Defendant The Piano Building LLC appeals from an order and judgment (one paper) of the Supreme Court, New York County (Marcy S. Friedman, J.), entered June 19, 2008, which, inter alia, granted plaintiff Rosenthal's motion for summary judgment and declared his unit subject to rent stabilization pursuant to the Emergency Tenant Protection Act of 1974.
The opinion of the court was delivered by: Renwick, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Angela M. Mazzarelli, J.P., Richard T. Andrias, Karla Moskowitz Dianne T. Renwick, Rosalyn T. Richter, JJ.
In this landlord-tenant dispute, we revisit the issue of whether an apartment covered by the Loft Law may revert to rent stabilization after the landlord purchased the prior occupant's rights under Multiple Dwelling Law (MDL) § 286(12) in a pre-1974 building containing six or more residential units. The landlord invites us to overrule our 2002 pronouncement in 182 Fifth Ave. v Design Dev. Concepts (300 AD2d 198) in which we answered the question in the affirmative. The owner relies primarily upon Wolinsky v Kee Yip Realty Corp. (2 NY3d 487 ), which the Second Department has interpreted broadly as barring Emergency Tenant Protection Act of 1974 (ETPA)*fn1 coverage to all loft units not subject to the Loft Law, even where the Zoning Resolution permits residential use as of right. We decline to follow the Second Department, as we find Wolinsky consistent with our view on this issue.
The essential facts are undisputed. The unit that is the subject of this action is a loft apartment (#14C) at 115 West 23rd Street in Manhattan. When the former owner purchased the commercial building in December 1977, Keith Christensen held a residential lease for the unit. In 1985, the Loft Board ruled that seven of the building's units, including Christensen's apartment, constituted an Interim Multiple Dwelling (IMD) and that his unit was covered under the Loft Law (MDL art 7-C)*fn2. The apartment thus became subject to rent regulation.
In December 1995, the former owner purchased the tenant's rights under the Loft Law pursuant to MDL § 286(12). The Loft Board sales record form indicates that the unit would not be converted to nonresidential use. In the space asking whether the unit is "subject to rent regulation under any other law, rule or regulation," the response is that it was an IMD and "is now registered with DHCR." The buyout agreement states that the Christensens, as occupants of the unit vacated, "were and are covered under article 7C of the Multiple Dwelling Law or the Rent Stabilization Laws."*fn3 By the time of this transaction, the prior owner had already obtained a certificate of occupancy for residential use of the premises. In addition, the certificate of occupancy indicates that the building contains 18 residential units. The owner kept the unit as a residential rental.
In June 1999, plaintiff Rosenthal began to occupy Unit 14C pursuant to a residential lease. From its inception, the prior owner treated Rosenthal as an unregulated market rent tenant, with monthly rent starting at $2,781*fn4. In April 2005, Rosenthal and others*fn5 commenced this action to declare his unit subject to rent stabilization under ETPA and to recover rent overcharges. The owner asserted in its answer that since the prior owner had purchased the Loft Law rights from the tenant's predecessor, the unit is not subject to ETPA. Where there is a sale of rights pursuant to the Loft Law, the owner argued, the unit is permanently deregulated. On the other hand, the tenant maintained that residential use of the unit triggered rent stabilization protection under ETPA for pre-1974 buildings with more than six residential units.
Following discovery, the tenant and the landlord each moved for summary judgment on the foregoing defense. The court granted the tenant's motion and denied the owner's cross motion, relying primarily upon our decision in 182 Fifth Ave. v Design Dev. Concepts. The owner now appeals.
We reject the owner's assertion that the sale of the Loft Law rights here ended the unit's eligibility for rent stabilization. In 182 Fifth Ave., this Court confronted a circumstance identical to this one: the owner of a loft covered by the Loft Law purchased the protected occupant's rights under MDL § 286(12) and then leased the unit for residential purposes. We held that where, as here, the building contains six or more residential units, it is subject to rent stabilization by virtue of ETPA "notwithstanding the sale of Loft Law rights by a prior tenant" (300 AD2d at 199; see also Matter of 315 Berry St. Corp. v Hanson Fine Arts, 39 AD3d 656 , lv dismissed 10 NY3d 742 ).
The result in 182 Fifth Ave. and its progeny is amply supported by the plain language of MDL § 286(12), which reads as follows: No waiver of rights pursuant to this article by a residential occupant qualified for protection pursuant to this article made prior to the effective date of the act which added this article shall be accorded any force or effect; however, subsequent to the effective date an owner and a residential occupant may agree to the purchase by the owner of such person's rights in a unit (emphasis added). By its own terms, MDL § 286(12) applies only to the purchase of an occupant's Loft Law rights. The statute says nothing about rent stabilization or ETPA; it says nothing about any subsequent tenant's rights; indeed, it says nothing about deregulating units in any way whatsoever. The purchase of rights permitted in this section is thus necessarily limited to an occupant's rights under the Loft Law.
This conclusion is bolstered by the Loft Board's own regulations, which contemplate that units formerly covered by the Loft Law may be subject to rent stabilization even after they have been "deregulated" under the Loft Law. These regulations provide that an owner has two options after a sale of rights under MDL § 286(12). First, the owner may return the unit to its lawful commercial use, in which event the owner must file a certificate with the Loft Board and submit to a Loft Board inspection to confirm that all residential fixtures have been removed (29 RCNY § 2-10[c]). The owner here does not claim to have availed itself of this option. Indeed, it issued the tenant a residential lease.
Under the regulation, the second option offered by the Loft Law upon a sale pursuant to MDL § 286(12) is to continue residential use, except that the owner must legalize the unit under the Loft Law and it may remain subject to rent regulation (29 RCNY § 2-10[c]): Residential use. If the unit is to remain residential, the owner remains subject to all the requirements of Article 7-C, and regulations and orders of the Board, including the legalization requirements of Multiple Dwelling Law § 284, except that the unit is no longer subject to rent regulation where coverage under Article 7-C was the sole basis for such rent regulation, provided that there is no finding by the Loft Board of harassment as to any occupant(s) of the unit which has not been terminated pursuant to § 2-02(d)(2) of the Board's Harassment Regulations. During the period of its IMD status, the IMD unit may be converted to non-residential use, as set forth in § 2-10(c)(1) of these regulations, except that a harassment finding made after a sale shall not bar conversion of the unit to non-residential use. The only other "such rent ...