New York Loft Law: a Soho Property Owner'S Board Dispute

Our client, the owner of an historic SoHo property, faced a complex challenge when several tenants filed an application seeking coverage under the New York Loft Law.

This application sought to compel our client to legalize the building as an “interim multiple dwelling” (IMD).

SJKP, on behalf of the client, opposed this application, arguing that the units did not meet the specific residential occupancy requirements during the statutory window period defined by the New York Loft Law.

This initial opposition was a critical first step in protecting our client's interests while exploring more practical solutions.

The matter highlighted the procedural nuances of the New York Loft Law.
 

Rather than engage in protracted litigation, our client and the tenants reached a mutually beneficial settlement agreement.

The tenants agreed to withdraw their Loft Law coverage application with prejudice.

In return, our client agreed to recognize the tenants under the Rent Stabilization Law, register their units with the Division of Housing and Community Renewal (DHCR), and make diligent efforts to obtain a residential certificate of occupancy.

This creative solution offered the tenants long-term stability and a clear path to legalization, bypassing the often-burdensome process of the New York Loft Law.
 

Despite the comprehensive settlement, the New York City Loft Board rejected the agreement, including the tenants' request to withdraw their application.

The Board asserted that allowing the withdrawal was against public policy because, without the protections of the New York Loft Law, the tenants' occupancy would be illegal pending a new certificate of occupancy.

The Board’s stance compelled continued administrative litigation despite the parties’ agreement, prompting judicial review of whether that determination was rational under Article 78 standards.
 

In response to the Board’s decision, SJKP filed an Article 78 petition on behalf of our client.

The petition argued that the Loft Board’s orders were arbitrary and capricious.

We contended that the Board exceeded its authority by compelling the parties to litigate a coverage application that the applicants themselves wished to withdraw.

Furthermore, we demonstrated that an independent and valid path to legalization existed under the Rent Stabilization Law, making the Board's insistence on the New York Loft Law process irrational under established administrative law principles.

This legal action was essential to prevent our client from being trapped in an unnecessary and costly administrative proceeding.
 

The Appellate Division affirmed that the Loft Board’s refusal to permit the tenants to withdraw their coverage application was irrational.

The court recognized that the New York Loft Law was not the exclusive path for legalization.

In this case, the property could qualify as a "horizontal multiple dwelling" with an adjacent, already rent-stabilized building owned by our client.

This doctrine provided an independent basis for the tenants to obtain rent-stabilized status once a certificate of occupancy was secured, thereby undermining the Board’s position that Loft Law coverage was the sole permissible path to legalization.

This part of the decision was a significant victory, validating the core argument that parties can choose alternative legal paths outside the New York Loft Law.
 

While siding with our client on the withdrawal issue, the court also clarified the Board’s authority.

It ruled that the Board's rejection of the settlement agreement itself was not irrational.

The court reasoned that once the tenants elected to withdraw their coverage application, the Loft Board could not compel further adjudication of the matter under the Loft Law. 

While the Board retained authority to reject the proposed settlement within its regulatory framework, it could not force the parties to proceed with a conversion application they no longer wished to pursue.

Navigating disputes involving the New York Loft Law and the New York City Loft Board requires a deep understanding of administrative law and real estate regulations. These cases often involve complex interactions between different regulatory schemes, such as the Loft Law and the Rent Stabilization Law. 

An experienced legal team can help property owners challenge arbitrary agency decisions and identify alternative paths to compliance. 

If you are facing a similar situation with a loft property or a dispute with an administrative board, contact SJKP for a consultation to explore your legal options.