Illegal Loft Tenants Entitled to Remain Rent-Free

The Loft Law, enacted in 1982, established deadlines (subsequently extended on multiple occasions) for loft landlords to obtain residential certificates of occupancy. The statute also entitled landlords to an extension of time if they proved unable to meet the deadlines for “reasons beyond his/her control.” To obtain the extension of time, a landlord had to demonstrate good-faith efforts to comply. (Multiple Dwelling Law, section 284(1)(vii)). Landlords that comply with the Loft Law by making those good-faith efforts are entitled to recover rent, and to maintain an
action for possession for nonpayment of rent. (Multiple Dwelling Law, section 285(1)).

Multiple Dwelling Law section 286(1) protects tenants from eviction by landlords on the ground that the premises are not in compliance with the certificate of occupancy. Section 286(2) provides that “[p]rior to compliance with safety and fire protection standards ' residential occupants qualified for protection pursuant to this article shall be entitled to continued occupancy, provided that the unit is their primary residence, and shall pay the same rent ' specified in their lease or rental agreement ' .” (emphasis added).

The statutory provisions, then, are in tension with one another. Section 302 precludes an action for eviction for nonpayment of rent in the absence of a residential certificate of occupancy, and section 285 appears to provide a limited exception for landlords in compliance with the Loft Law. By contrast, section 286 appears to place on tenant an obligation to pay rent before landlord obtains a certificate of occupancy, and does not expressly limit that obligation to cases in which landlords have made good-faith efforts.

The Chazon Problem

Loft landlords, including the landlord in the Chazon case, have been slow to comply with the statute's mandates. The landlord in the Chazon case, for instance, had neither met the statute's deadlines nor obtained an extension of time. At the same time, the tenant in Chazon has not paid rent for the last nine years. The landlord then brought an ejectment action, seeking to recover possession for nonpayment of rent. Both Supreme Court and the Appellate Division awarded possession to landlord. The Court of Appeals granted tenant's motion for leave to appeal.

The Case Law

Both the First and the Second Department had held that a loft landlord is entitled to bring an ejectment action to evict an illegal residential tenant. In Le Sannom Bldg Corp. v. Lassen, 173 AD2d 249, the First Department, implicitly focusing on Multiple Dwelling Law section 286, held that the Loft Law protects tenants from eviction for lack of a residential certificate of occupancy (the explicit rule set out in section 286(1)), but not from eviction for non-payment of rent (a conclusion consistent with section 286(2)'s mandate that tenant pay the rent specified in the lease or rental agreement). In effect, the First Department read the language of section 286(2) as an exception to section 302(1)'s general prohibition on eviction for nonpayment of rent when the premises lack the requisite residential certificate of occupancy.

The Second Department reached the same result, in a much less defensible opinion, in 99 Commercial St. v. Llewellyn, 240 AD2d 481. In Llewellyn, the court appeared to hold that section 302(1) bars a summary proceeding seeking possession for nonpayment of rent, but not an ejectment action. That conclusion, however, is directly contradicted by the language of section 302(1), which provides that “no action or special proceeding” shall be maintained for possession for nonpayment of rent when the premises do not have the requisite residential certificate of occupancy.

The Chazon Opinion

In Chazon, however, the Court of Appeals, in a unanimous opinion by Judge Robert Smith, rejected the results in both Le Sannom and Llewellyn, holding instead that a loft landlord that is not in compliance with the Loft Law's provisions may recover neither rent nor possession from a residential tenant. The court emphasized that section 285(1) of the Loft Law includes an exception to section 302(1) only for landlords that are “in compliance with” the Loft Law ' which Chazon clearly was not. In that situation, the court held that section 302's absolute prohibition remains in effect, and leaves the landlord and tenant in a stalemate: The tenant may remain in possession, and need not pay rent until compliance is achieved. The court recognized that the results reached by the appellate divisions might make sense from a practical point of view, but could find no way to reconcile those results with the language of section 302(1).

The court's holding leaves section 286(2) without much practical import. That statute obligates the tenant to pay rent, but the court's holding leaves landlord without any remedy for tenant's failure to meet that obligation. But any reading other than the one the court embraced would have given no meaning to section 285(1)'s language protecting only those landlords “in compliance with” the Loft Law. The problem is with the legislation itself, and the court suggested that the legislature was the proper forum for addressing the issue.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.

With the enormous demand for residential space in Manhattan, and the corresponding decline in demand for commercial space over the last half century, many New York landlords have rented commercial lofts for residential purposes, without bringing those lofts into compliance with the standards the city mandates for residential space. In 1982, the state legislature enacted the Loft Law to assist loft landlords in obtaining residential certificates of occupancy, but the statute has been successful only in part. What rights, then do landlords and tenants have with respect to those lofts that remain illegally occupied? The Court of Appeals addressed that question in Chazon, LLC v. Maugenest, NYLJ 6/8/12, p. 24, col. 5, and held that the clear language of Multiple Dwelling Law section 302(1) provides that landlords may recover neither rent nor possession from residential tenants remaining in illegal lofts.

