Real Estate Weekly
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Deals & Dealmakers

Understanding Single-Room Occupancy Laws

By Adam Leitman Bailey and Dov Treiman

Part III

When CONH’s Are Denied

The Administrative Code is clear in outlining the procedural steps that an owner must take to obtain a CONH. However, even for clear law, there are very few cases construing it.

There is a statutory presumption that acts of harassment are with the intent of causing lawful occupants to vacate their units or surrender their rights in relation to occupancy. When such a pattern was the doing of a former owner, without regard to the new owner’s fault, or lack of fault, acts of harassment by the old owner, are attributable to the new owner. Thus, for example, if the former owner failed to provide heat, and other essential services during the three-year inquiry period, the new owner will be denied the CONH.17

In HPD v. Zimmerman,18 it was held that “new” SRO owners must rebut the statutory presumption that acts of harassment committed by old SRO owners were with the intent to cause the lawful occupants to vacate their units or surrender their rights in relation to occupancy. Without regard to the new owner’s fault, or lack of fault, acts of harassment by the old owner were attributable to the new owner that the acts of harassment committed by the old owner were with the intent of causing tenants to vacate and as such, the new owner was properly denied a CONH.

The petitioner proved the previous owner failed to provide heat, and other essential services during the three-year inquiry period. Upon sale of the building to the new owner, denial of the CONH was warranted.

Where the building includes failures to maintain basic services such as the failure to keep public bathrooms and hallways clean, eradicate vermin, repair holes in the ceiling and prevent overcrowding, and there are numerous violations in the building, harassment is properly found.19 Where there is evidence of deplorable physical conditions within the premises or and where the landlord attempted to intimidate the tenants into leaving, HPD appropriately refuses a CONH.20 When the landlord makes repeated buy-out offers making a tenant feel threatened, so too, HPD properly refuses a CONH.21
Admin. Code §27-2093 permits HPD to rescind or suspend certificates after they have been issued if there is reason to believe harassment occurred prior to the commencement of substantial work.22

In HPD v. Gill, 23 it was held that commencing the conversion of an SRO into a Class A apartment, while the certificate is pending and has not yet been obtained, creates a reasonable inference of harassment. In Gill , respondent purchased the building and within weeks, removed over 26 tenants, and began to convert the building after the application had commenced, but prior to its conclusion.

Additionally, OATH decisions have weighed in on rescission, and suspension of CONHs, though these decisions have not yet gone on appeal. Admin. Code §27-2093 permits HPD to rescind or suspend certificates after they have been issued if there is reason to believe harassment occurred prior to the commencement of substantial work.

In HPD v. 331 West 22nd Street,24 substantial work was defined as commencing “upon payment of the first advance by a lender on building loan contract which is financing the alterations or demolition for which a certificate of no harassment was granted.” Further, substantial work has occurred “upon an ‘actual expenditure’ of more than fifty percent of the total cost of alteration or demolition.”

Lastly, OATH has sought to clarify other SRO-related issues. One issue being, for example, that there is no time frame within which HPD must complete its investigation. In HPD v. Fenelon,25there was a two-and-a-half-year lag between the filing of the application and an OATH hearing. However, it was held that respondent was barred for three years from the time of final determination, and not the filing of the application, when the certificate was denied.

Vacating an SRO Building

The same laws used to evict rent-regulated tenants using their apartments or occupancy illegally applies to SROs. This includes eviction through non-primary residence, illegal sublet, demolition, chronic nonpayment, nuisance, and all other laws listed in the rent stabilization code.

Where an SRO unit is subject to rent stabilization, it is subject to being recovered for the owner’s own use, just like any conventional apartment which would allow a property owner to recover all the units in the building for his or her private or family use once a certificate of no harassment has been issued.

Conclusion

Single-room occupancy laws are one of the most misunderstood and least known regulatory laws. At the same time, there is a record number of filings to convert these buildings into Class A apartment houses. This article attempts to navigate the SRO buyer, owner and practitioner to their desired goal.

ENDNOTES:
1. Admin. Code §§27-2077(a)(2) & (3).
2. Inside New York City, the Multiple Dwelling Law applies. Outside New York City, municipalities may elect the Multiple Dwelling Law, a statute lacking an SRO provision.
3. Gracecor Realty, v. Hargrove, 90 N.Y.2d 350 (1997) (holding that the RSC may cover class “B” units).
4. MDL §248(15) really does specify that these two workers must be “competent,” a rare requirement in the law.
5. “Hotel” is something of a technical term. It requires a front desk and certain other amenities, but bears little other resemblance to the average reader’s idea of a hotel.
6. RSC §2520.6(j).
7. RSC §§2524.3(a) & (b); Admin. Code §26-521(a)(1).
8. Admin. Code §27-2093(f)(1); See also, NYCRR §10-02 – §10-11.
9. Id.
10. Id.
11. Developers frequently require such affidavits and a vacant building prior to taking title to SRO buildings.
12. Id.
13. 292 A.D.2d 225(1st Dept. 2002).
14. CPLR 7803.
15. Baba v. 113 Bldg. Corp., 210 A.D.2d 6 (1st Dept. 1994).
16. Breslin Tenant Assn’n v. HPD, 67 A.D.3d 522 (1st Dept. 2009).
17. HPD v. Zimmerman, OATH Index No. 347/05 (Oct. 4, 2004).
18. OATH Index No. 347/05 (Oct. 4, 2004).
19. Hersch v. HPD, 44 A.D.3d 525 (1st Dept. 2007).
20. Matter of 235 Hotel v. HPD, 309 A.D.2d 587 (1st Dept. 2003).
21. Vaughan v. Michetti, 176 A.D.2d 144 (1st Dept. 1997).
22. HPD v. 331 West 22nd Street, LLC, OATH Index No. 912/06, mem. Dec. (Dec. 29, 2006).
23. OATH Index No. 2729/09 (July 30, 2009).
24. OATH Index No. 912/06, mem. Dec. (Dec. 29, 2006).
25. OATH Index No. 1525/04 (Oct. 6, 2004).

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