Jo-Fra Properties, Inc. v. Bobbe

• Decision Date: 16 December 2010
• Citation: 81 A.D.3d 29,917 N.Y.S.2d 119
• Parties: JO-FRA PROPERTIES, INC., Plaintiff-Appellant-Respondent, v. Leland BOBBE, et al., Defendants-Respondents-Appellants.
• Court: New York Supreme Court — Appellate Division

917 N.Y.S.2d 119

81 A.D.3d 29

JO-FRA PROPERTIES, INC., Plaintiff-Appellant-Respondent,

v.Leland BOBBE, et al., Defendants-Respondents-Appellants.

Supreme Court, Appellate Division, First Department, New York.

Dec. 16, 2010.

Aury Bennett Stollow, P.C., New York (Aury B. Stollow of counsel), for appellant-respondent.

Robert Petrucci, New York, for respondents-appellants.

RICHARD T. ANDRIAS, J.P., DAVID B. SAXE, DAVID FRIEDMAN, EUGENE NARDELLI, ROLANDO T. ACOSTA, JJ.

SAXE, J.

In this appeal, plaintiff-landlord Jo-Fra Properties challenges the application of the provision of the Loft Law (Multiple Dwelling Law article 7-C) that precludes the owner of a building covered by the Loft Law from collecting rent if it fails to bring the building into compliance with the requirements of the law ( see Multiple Dwelling Law § 302[1][b] ). Primarily,plaintiff asserts that it is unjust and inequitable to prevent it from collecting use and occupancy because its inability to legalize the residential lofts in its buildings was not its fault.

The buildings at issue are located on West 28th Street in Manhattan. Plaintiff purchased the buildings at 47 through 55 West 28th Street in 1977; the current principals of Jo-Fra inherited their interests in 2002. Defendants are the residents of 51, 53 and 55 West 28th Street. The buildings' lofts became occupied with residential tenants beginning in the 1970s; more residential tenants were acceptedthrough the 1990s. All these tenants' leases specified that their premises were not for residential use.

As early as 1978, the Department of Buildings issued violations for the illegal residential use of some of the buildings' commercial lofts. Jo-Fra thereafter sent those tenants form letters directing them to end the violation or vacate the premises, but it took no follow-up steps. The Loft Law was enacted in 1982; in 1984, Jo-Fra registered one of the five buildings, 47 W. 28th Street, with the Loft Board in the course of unsuccessfully attempting to contest the Loft Law's applicability to the building.

Jo-Fra took no steps to comply with the Loft Law with regard to those buildings before August 2004, when the tenants filed an application for coverage under Multiple Dwelling Law article 7-C, which application Jo-Fra opposed. After substantial litigation ( see Matter of Jo-Fra Props., Inc., 27 A.D.3d 298, 813 N.Y.S.2d 63 [2006], lv. denied 8 N.Y.3d 801, 830 N.Y.S.2d 9, 862 N.E.2d 88 [2007] ), the parties stipulated that the tenants' application would be withdrawn without prejudice and that Jo-Fra would register the buildings as interim multiple dwellings. Jo-Fra filed the registration on Oct. 1, 2007. Although the Loft Board did not initially accept the registration, purporting instead to grant the tenants' 2004 application, after a court order issued in the context of a CPLR article 78 proceeding directed it to do so, the Loft Board finally accepted Jo-Fra's registration by an order dated February 19, 2009.

Meanwhile, in the course of 2008, following its Oct. 1, 2007 filing, Jo-Fra took a number of steps to begin bringing the buildings into compliance with the Multiple Dwelling Law. In August 2008 it filed architectural plans and alteration applications for all three buildings at issue here, and it filed narrative statements for number 55 on September 29, 2008 and for number 53 in January 2009. As of the date of its motion for use and occupancy, it had not yet filed a narrative statement fornumber 51; its architect's affidavit dated February 17, 2009 stated that the narrative statement for number 51 would not be filed until after the Loft Board conference for building 53 was completed. No permits to perform the legalization work were obtained.

In July 2008, the tenants filed overcharge complaints with the Loft Board for the years 2004-2008. Also in 2008, a dispute began between Jo-Fra and the tenants regarding the tenants' use of public areas of the buildings, such as the hallways and staircases, to store personal property. Violations were issued by the Fire Department in the summer of 2008, and Jo-Fra notified the tenants to cease the use of the public areas. In August 2008, Jo-Fra served 10-day notices of termination based on failure to cure "violation of substantial obligation of tenancy" and purporting to terminate "license[ s ], if any," for the use of the public areas of the buildings.