The Statutory Scheme

Multiple Dwelling Law section 301(1) prohibits occupation of multiple dwellings without a residential certificate of occupancy. Section 302(1) provides that if a dwelling is occupied in violation of section 301, “[n]o rent shall be recovered by the owner of such premises ' and no action or special proceeding shall be maintained therefor, or for possession of said premises for nonpayment of such rent.” These provisions, which were in place before enactment of the Loft Law, make residential occupation of premises lacking a residential certificate of occupancy entirely illegal.

The Loft Law, enacted in 1982, established deadlines (subsequently extended on multiple occasions) for loft landlords to obtain residential certificates of occupancy. The statute also entitled landlords to an extension of time if they proved unable to meet the deadlines for “reasons beyond his/her control.” To obtain the extension of time, a landlord had to demonstrate good-faith efforts to comply. (Multiple Dwelling Law, section 284(1)(vii)). Landlords that comply with the Loft Law by making those good-faith efforts are entitled to recover rent, and to maintain an
action for possession for nonpayment of rent. (Multiple Dwelling Law, section 285(1)).

Multiple Dwelling Law section 286(1) protects tenants from eviction by landlords on the ground that the premises are not in compliance with the certificate of occupancy. Section 286(2) provides that “[p]rior to compliance with safety and fire protection standards ' residential occupants qualified for protection pursuant to this article shall be entitled to continued occupancy, provided that the unit is their primary residence, and shall pay the same rent ' specified in their lease or rental agreement ' .” (emphasis added).

The statutory provisions, then, are in tension with one another. Section 302 precludes an action for eviction for nonpayment of rent in the absence of a residential certificate of occupancy, and section 285 appears to provide a limited exception for landlords in compliance with the Loft Law. By contrast, section 286 appears to place on tenant an obligation to pay rent before landlord obtains a certificate of occupancy, and does not expressly limit that obligation to cases in which landlords have made good-faith efforts.

The Chazon Problem

Loft landlords, including the landlord in the Chazon case, have been slow to comply with the statute's mandates. The landlord in the Chazon case, for instance, had neither met the statute's deadlines nor obtained an extension of time. At the same time, the tenant in Chazon has not paid rent for the last nine years. The landlord then brought an ejectment action, seeking to recover possession for nonpayment of rent. Both Supreme Court and the Appellate Division awarded possession to landlord. The Court of Appeals granted tenant's motion for leave to appeal.

The Case Law

Both the First and the Second Department had held that a loft landlord is entitled to bring an ejectment action to evict an illegal residential tenant. In Le Sannom Bldg Corp. v. Lassen , 173 AD2d 249, the First Department, implicitly focusing on Multiple Dwelling Law section 286, held that the Loft Law protects tenants from eviction for lack of a residential certificate of occupancy (the explicit rule set out in section 286(1)), but not from eviction for non-payment of rent (a conclusion consistent with section 286(2)'s mandate that tenant pay the rent specified in the lease or rental agreement). In effect, the First Department read the language of section 286(2) as an exception to section 302(1)'s general prohibition on eviction for nonpayment of rent when the premises lack the requisite residential certificate of occupancy.

The Second Department reached the same result, in a much less defensible opinion, in 99 Commercial St. v. Llewellyn , 240 AD2d 481. In Llewellyn, the court appeared to hold that section 302(1) bars a summary proceeding seeking possession for nonpayment of rent, but not an ejectment action. That conclusion, however, is directly contradicted by the language of section 302(1), which provides that “no action or special proceeding” shall be maintained for possession for nonpayment of rent when the premises do not have the requisite residential certificate of occupancy.

The Chazon Opinion

In Chazon, however, the Court of Appeals, in a unanimous opinion by Judge Robert Smith, rejected the results in both Le Sannom and Llewellyn, holding instead that a loft landlord that is not in compliance with the Loft Law's provisions may recover neither rent nor possession from a residential tenant. The court emphasized that section 285(1) of the Loft Law includes an exception to section 302(1) only for landlords that are “in compliance with” the Loft Law ' which Chazon clearly was not. In that situation, the court held that section 302's absolute prohibition remains in effect, and leaves the landlord and tenant in a stalemate: The tenant may remain in possession, and need not pay rent until compliance is achieved. The court recognized that the results reached by the appellate divisions might make sense from a practical point of view, but could find no way to reconcile those results with the language of section 302(1).

The court's holding leaves section 286(2) without much practical import. That statute obligates the tenant to pay rent, but the court's holding leaves landlord without any remedy for tenant's failure to meet that obligation. But any reading other than the one the court embraced would have given no meaning to section 285(1)'s language protecting only those landlords “in compliance with” the Loft Law. The problem is with the legislation itself, and the court suggested that the legislature was the proper forum for addressing the issue.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.