Matter of Boyers OATH Index Nos. 1338/12, 1381/12 & 1403/13 (Feb. 10, 2014), adopted in part, rejected in part, Loft Bd. Order No. 4302 (Sept. 18, 2014) [Loft Bd. Dkt. Nos. TR-0832, TR-0847, LC-0160]

Applicants Boyers and Kelly applied for coverage of their second- floor unit. ALJ found that there was inconclusive evidence that there was residential occupancy of the unit for twelve consecutive months during the window period. Moreover, there was insufficient physical conversion of the loft and any residential use was incidental to the primary commercial use of the unit as a fitness training business, dance studio and artist’s studio. ALJ recommends that Boyers’ and Kelly’s application for coverage be denied.

Applicants Nourse and Bennett applied for coverage of their eighth-floor unit that includes a residential apartment, an adjacent office and a storage closet in another tenant’s unit. During the proceeding, the owner registered the building and the Nourse/Bennett unit, then filed an application for de-coverage of the office space and closet. Nourse and Bennett moved for dismissal of the de-coverage proceeding, asserting that the owner’s registration of their unit and failure to timely contest coverage thereafter preclude the owner from contesting coverage. ALJ recommends that tenants’ application for dismissal be granted in part and denied in part.

Loft Board adopts ALJ’s finding that the second floor (Boyers/Kelly) unit is not eligible for Loft Law coverage because the applicants did not prove they residentially occupied the unit during the window period or that the formerly commercial unit had been converted, at least in part, into a dwelling unit.

Loft Board found for the Nourse/Bennett eighth floor unit that by registering 7N and 8SE the owner acknowledged Nourse/Bennett as the protected occupants of their unit. The Loft Board found that the office area is part of the residential unit but the storage closet is not and that use of the storage closet was not a service provided by the owner.

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______

NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS

In the Matter of LOWELL BOYERS AND EILEEN KELLY Applicants & In the Matter of KAREN NOURSE AND ZACHARY BENNETT Applicants & 513 WEST 26TH REALTY, LLC Applicant -against- KAREN NOURSE AND ZACHARY BENNETT Respondent ______

REPORT AND RECOMMENDATION KARA J. MILLER, Administrative Law Judge Applicants Lowell Boyers and Eileen Kelly and applicants Karen Nourse and Zachary Bennett applied to the Loft Board, under section 281(5) of the Multiple Dwelling Law (“MDL”) for a finding that they are protected occupants of an interim multiple dwelling (“IMD”) located at 521-523 West 26th Street, New York, New York (the “building”). See Mult. Dwell Law Art. 7-C (the Loft Law); 29 RCNY§§2-08, 2-09(b) (Lexis 2013). 513 West 26th Realty, LLC, the corporate owner of the building, opposed the applications and the Loft Board referred the matter to this tribunal for hearing. 29 RCNY§1-06(j)(2)(ii). (ALJ Exs. 1, 2, 4, 5). Applicants Nourse/Bennett filed a motion for summary judgment on May 25, 2012, which was granted in part because there was no dispute that the parties were residentially occupying a portion of their unit and denied in part because an issue of fact existed as to whether the office portion of the unit was a commercial or commercial/residential space. See Matter of Nourse, OATH Index No. 1381/12, mem. Dec. (June 15, 2012). (ALJ Exs. 7, 8, 9, 10) A 10-day hearing was held in which the parties presented 21 witnesses and documentary evidence. On the fourth day of the hearing, I made a site visit to the applicants’ units. After reviewing the hearing record, as well as the parties’ post-trial briefs, I conclude that the Boyers/Kelly coverage application should be denied, the Nourse/Bennett coverage

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application should be granted in part and denied in part, and the owner’s de-coverage application should be denied in part and granted in part.

ANALYSIS

The building is located at 521-523 West 26th Street in the Chelsea section of Manhattan. The proceeding was commenced by two coverage applications being filed at the Loft Board by Boyers and Kelly seeking coverage of the second floor and Nourse and Bennett seeking coverage of their unit on the eighth floor. The applications were consolidated for hearing (ALJ Ex. 1, 4).

