ORDER

NEW YORK CITY LOFT BOARD In the Matter of the Application of Loft Board Order No. 4803 BOARD OF MANAGERS OF 583-587 BROADWAY CONDOMINIUM Docket No. LE-0675

RE: 583-587 Broadway New York, New York

IMD No. 10906

ORDER

The New York City Loft Board ("Loft Board") grants the application of Board of Managers of 583- 587 Broadway Condominium ("the Association"), the owner association of the building located at 583-587 Broadway, New York, New York (UBuilding") for removal of the Building from the Loft Board's jurisdiction.

BACKGROUND

On September 2,2016, the New York City Department of Buildings issued a residential Certificate of Occupancy for the Building under certificate number 100977098F. Pursuant to Title 29 of the Rules of the City of New York ("29 RCNY") §§ 2-01(i)(1) and (2) and 2-01(n)(4), the Association was then eligible to apply for rent adjustments based on the costs of compliance and Rent Guidelines Board (URGB") increases (URGB Increases"). To date, the Association has not applied for rent adjustments based on the costs of compliance. In addition, the Association has not filed a Notice of RGB Increase Filing Form ('~RGB Notice Filing") seeking RGB Increases.

On February 6, 2017, the Association filed an application to remove the Building from the Loft Board's jurisdiction. Along with the application, the Association filed a Cooperative/Condominium Exemption Form indicating twenty (20) of the twenty-three (23) units were owner occupied, and three (3) units, 4M, 7M and 1OB were rented to tenants by the owners of the units. The Association argued in the application that the Loft Board did not have to set initial legal regulated rents for any of the units because the Building is owned in condominium form and the units are either owner occupied or occupied by tenants who are not qualified for protection under Article 7-C.

No affected parties answered the application.

After receipt of the application, Loft Board staff members (UStaff') reached out to the Association's attorney for additional information as to why the three rented units should not be subject to rent regulation. In a letter dated May 9, 2017, the Association's attorney gave the following reasons for his claim:

• Each unit is rented for over $30,000 and it would be absurd from a public policy perspective to afford rent regulatory protection to a tenant who has not asked for protection and is paying that much rent; • Tenants who took possession of these units after the effective date of the law are not among the category of tenants the Legislature intended to protect in enacting the Loft Law; • In addressing condominiums and cooperatives, the Loft Law and the Loft Board's rules make no distinction between the two types of ownership and protected occupancy status should not hinge on the happenstance of whether a building is a cooperative or a condominium; • The Board has previously held that in relationship to cooperative units, a tenant who rents an interim multiple dwelling ("IMD") unit from a proprietary lessee is a subtenant of the proprietary lessee and is not a prime lessee for the purpose of protection under the Loft Law. Loft Board Order No. 4803

On July 17, 2018, upon notice to all affected parties, Staff held a conference. Only the Association's attorney and managing agent attended. At the conference, the Association reiterated its position that the three units should not be subject to rent stabilization pursuant to the Loft Law. The Association's representatives stated that unit 4M is vacant, unit 7M was recently leased to a different tenant and the lease for Unit 10B expired but the tenant is still in residence.

After the meeting, the Association reached out to the owners of the three units to inform them of the possibility that the Loft Board might find the ·units to be rent stabilized. According to the Association's attorney, he received no responses from the owners of Units 4M and 10B. As to 7M, the attorney for the unit owner forwarded to the Loft Board an affidavit indicating that the unit had been rented at a rate of $32,000 per month until April 30, 2018. However, the tenant left at the end of the lease term and the unit owner then rented the unit at a below market rate of $25,000 per month due to an urgent need for revenue and the possibility of currying favor with a potential business associate.

ANALYSIS

A. Covered Units

According to Loft Board records, on November 1, 2011 , the Association filed a registration application with the Loft Board. The registration application indicated the Building contained twenty-three (23) residential units and two (2) commercial units.

