THE LOFT BOARD PROPERLY REJECTED TENANTS’ REQUEST TO WITHDRAW THEIR APPLICATIONS FOR COVERAGE UNDER THE LOFT LAW FOLLOWING A SETTLEMENT AGREEMENT WITH THE LANDLORD; HERE THE LANDLORD HELD COMMERCIAL PROPERTY WHICH INCLUDED THE TENANTS’ RESIDENCES IN THE ABSENCE OF A CERTIFICATE OF OCCUPANCY; THE LANDLORD HAD SETTLED WITH THE TENANTS, AGREEING TO OBTAIN A CERTIFICATE OF OCCUPANCY AND CONVERT THE PROPERTY TO RENT STABILIZED RESIDENCES (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined: (1) the settlement agreement between that landlord and tenants providing that the landlord would take steps to obtain a certificate of occupancy and convert the property into rent stabilized residences should not have been annulled in its entirety; (2) the tenants’ attempt, based on the settlement, to withdraw their applications for coverage of he property under the Loft Law was properly denied. The property in question was commercial property which included residences for which no certificate of occupancy had been issued:

The Loft Law is designed to integrate “uncertain and unregulated residential units, converted from commercial use, into the rent stabilization system in a manner which ensures compliance with the Multiple Dwelling Law and various building codes” … . The Loft Law was created to regulate the conversion of industrial, manufacturing, and commercial space into residential space. It enables an owner to rent space in a building while the structure is undergoing conversion pursuant to building department, fire department, and other regulatory requirements necessary to obtain a certificate of occupancy for a residential building. The work necessary to legalize a building for residential use is subject to specifically prescribed time periods (see Multiple Dwelling Law § 284[1]), and the Loft Board is specifically charged with determining interim multiple dwelling status and other issues of coverage, including coverage applications (see Multiple Dwelling Law § 282).

Here, the Supreme Court should have confirmed the Loft Board’s determination rejecting the tenants’ proposed withdrawal of their coverage applications and remitting the coverage applications … for adjudication. Contrary to the tenants’ contentions, the Loft Board had jurisdiction over the coverage applications (see Multiple Dwelling Law § 282), and the coverage applications did not become moot upon the tenants’ proposed withdrawal with prejudice of the applications. Title 29 of the Rules of the City of New York provides that the Loft Board may review settlement agreements and exercise discretion to reject a proposed settlement and remit matters for further investigation and adjudication (see NY City Loft Board Regulations [29 RCNY] § 1-06[j][5]). There is nothing in that rule that limits the Loft Board’s review of settlement agreements or its authority to re-open and remit a coverage application. Matter of Dom Ben Realty Corp. v New York City Loft Bd., 2019 NY Slip Op 08188, Second Dept 11-13-19