Multiple Dwelling Law In 2010, the state legislature passed amendments to the Loft Law, which added section 281(5) to the MDL. L. 2010, Ch. 135 § 1 (eff. June 21, 2010) (adding MDL § 281(5)); L. 2010, Ch. 147 § 1 (eff. June 21, 2010) (amending MDL § 281(5)). Amended section 281(5) defines an IMD as any building that: (1) at any time was occupied for manufacturing, commercial, or warehouse purposes; (2) lacks a certificate of compliance or occupancy pursuant to section 301 of this chapter; (3) is not owned by a municipality; and (4) was occupied for residential purposes as the residence or home of three or more families living independently from one another for a period of 12 consecutive months during the period commencing January 1, 2008, and ending December 31, 2009, “provided that the unit” (i) is not located in a basement or cellar and has at least one entrance that does not require passage through another residential unit to obtain access to the unit, (ii) has at least one window opening onto a street or a lawful yard or court as defined in the zoning resolution for such municipality, and (iii) is at least 400 square feet in area. MDL § 281(5) (Lexis 2013). Since this building is located on West 26th Street between Tenth and Eleventh Avenues in Chelsea, it is subject to a coverage exception that requires only two families to occupy the building for a residential purpose during the window period, as opposed to three or more families. See MDL § 281(5) (permitting an exception for a geographical area in Manhattan bounded by West 24th Street to the south, West 27th Street to the north, Tenth Avenue to the east and Eleventh Avenue to the west). On August 14, 2012, before the hearing was concluded, the owner registered the building with the Loft Board, covering the entire Nourse/Bennett unit

- 4 - and another tenant’s unit on the seventh floor, who is not a party to this action (ALJ Ex. 11). On October 15, 2012, the owner filed an application contesting coverage of a portion of the Nourse/Bennett unit (ALJ Ex. 13). On January 29, 2013, Nourse and Bennett filed a motion for summary judgment and a motion to dismiss the owner’s de-coverage application (ALJ Ex. 15). On February 7, 2013, I denied the motion for summary judgment and reserved decision on the motion to dismiss (ALJ Ex. 18). The remaining question is whether the Boyers/Kelly unit and the Nourse/Bennett unit should be covered under the Loft Law.

Coverage Application of Lowell Boyers and Eileen Kelly When Boyers initially moved into the building in 1991, he was residing on the seventh floor. Kelly moved in with Boyers on the seventh floor in 1995. In 1996 they moved together from the seventh to the second floor (“the loft”) with a friend for the purpose of living in the space. The space had previously been an upholsterer’s shop and when Boyers and Kelly moved in, it was a raw, empty space with a few walls. Boyers and Kelly renovated the loft by tearing down the existing walls, changing some of the existing plumbing, tearing out the bathroom stalls in the “master bathroom,” installing a second bathroom, building two kitchens on either end of the loft, installing electrical wiring, and building walls to divide the loft into two separate living spaces. They lived on one end of the loft in their own residential space and the friend lived on the other end of the loft (Tr. 141-42, 246-49, 315, 806, 990-92). Boyers, an artist, became a personal trainer in 1997 to supplement his income from selling his paintings. Kelly, a dancer, became a personal trainer as well, shortly thereafter (Tr. 993-94). In 1997, Boyers opened his own physical training business in the loft. He described the initial commercial enterprise as “a rudimentary gym in one room” of the loft (Tr. 995). Boyers and Kelly described the remainder of the space as “living and creative” areas. By the time that the rudimentary gym was installed, their friend had already moved out and a portion of the loft was rented to a tenant (Tr. 995-96). Between 1997 and 2004, the loft had been reconfigured several times and Boyers and Kelly had moved from one portion of the loft to the other to accommodate their health and fitness business (Tr. 249-50, 996). In addition to physical training, Kelly taught yoga, gave massages and trained clients in nutrition (Resp. Ex. A, BB; Tr. 33-34, 66, 84, 160-61, 249, 806, 997-98, 1055-59, 1061).

