By Lisa Gallaudet
Belkin Burden Wenig & Goldman LLP
The New York City Loft Board has disseminated “final” rules governing buildings subject to Article 7-C of the Multiple Dwelling Law (the Loft Law).
These buildings are commonly known as IMDs, or interim multiple dwellings, due to the absence of a certificate of occupancy despite the existence of residential usage.
The final rules became effective on September 12, 2013. They incorporate and implement the 2010 expansion of the Loft Law to a broader number of buildings that fell under Multiple Dwelling Law section 281(5) (the New Loft Law), and additional 2013 amendments to those laws.
The final rules also included some minor changes that affect buildings covered under the original Loft Law.
The New Loft Law, originally promulgated on June 21, 2010, extended regulatory coverage to buildings or units in buildings that meet certain requirements, and were residentially occupied by three families living independent of each other for 12 consecutive months during the years of 2008 and 2009.
This new “window period” resulted in a significant number of new applications filed with the Loft Board over the past three years.
In addition, the New Loft Law provides that any occupant who was in occupancy on June 21, 2010 and meets all of the qualifications of the New Loft Law may be covered, regardless of whether the occupant is a subtenant or roommate of the prime tenant.
However, if a tenant subdivides a space and was only residing in a portion of the unit on June 21, 2010, and sublet the subdivided space to a subtenant, the prime tenant will only be covered for the portion of the unit he/she actually occupied.
The regulations regarding the apportioned rent for that space are detailed and circumstantial and should be discussed with an attorney.
In January 2013, Governor Cuomo signed a further amendment to the Loft Law to reduce the milestone increases an owner can receive throughout the legalization process from six percent upon the filing of an alteration application, eight percent upon the issuance of a work permit and six percent upon achieving Article 7-B compliance, to 3%, 3%, and 4%, respectively.
Under the New Loft Law, if a building contained a use incompatible with residential use on the date the New Loft Law became effective, June 21, 2010, the building was exempt from Loft Law coverage.
Under the 2013 amendment, the incompatible use had to exist on the date a tenant filed for coverage.
The amendment also granted the Loft Board discretion to exempt certain uses from the classification of “incompatible with residential use.”
This is a new area of regulation under the Loft Law and the seminal cases are currently being litigated. Therefore, it is unclear how the Loft Board’s discretion will affect coverage applications in buildings that owners claim contain such incompatible uses.
The 2013 statutory amendment also reduced the required size of a unit from 550 square feet to 400 square feet, enabling tenants in units that otherwise meet the qualifying criteria under the Loft Law and are at least 400 square feet to apply for coverage.
The adoption of the final rules triggered the six month deadline for all tenants to apply for coverage under the Loft Law and for all owners to register their buildings as a IMD by March 11, 2014.
This deadline applies to buildings that qualify under the original Loft Law and also the 2010 expansion and 2013 amendment to the Loft Law.
It is the first time the Legislature has promulgated a deadline, creating a finite number of IMD buildings in New York City as of March 12, 2014.
An application to the Loft Board for an extension of the code compliance deadlines must be filed prior to the expiration of the deadline.
However, the final rules have carved out exceptions to this general rule:
New owners who have acquired an IMD building after deadlines have passed may apply for an extension within 90 days from the date of acquiring title;
Where an IMD is found to be covered under the Loft Law after the compliance deadlines have passed, the owner may file for an extension within 90 days after the issuance of a final order determining the coverage issue by a court of competent jurisdiction, or the issuance of an IMD registration number, whichever is first; and
An owner has missed a deadline due to the 2013 amendments, which shortened certain deadlines.
All extensions granted will be limited to one year in time and one extension per owner per code compliance deadline.
Owners sometimes find that a registered IMD unit cannot be legalized pursuant to the New York City Building Code due to its size, design, or location in the building.
In such circumstances, the Executive Director of the Loft Board can order the owner to apply for a variance to obtain approval from DOB, order the owner to alter the plans to make the unit legal or revoke the unit’s Loft Law coverage if the other two options are unavailing.