The Certificate of Occupancy, however, lists the Building as having twenty-two (22) residential units. After the conference held on July 17, 2018, the Association's attorney sent a letter explaining that although the registration lists two units on the twelfth floor and one unit on the penthouse floor, unit 12M and the penthouse are one combined unit. This is reflected on the Certificate of Occupancy which lists the twelfth floor as having 1.5 units and the penthouse as having .5 units.

The Board accepts this explanation and finds that the Association has obtained a residential Certificate of Occupancy that accounts for the twenty-three (23) IMO units. The Association is thus in compliance with Multiple Dwelling Law ("MOL") § 284( 1). See, Matter of Halebid Corp., Loft Board Order No. 585 (Apr. 30, 1987).

B. Units 4M, 7M and 10B Are Subject to Rent Regulation.

The Board rejects the Association's arguments that Units 4M, 7M and 10B should not be rent­ stabilized. The plain language of the law states, "Cooperative and condominium units occupied by owners or tenant-shareholders shall not be subject to rent regulation pursuant to the statute." That the market rents may be high and the tenants wealthy enough to pay is of no consequence. Other sections of the law clearly provide for escalation of rents to market rate and subsequent rent regulation. See MOL § 286(6) and 29 RCNY § 2-070)(1).

Furthermore, Owner's argument that protected occupancy status should not hinge on the happenstance of whether a building is a cooperative or a condominium misses the issue. The exemption from rent regulation is contingent upon owner occupancy; not upon protected occupancy. See 150 Franklin Street Cooperative, Inc., Loft Board Order No. 2995 (Nov. 17, 2005) and Matter of Pier 29 Lofts Corp, Loft Board Order No. 2539 (June 29, 2000). While the Loft Board rule, 29 RCNY § 2-01 (n) uses units occupied by protected occupants as an example of non-owner occupied units, the law clearly only exempts owner occupied units from rent regulation. Therefore, even a vacant unit, such as unit 4M, is subject to rent regulation because it does not meet the condition in the law exempting it from rent regulation. That is, it is not owner occupied. See Matter of 285 Lafayette Street Condominium, Loft Board Order No. 3484 (January 15, 2009).

Nor can the Association claim it should not be obligated to undertake registration of the units with the New York State Division of Housing and Community Renewal ("OHeR") because the Association

2 Loft Board Order No. 4803 freely allows leasing of units. In § 7.3 of the Second Amendment and Restatement of Declaration of Condominium dated May 6, 2004 ("Declaration"), the Association readily consents to leasing and subleasing of units by owners provided that the leases or subleases contain certain provisions. The leases provided for Units 4M, 7M and 10B contain these provisions. Furthermore, the Declaration allows the Board of Managers to terminate a lease or sublease and evict a tenant or subtenant if certain conditions are met. See, Declaration, at 14. .

The Association next argues that in addressing condominiums and cooperatives, the Loft Law and the Loft Board's rules make no distinction between the two types of ownership. It is true that cooperatives and condominiums are addressed in the same section of law in the MDL and in the same rule in the Board's rules. However, the Association has offered no evidence in support of its claim that the legislature intended both types of ownership to be treated equally under the law. Furthermore, the two types of ownership are not equal. The owner of a cooperative unit is a shareholder in the cooperative association. The owner of a condominium owns its unit in fee simple and is an "owner" under the Real Property Law in every sense of the word. Even the Association concedes each condominium unit is a separate tax lot.