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In 2003, Kelly started Threshold: Fitness Beyond the Physical, Inc. (“Threshold”). In either late 2003 or early 2004, Boyers and Kelly, along with some other tenants, brought a lawsuit against the owner of the building seeking rent stabilization. The tenants were unsuccessful and as part of a settlement Boyers and Kelly agreed to use the loft exclusively for commercial purposes. In 2004, they renegotiated their commercial lease for the loft and agreed to remove the two kitchens. They did not dismantle the bathrooms because they were used for the physical fitness business. The space was reconfigured and Boyers and Kelly purchased a studio apartment two blocks away at 470 West 24th Street (“London Terrace”), where they resided (Resp. Ex. A, BB; Tr. 33-34, 36-37, 69, 84, 102, 160-61, 249, 340-41, 343-48, 389-90, 410, 422, 806, 830, 997-98, 1055-59, 1061, 1583-). Boyers and Kelly testified that they furnished the London Terrace studio apartment with furniture and rugs given to them from friends and family. It has a “kitchenette” stocked with pots/pans, dishes, cutlery and glasses. There is also a table and chairs (Tr. 1065-66). Boyers’ and Kelly’s second-floor loft has two entrances, one through a locked door at the top of the stairwell, and the other from a private elevator that requires a key. In 2003, they purchased the initial gym equipment which was set up in one of the rooms that Boyers and Kelly described as the “living room/training area.” In 2004, they purchased additional equipment and set up a training room in what they describe as the “dining room/kitchen/training area.” There are Moroccan doors at the entrance to each of the gyms. The living room/training area has six large pieces of Nautilus commercial fitness training equipment, including a leg press, leg extension, leg curl, chest press, chest row, and shoulder press. The living room/training area is also furnished with a Persian carpet, an Indonesian daybed, Kelly’s grandmother’s wedding trunk, some chairs, and free weights. The dining room/kitchen/training room has six large pieces of Nautilus commercial fitness training equipment, including a leg press, chest press, abduction/adduction, a pullover, abdominal crunch, and a spinal exercise machine. The room is also furnished with a Persian carpet, a small antique table, two big Chinese wooden chairs, a bookcase, sitting stools, and knick knacks. Both gyms are decorated with Boyers’ paintings. Kelly testified that the décor is an “expression of our creative imagination” (Tr. 411). She referred to the loft as “the last Bohemian outpost in Chelsea” (Tr. 1004). The physical layout of the training rooms remained the same between 2004 and 2010, until a kitchen was installed in

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August 2010 in one of the rooms (App. A Ex. 3; Resp. Ex. G; Tr. 25, 56-60, 85-87, 104, 204-05, 226-27, 251, 261-62, 343-48, 415, 438, 501, 1005, 1024, 1054-58). Threshold’s clients’ appointments are from approximately 7:30 a.m. until noon, Monday through Friday, and Monday evenings from 5:30 to 7:30 p.m. The sessions are 45 minutes in duration. Boyers and Kelly each see three to five clients a day. The clients paid either $70 or $75 per session in 2008 and 2009, and $80 per session from 2010 to present (Tr. 54, 98, 106, 404-05, 417-18, 856-58, 894, 901-02, 927-929). Some of Threshold’s clients use the shower in what Boyers and Kelly refer to as the “master bathroom” and Threshold provides them with towels and toiletries. Lynn Vogelstein, a former client and good friend, testified that there was a cabinet in the bathroom for clients to leave their own toiletries (Tr. 86, 100-01). Other clients use the bathroom to change their clothes (Tr. 50, 53, 86, 101, 121, 171, 416-18, 807, 1077, 1091). Boyers and Kelly testified that the washer and dryer in the laundry room are used to wash their laundry as well as to launder the towels Threshold clients use (Tr. 439). Boyers’ artist studio is in the rear of the loft. In addition to paints, canvases, brushes and other painting tools, Boyers testified that his studio has a bigger table where they would eat dinner. Other items located in Boyers’ studio include a television, dog bed, chairs and their bicycles. Between 2004 and 2010, there was a makeshift kitchen in Boyers’ studio. There was no sink or oven because there was no plumbing or gas in his studio. There were, however, pots/pans, dishes, and assorted electrical appliances, such as a rice cooker, tea kettle, and two- burner hot plate. Additionally, there was a refrigerator, but there was conflicting testimony as to its actual size. In 2008, Boyers purchased a convection/toaster oven, which was stored on a bookshelf with the other small appliances (App. A Ex. 2, 3; Tr. 87, 124-25, 131, 144-45, 169- 179, 172, 204-05, 263-64, 814, 832-33, 840-41, 848, 850, 854, 874, 903-04, 1002-03, 1013-14, 1052-53, 1069, 1072, 1095). There is an interior corridor off of the elevator and stairwell entrance. Off of this corridor is the “master bathroom,” which has a gang sink (one long sink with three faucets), claw-foot bathtub, and toilet (App. A Ex. 3; Tr. 143, 205-06, 234, 808, 1008, 1071, 24, 68-69, 85-86). The laundry room, which has a washer, dryer, and hot water heater, is also accessible from the corridor (App. A Ex. 3; Tr. 265, 25, 56, 85-86). Between the training rooms there is a sitting area with a row of theater audience seats, as well as, an antique chair, a low bench, a Moroccan rug, and some of Boyers’ paintings. Clients will often sit in this area to wait for their

