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Claim of Non-Purchasing Tenant Status Rebuffed
When developers convert occupied buildings to condominiums or, less frequently, cooperative ownership, non-purchasing tenants are protected from eviction. When tenants in those buildings acquire vested rights as non-purchasing tenants is significant for developers, because the timing dictates the number of units that will be available for sale to outside purchasers. It is, therefore, no surprise that this is a highly charged and contested issue. Kessler v. Carnegie Park Associates, et al., represents the most recent effort by a group of tenants to expand their rights and to retain possession of otherwise unregulated units. In Kessler, plaintiffs unsuccessfully claimed that eligible senior citizens and eligible disabled persons are entitled to non-purchasing tenant status under the Martin Act upon acceptance of a non-eviction offering plan for filing. The Supreme Court and the Appellate Division made short-shift of their baseless claims and dismissed the complaint on a pre-answer motion to dismiss, recognizing that plaintiffs had ignored the statutory differences between eviction plans and non-eviction plans.
General Business Law 352-eeee sets forth the rights of tenants in occupancy, as well as the obligations of sponsors, with respect to conversions of occupied properties. A non-purchasing tenant obtains the right to remain in possession for so long as he or she chooses, subject to not unconscionable rent increases. Non-purchasing tenants may not be evicted, other than for cause (e.g., breach of a substantial obligation of their tenancy or nuisance). In MH Residential I, LLC. v. Barrett, 78 AD3d 99 (1st Dept. 2010), the First Department determined that market tenants whose leases expired prior to the effective date of an offering plan were not entitled to non-purchasing tenant status. Against that backdrop, the plaintiffs in Kessler asserted a new and unique theory as a pathway to non-purchasing tenant status. The four named plaintiffs in Kessler asserted that they were entitled to non-purchasing tenant status as eligible senior citizens and eligible disabled persons within the meaning of GBL 352-eeee(1)(f) and (1)(g). Plaintiffs commenced their action in Kings County against 11 defendants, without regard to the location of the properties at issue. The HFZ defendants were the sponsors of four conversions in Manhattan, and none of the plaintiffs resided in any of the HFZ defendants' properties.
Plaintiffs' complaint alleged that eligible senior citizens and eligible disabled persons acquired non-purchasing tenant status as soon as the offering plan was accepted for filing by the New York State Attorney General. First, plaintiffs claimed that the Martin Act does not draw any distinction between the rights afforded to eligible senior citizens and eligible disabled persons in Eviction Plans and Non-Eviction Plans. Second, plaintiffs relied on a memorandum issued by the Real Estate Finance Bureau of the Attorney General of the State of New York, dated Aug. 31, 2016, which revised its regulations related to the rights of eligible senior citizens and eligible disabled persons.
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