Jo-Fra commenced this action in October 2008, seeking arrears in use and occupancy, ejectment of the tenants, and counsel fees. The tenants' answer seeks a money judgment for the amount of the overcharge and reciprocal counsel fees under Real Property Law § 234.

Both sides moved for summary judgment. The motion court granted the tenants' cross motion for summary judgment to the extent of dismissing Jo-Fra's use and occupancy claims, but granted Jo-Fra summary judgment on its cause of action for attorney's fees in connection with its remaining claims. Each side appeals from the portion of the order adverse to its position.

Initially, there is no dispute here that the Loft Law applies to these buildings. The purpose of the Loft Law was to legalize de facto multiple dwellings that were not up to code ( see Matter of Lower Manhattan Loft Tenants v. New York City Loft Bd., 66 N.Y.2d 298, 302-03, 496 N.Y.S.2d 979, 487 N.E.2d 889 [1985] ). The law was intended "to confer rent stabilized status on legalized interim multiple dwellings" ( 91 Fifth Ave. Corp. v. NYC Loft Bd., 249 A.D.2d 248, 249, 672 N.Y.S.2d 301 [1998], appeal dismissed 92 N.Y.2d 918, 680 N.Y.S.2d 458, 703 N.E.2d 270 [1998] ). Incremental conversion was provided for so as to allow a "transition" of former commercial spaces into the rent regulation system ( see Blackgold Realty Corp. v. Milne, 119 Misc.2d 920, 921, 464 N.Y.S.2d 969 [Civ. Ct., N.Y. County 1983], affd. 126 Misc.2d 721, 490 N.Y.S.2d 1022 [App. Term, 1st Dept. 1984], affd. 119 A.D.2d 512, 501 N.Y.S.2d 44 [1st Dept. 1986], affd. 69 N.Y.2d 719, 512 N.Y.S.2d 25, 504 N.E.2d 392 [1987] ).

With the enactment of the Loft Law in 1982 (L. 1982 ch. 349), owners of interim multiple dwellings were first given a timetablein which to " take all reasonable and necessary action to obtain a certificate of occupancy as a class A multiple dwelling for the residential portions of the building" (multiple dwellinG law § 284[1][I] ). if they complied with that legalization timetable, they were entitled to collect rent even if they had not yet obtained a certificate of occupancy (§ 285); otherwise, the lack of a proper certificate of occupancy would preclude a right to collect rent for those properties (§ 302[1][b]; see Cromwell v. Le Sannom Bldg. Corp., 171 A.D.2d 458, 567 N.Y.S.2d 41 [1991]; County Dollar Corp. v. Douglas, 161 A.D.2d 370, 556 N.Y.S.2d 533 [1990] ). The compliance timetables were extended when the Loft Law was renewed in 1992, 1996, and 1999 (Multiple Dwelling Law §§ 284[1][ii], [iii], [iv] ).

The importance of compliance with those timetables while they are in place is illustrated by Lipkis v. Gilmour, 221 A.D.2d 229, 633 N.Y.S.2d 957 [1995], affg. 160 Misc.2d 50, 611 N.Y.S.2d 976 [1994]. There, during the period after one statutory legalization timetable had expired and before a new legalization timetable had yet been enacted, an owner who had failed to comply with the prior legalization timetable was held to be precluded from suing for rent, up until the point that a new timetable was put in place by the Legislature.

While Jo-Fra has, albeit very belatedly, taken a number of the steps required by the Multiple Dwelling Law to legalize the buildings, it does not, and cannot, contend that it has taken all such steps, or that it has taken those steps within any statutory time frame. Indeed, Jo-Fra points out that it is, of course, impossible for it to meet the expired September 1999 deadline for filing an alteration application. Rather, it suggests that equity requires forgiving its non-compliance and allowing it to collect use and occupancy. It argues that Supreme Court's dismissal of its claim relies on an overly literal interpretation of the Multiple Dwelling Law and that the statute's literal application produces an absurd, unjust result. It also argues that the statute, being remedial, should be interpreted equitably to favor owners.

As to Jo-Fra's argument that compliance is impossible because the tenants did not seek coverage until 2004, it is founded on an incorrect assumption. The Loft Law...