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appointments and there are lockers for the clients to leave their belongings (App. A Ex. 3; Tr. 25, 56, 168, 266, 1092). Boyers and Kelly testified that they also use this sitting area to read, talk or play with their dogs (Tr. 118-19, 1098). As part of the reconfiguration after Boyers and Kelly agreed to move out in 2004, they constructed a wall in the front of the loft to create a dance studio and installed a wooden dance floor and a mirrored wall with a theater curtain. Kelly does authentic movement and contemplative dance. Although Kelly uses the space to dance, the dance studio is primarily used by The Field, a membership based non-profit dance organization that administers the Field Artist Residency program to provide free and subsidized rehearsal space to artists (Tr. 272, 377, 440, 591-92). The Field has subleased the dance studio from Threshold Fitness since 2004 until present. The Field paid for the installation of the dance floor, the mirrored wall, and theater curtains to cover the mirrors. They also provided a boom box, the folding chairs, and a folding table. In addition, there is a bathroom located inside the dance studio. The furnishing is minimal, with some rugs, folding chairs, and a television. The Field uses the dance studio for artists to rehearse, for round table discussions, and for a program called “Field Work,” in which artists meet to show and discuss work in progress (App. A Ex. 3; Resp. Exs. B, C, D, M-31, M- 32, M-33, M-34, M-35; Tr. 650). The Field signed a five-year lease with Threshold in 2004, which was renewed in 2009. There is nothing in the lease to indicate that the dance studio is a shared space to provide for Kelly’s use of the space (Resp. Exs. B, C, M1-2, M3-5; Tr. 821-24). The Field pays monthly rent for the dance studio and the bathroom inside the dance studio. In addition to rent, The Field pays fifty percent of the electricity which fluctuated between $180 and $360 per month (Resp. Exs. B, M1-2, M6-26; Tr. 187, 189, 191, 202, 259, 272-74, 375 378, 393-94, 618, 622-23, 644, 896-97, 1006, 1081). The renewal sublease included a provision, for The Field to pay half of any monthly real estate tax increases (Resp. Ex. C, M3-5; Tr. 403, 607-612). The loft is approximately 3,400 square feet and the dance studio comprises 1,000 square feet. Threshold paid rent of $7,503 per month for the loft in 2008, and The Field paid $3,441 per month in rent to Threshold that year. The Field’s rent was increased three percent annually. In 2009, it was $3,613 per month and in 2010, it was $4,081 per month (Resp. Exs. A, B, C, M1-2, M3-5, M-27 M-30; Tr. 359-362, 364-65, 367-68, 399-403, 418-21).

