickly, the actual making of a written motion for summary judgment, (CPLR 3212), is permitted. (Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 409.) In other words, CPLR 409(b) merely allows for summary determination upon a trial/hearing on the pleadings where no triable issues of fact exist. ( Port of NY v 62 Cortlandt, 18 NY2d 250.) Therefore, CPLR 409 cannot be used as a basis for a written accelerated judgment motion similar to article 32 of the CPLR, and the respondent's request for same is denied. There still remains, however, the respondent's summary judgment (CPLR 3212) request.

In his cross motion affidavit, the respondent alleges that he initially took possession in July 1995 pursuant to a lease, which he is unable to find. He was able to locate an "Extension of Lease" dated March 30, 2001, between the petitioner and David Rose, which extended the tenancy for an additional two years. According to the respondent, David Rose was his roommate. The aforementioned "Extension of Lease" is not a rent stabilized lease, and the respondent's name does not appear on same. The respondent concedes that he never signed another lease, but continued to make monthly rent payments. The respondent alleges that the petitioner never told him that he would be residing in a commercial space, the petitioner knew he would be occupying same for residential purposes, and he personally made improvements to the apartment such as constructing bedrooms, kitchen and laundry.

In opposition to the cross motion, the petitioner notes that the J51 benefits, which only apply to the 42 Class A apartments, had already expired by the time the respondent took occupancy. In reply, the respondent alleges that he "re-visited the actual commencement date when [he] started living in the building" and now realizes that his initial allegations regarding his occupancy and lease were in error. The respondent now alleges that he "commenced occupancy in the Spring of 1993." Ultimately, the respondent's veracity regarding his initial occupancy date may be an issue at trial, but it is not subject to review in a summary judgment motion. The respondent further alleges that in the early 1990s, David Rose, whom he now describes as the prior tenant, made the following improvements to the subject apartment: constructed three bedrooms, erected demising walls and installed electrical lines and fixtures, installed kitchen, plumbing lines, sink, cabinets and countertops; installed bathroom with shower, sink and toilet; relocated front door to make more room for the third bedroom; and refinished the floors. The work allegedly took place prior to the respondent's occupancy, and he paid David Rose $4,000.00 representing a fixture fee for the value of the improvements. According to the respondent, he asked the prior owner for a lease in his name, but the prior owner insisted that the lease remain in the name of David Rose. Mr. Rose moved out in the Spring of 1993, at which point the respondent began paying rent in his own name; however, Mr. Rose did sign the renewal lease in 2001.

According to the respondent, he was unable to obtain an affidavit from David Rose because Mr. Rose is vacationing in France.

The respondent also challenges whether the capital improvements made in converting floors 4 through 10 from factory to 42 residential apartments, while leaving some 18 units on floors 1 through 3 commercial and unrenovated, constitute "substantial rehabilitation" of the building subsequent to January 1, 1974, so as to exempt the building from rent stabilization. According to the respondent, the petitioner also failed to establish that floors 1 through 3 have been substantially rehabilitated so as to exempt them from rent stabilization coverage. And even if the J51 benefits do not apply to these floors, the respondent asserts that the owner's acquiescence in the residential use of the subject unit during the J51 period, in a building with at least five other rent stabilized tenants, entitles him to rent stabilization protection. Lastly, the respondent argues that a review of floors 1 through 3 alone reveals that at least six separate residential tenants have occupied these floors for over a decade warranting rent stabilization coverage.

Whether rent stabilization protects tenants who convert commercial space for residential use in a building built before 1974 with at least six other residential units has a long and complex history. In 1974, the Emergency Tenant Protection Act ("ETPA") made residential units in buildings of six or more units constructed before January 1, 1974, that were not subject to Rent Control, subject to Rent Stabilization. (NYC Adm Code § 26-504; 9 NYCRR § 2520.11.) And in response to the increased number of conversions of commercial and manufacturing loft buildings to residential use without compliance to applicable building codes and local laws regarding housing maintenance standards, the Legislature passed article 7-C of the Multiple Dwelling Law ("MDL") in 1982. Generally referred to as the "Loft Law," this statute established a mechanism for the procurement of a residential certificate of occupancy, during which time the loft tenants were covered by rent regulation pursuant to section 286 of the MDL and the Loft Board regulations. Once a residential certificate of occupancy was obtained, the tenants became rent stabilized under the auspices of the New York State Division of Housing and Community Renewal. The Loft Law applies to "interim multiple dwellings," which are defined as any building or structure or portion thereof which (i) at any time was occupied for manufacturing, commercial, or warehouse purposes, (ii) lacks a certificate of occupancy, and (iii) on December 1, 1981, was occupied for residential purposes since April 1, 1980, as the residence or home of any three or more families living independently of one another. (MDL § 281.) As the building which is the subject of this proceeding has a certificate of occupancy, and was first used for residential purposes after April 1, 1980, the Loft Law does not apply. ( Wolinsky v Kee Yip, 2 NY3d 487.)