The cases cited by the Association do not support the Association's argument. The facts in the cases pertain to proprietary lessees of cooperative units who sublease to subtenants. The subtenants claim they are entitled to coverage or protected occupancy or both. In denying coverage or protected occupancy status, the Board holds that the proprietary lessees are the prime lessees and the subtenants, who took occupancy after the effective date of the law, are not entitled to protection unless the co-op association landlord consents to a statutory tenancy. See Matter of Schlesigner, Loft Board Order No. 1148, (Jan. 31, 1991), Matter of Sideri, Loft Board Order No. 1988 (June 27, 1996). However, the unit owners in this case are not proprietary lessees arid the Association has consented to the leases. c. Rent Amounts

The amount of the rent is equal to the rent in effect and any RGB Increases as of the date of the rent order ("base rent"), plus the maximum annual amount of an increase allocable to compliance, plus the percentage increase then applicable to one-year or two-year leases, as elected by the tenant, as established by the RGB and applied to the base rent. The "rent in effect," also known as the "base rent," is the rent an owner is allowed to charge while a building is under the jurisdiction of the Loft Law. Because this Building was registered pursuant to MDL §281 (5), the provisions of 29 RCNY § 2-06.2 are used to determine these rent amounts. Pursuant to 29 RCNY § 2-06.2(b)(4) and (d), the "total rent" payable while the building is under the jurisdiction of the Loft Board is the rent specified in a lease or rental agreement in effect on June 21, 201 O.lf no lease is in effect, the "total rent" is the rent paid by the tenant to the landlord on or before June 21, 2010 pursuant to the last lease or rental agreement prior to June 21,2010.1

Pursuant to 29 RCNY § 2-01 (m), the Loft Board may establish the initial legal regulated rent for an IMD unit based on the RGB Notice Filing, or if there is no RGB Notice Filing, by evidence contained in the Loft Board's records, documents submitted by affected parties and the testimony of witnesses. See, 29 RCNY § 2-01 (m)(2). Here, because none of the affected parties filed answers to the removal application the Loft Board looks to the information supplied in the registration application and thereafter, including leases for Units 4M 7M and 10B, to determine the base rents.

As to additions to the base rent, pursuant to the Loft Board's rules, the Association had nine (9) months from when it obtained the Certificate of Occupancy to file a request for code compliance rent adjustments. The Certificate of Occupancy was issued on September 2, 2016. As of this date, the Association has not applied for rent adjustments based on the costs of compliance. Therefore, the Association has waived its right to a rent adjustment based on the necessary and reasonable costs of obtaining a final Certificate of Occupancy. See 29 RCNY §§ 2-01 (i)(2)(ii) and 2-01 (n)(4). In addition, the

1 The "total rent" also includes certain escalators. However, there is no proof here that the unit owners charged escalators.

3 Loft Board Order No. 4803

Association has not submitted the required documents in order to obtain RGB Increases. Therefore, the Association is not entitled to RGB Increases. See, 29 RCNY § 2-01(i)(1)(ii). Therefore, the following are the initial legal regulated rents for Units 4M, 7M and 10B:

1. Unit 4M

The Loft Board's records do not contain a lease or any other information as to the rent charged on June 21,2010. The earliest lease contained in the Loft Board's records is a lease with a monthly rent of $28,000 and a lease term of August 1, 2011 to August 1, 2012. Absent other documentation of an earlier rent, that lease determines the base rent to be $28,000 per month. Therefore, the initial legal regulated rent for unit 4M is $28,000. As the unit is currently vacant, the period of this rent level begins at first rental after the issuance of the order in this case. See Matter of 502 West 44th Street, Loft Board Order No. 4280 (July 17, 2014).

2. Unit 7M,

The Loft Board's records do not contain a lease or any other information as to the rent charged on June 21,2010. The earliest lease contained in the Loft Board's records is a lease with a monthly rent of $25,000 and a lease term of February 1, 2011 to April 30, 2013. Absent other documentation of an earlier rent, that lease determines the base rent to be $25,000 per month. Therefore, the initial legal regulated rent for unit 7M is $25,000. Unit 7M has a lease currently in effect at that rent level and a lease term of April 1, 2018 to March 31, 2019. Therefore, the period of the initial legal regulated rent takes effect upon the expiration of the lease currently in effect. The tenant may elect a one or two year term at that time.