As noted by the Court of Appeals in Wolinsky, the ETPA and the Loft Law must be read together for the simple reason that if the prior-enacted ETPA already protected illegal residential conversions of manufacturing space, significant portions of the Loft Law would have been unnecessary. Illegal and unregulated residential conversions cannot use the Loft Law and/or the ETPA to undermine the integrity of legitimate local zoning resolutions. According to Wolinsky, although such illegal conversions are not expressly exempted from ETPA coverage, it is evident that the Legislature did not view the ETPA as safeguarding the interests of same. This does not necessarily negate ETPA coverage, which is an inclusive statute that regulates all housing accommodations not expressly exempted, including those that were previously unregulated. ( Tan v Wallace, 187 Misc 2d 687 [App Term, 1st Dept 2001].) The Court of Appeals in Wolinsky noted that if the City were to rezone a manufacturing neighborhood so as to permit residential use, such steps could make illegal residential units legal or capable of being legalized. Therefore, although ETPA protection cannot apply to a dwelling unit which has not been legalized, ( J M v Lim, Sup Ct, NY County, Nov. 15, 1991, Sherman, J., Index No. 1198/91, affd 191 AD2d 345 [1st Dept 1993]; Tan Holding v Wallace, 187 Misc 2d 687 [App Term, 1st Dept 2001]), if the unit is capable of legalization, rent stabilization under the ETPA may apply if the owner knew of or acquiesced in the tenant's conversion to residential use. ( 142 v Hegarty, 41 AD3d 286 [1st Dept 2007]; Metzendorf v 130, 132 AD2d 262 [1st Dept 1987]; Wilson v One, 123 AD2d 198 [1st Dept 1987].)

As already noted, the ETPA made residential units in buildings of six or more units constructed before January 1, 1974, that were not subject to rent control, subject to rent stabilization. (NYC Adm Code § 26-504; 9 NYCRR § 2520.11.) To be entitled to rent stabilization coverage, the statute does not require that the sixth unit exist as of the base date (i.e., January 1, 1974); therefore, once a building is altered so as to contain six or more units, all of the units may become subject to rent stabilization. ( Wilson v One, 123 AD2d 198, supra; Commercial v White, 194 Misc 2d 26 [App Term, 2nd Dept 2002]; Duane v Sylvan, 117 Misc 2d 360 [Sup Ct, NY County 1982].) But once again, although rent stabilization is inclusive and may provide regulation for all housing accommodations not expressly exempted, it cannot provide coverage to units which have not been legalized or are incapable of being legalized. ( Tan v Wallace, 187 Misc 2d 687, supra.) To allow otherwise would undermine the integrity of legitimate local zoning resolutions.

Housing accommodations in buildings substantially rehabilitated as family units on or after January 1, 1974, are also exempt from rent stabilization. ( 9 NYCRR § 2520.11(e).) However, in the case of Mandel v Pitkowsky, ( 102 Misc 2d 478), the Appellate Term, First Department, held that where it was the commercial loft tenants who undertook the substantial rehabilitation by investing substantial sums to convert and occupy their spaces for residential use with the expectation and assurance that the landlord would take the necessary steps to legalize their occupancy, these tenants were entitled to rent stabilization protection. As noted by the Appellate Division, First Department, in the case of Wilson v One, ( 123 AD2d 198, supra), it would be a ridiculous perversion of the statute to hold that when the costs are substantially born by the tenants, it would qualify the landlord for unregulated rent and leave the tenants defenseless against increased exactions. Regardless of whether the 42 Class A apartments are subject rent stabilization or not, once the subject building was altered so as to contain six or more residential units, the potential existed for the respondent's unit to be subject to rent stabilization if it were capable of legalization and does not fall within a specific exemption. ( Wilson v One, 123 AD2d 198 supra; Commercial v White, 194 Misc 2d 26, supra; Duane v Sylvan, 117 Misc 2d 360, supra.) And if the subject unit is capable of being legalized based on the efforts by the respondent and/or Mr. Rose to convert and occupy the commercial space for residential use, which the petitioner and/or its predecessor consented or acquiesced to, then the petitioner cannot now rely on these efforts to support a substantial rehabilitation exemption. Based on the aforementioned, the court is satisfied that issues of fact exist warranting denial of both the petitioner's and respondent's requests for summary judgment.

To a large extent, the Loft Law codified the Appellate Term's equitable holding in Mandel, in that it gave rent stabilized status to loft tenants who had invested substantial sums to convert their space to residential use with the expectation that the landlord would legalize their occupancy.

As for the petitioner's request for u o, given the factual issues as to whether the petitioner knowingly countenanced the respondent's residential use of the subject unit, for which no c/o has been obtained, Multiple Dwelling Law § 302 precludes the petitioner's recovery of same at this time. ( Hornfeld v Gaare, 130 AD2d 398 [1st Dept 1987]; Sima v Philips, 282 AD2d 394 [1st Dept 2001]; S M v Lee, 280 AD2d 265 [1st Dept 2001].) On the other hand, the respondent is attempting to obtain rent stabilized status for the subject unit. Therefore, in order to properly balance the equities, the respondent is ordered to deposit with the court all unpaid u o, which is set at the previously undisputed amount of $2,977.28 per month, that has accrued from the date the petition and notice of petition were served upon him. Said payment shall be made within five days after service of a copy of this order by the petitioner with notice of entry upon the respondent. The respondent is also ordered to deposit with the court monthly u o on/before the fifth of each month during the pendency of this proceeding. The instant proceeding is adjourned to March 17, 2008, at 9:30 AM, Part A, room 523, for all purposes.

This constitutes the decision and order of this court, copies of which are being mailed by the court to the parties' respective attorneys.