3. Unit 10B

The Loft Board's records do not contain a lease or any other information as to the rent charged on June 21 , 2010. The earliest lease contained in the Loft Board's records is a lease with a monthly rent of $30,000 and a lease term of May 1, 2017 to April 30, 2018. Prior to this lease, the unit was owner occupied. Therefore, the initial legal regulated rent for unit 10B is $30,000.00. Assuming the date of the final rent order is September 20, 2018, the period of this rent level will run from October 1, 2018 for a one or two year term as elected by the tenant.

D. Items of General Applicability

Pursuant to 29 RCNY § 2-01(m), the Loft Board directs the Association to register:

• the Building as a multiple dwelling with the New York City Department of Housing Preservation and Development ("HPD") and • units 4M, 7M and 10B as rent stabilized units with DHCR2 or any succeeding regulatory agency.

See, MDL § 286(3). Further, the unit owners of 7M and 10B must offer the occupants of units 7M and 10B leases subject to the provisions of this Order, the Emergency Tenant Protection Act of 1974 and the Rent Stabilization Law and Code except to the extent that the provisions of Article 7 -C are inconsistent. See, MDL § 286(3) and 29 RCNY § 2-01(m).

CONCLUSION

The Loft Board finds that the Association is in compliance with MDL § 284(1).

2 The Association must register the Building with HPD, if required under MDL § 325, before the Building can be registered 'with DHCR.

4 Loft Board Order No. 4803

The loft Board finds Units 2B, 2M, 3B, 3M, 4B, 5B, 5M, 6B, 6M, 7B, 8B, 8M, 9B, 9M, 10M, 11 B, 11 M, 12B, and the combined unit 12M/PH are owner-occupied condominium units. A final rent adjustment is not necessary for these IMD units because pursuant to MDl § 286(8), owner-occupied condominium units are not subject to rent regulation.

Additionally, the loft Board directs the Association to register the Building as a multiple dwelling with HPD and to register Units 4M, 7M and 10B as rent stabilized units with DHCR or any succeeding regulatory agency.

The initial legal regulated rents are:

Unit Tenants Initial Lejlal ~u lated Rent 4M N/A $28,000.00 7M Prakazrel Michel $25,000.00 10B Michael Graff & Carol Ostrow $30,000.00

Effective thirty-five (35) days from the mailing date of this Order, the Building is no longer an IMD and is no longer under the jurisdiction of the New York City loft Board.

DATED: September 20,2018

Renaldo Hylton Chairperson

Board Members Concurring: Barowitz, Roche, Hernandez, Delaney, Schachter, Torres, Hylton

Board Members Dissenting: Carver

DATE lOFT BOARD ORDER MAilED: SEP 2 8 2018

5 NOTICE

A party aggrieved by a determination of the Loft Board may file an application for reconsideration of the determination. Under 29 RCNY § 1-07(b), an aggrieved party must serve the reconsideration application on the affected parties to the prior proceeding. Service of the application shall be completed in accordance with 29 RCNY § 1-06. The aggrieved party must then file the application at the Loft Board's office along with proof of service and the required application fee. Under section 1-07(b), "(t)o be considered timely, a complete reconsideration application must be received by the Loft Board within 30 calendar days after the mailing date of the determination sought to be reconsidered."

Pursuant to 29 RCNY §1·07(d):

A Loft Board determination pursuant to section 1-06 if these rules shall be the final agency determination for the purpose of judicial review, unless a timely application for reconsideration of the determination has been filed. In such case, (i) if the Loft Board modifies or revokes the underlying order, such revocation or modification shall be deemed the final agency determination from which judicial review may be sought; (ii) if the Loft Board denies the reconsideration application, the underlying order shall be deemed the final agency determination; and (iii) if the Loft Board decided the reconsideration application by remanding the matter to the hearing officer for further proceeding, neither the underlying order nor the remand order shall constitute a final agency determination, and no judicial review may be sought until such time as the Loft Board issues a final agency determination following the remand.