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The dancers using the space leased by The Field enter the loft through the stairwell door (Tr. 310-11, 456, 602, 653). The Field has keys to the building’s entrance door and the loft’s locked entrance door at the top of the stairwell (Tr. 395, 456, 458). The keys are kept at The Field’s main office and the dancers have to pick them up there (Tr. 634-35). Although someone consults with Boyers and Kelly about scheduling, there is nothing in the lease limiting the amount of time that The Field uses the dance studio (Tr. 274, 395). If Boyers and Kelly are away, The Field still uses the dance studio, and the dancers are able to access the space with The Field’s key (Tr. 1079). The Field’s dance studio in the loft has been used by over one hundred dancers in a calendar year, either individual dancers or groups of performers consisting of ten to fifteen dancers (Tr. 396, 600). Jennifer Wright-Cook, the Executive Director of The Field, testified that the artists pay a subsidized fee to use the space for a period of three to four months for six to eight hours a week. There are approximately seven to eight artists or artist companies that will use the space during a three to four month period (Resp. Exs. M-28, M-29, N; Tr. 592- 93). The Field has permitted artists to hold small benefits or performances in the dance studio, but they must request The Field’s permission before they could do so (Resp. Exs. M-31, M-32, M-33, M-34, M-35; Tr. 594-95). Boyers and Kelly host a dinner in the dance studio for the artists at the beginning of each season, which is usually catered (Tr. 623, 625). The Field will sometimes use the space to conduct classes or hold panel discussions. There are times that The Field will use the space for the entire weekend when they bring in artists from around the country (Resp. Exs. M-28, M-29, M-31, M-32, M-33, M-34, M-35; Tr. 623-24). Joanne Marie Burgess, a former employee of The Field from June 2008 through May 2009, testified that she would discuss the dancers’ schedules with Boyers and Kelly. According to Burgess, Boyers and Kelly had first choice on the use of the space and she would schedule the studio for the artists on dates that were cleared by them (Tr. 207, 215, 218, 221). Most of Burgess’ contact with Boyers and Kelly was over the telephone, although she would occasionally see them when she went to the loft to clean the dance studio or to check on the dancers (Tr. 222). Across from the dance studio is a small room. Depending upon the year, this room served different purposes. Boyers and Kelly testified that between 2004 and 2008, this room was an office and yoga studio. They further testified that from 2008 to 2010, it was a bedroom and for two months in 2010 it was leased to an architect for office space. The architect had his own key to the loft and for his office door. He employed several people and used the space

- 9 - exclusively for commercial purposes. The architect and his employees came and went as they pleased and used the “master bathroom.” When Boyers and Kelly leased the space to the architect, their expectation was that he would be using the office space for one year. Boyers and Kelly, however, decided after two months that they did not want to lease space to the architect anymore so they asked him to move out. After the architect vacated, Boyers and Kelly maintained that they converted the space to a bedroom (Resp. Ex. R; Tr. 110, 258, 267, 271-72, 275-76, 444-45, 809, 833, 1082-84, 1089-90, 1097, 1101). Boyers, Kelly, and several witnesses testified that in 2008, Boyers and Kelly separated. They maintained that Boyers moved back into the loft to sleep in June 2008, because Kelly had asked him to leave the London Terrace apartment (App. A Ex. 1, 2; Tr. 26-27, 89, 91, 102, 115, 143-45, 148, 161, 164, 166, 172, 258-59, 267, 1011-12, 1062). Robert Boyers, Lowell Boyers’ father, testified that there was an “explosive split” in their marriage at his other son’s wedding on June 14, 2008 (Tr. 166). Boyers and Kelly maintained that there was always a bed in Boyers’ studio that he had stored on its side in the racks where he keeps his paintings. In 2008, when they first separated, Boyers moved the bed from his art studio and put it on the floor of the office/yoga studio (Tr. 453-544, 1064, 1067). There was no physical alteration of the loft during this period of time. Neither Boyer nor Kelly informed the owner of the building that Boyers was living in the loft again because they believed that it could have jeopardized their lease (Tr. 445). Indeed, Boyers testified that the owner of the building would have moved to evict him if he had known that he was living there (Tr. 1074). Boyers and Kelly testified that in 2010, they reconciled and she moved back into the loft in February 2010 (Tr. 269, 1016). As a consequence, they rented the London Terrace apartment through Flip Key Trip Advisor, Craig’s List and Air B&B (App. A. Exs 12, 13; Res. Ex. T; Tr. 128-29, 289, 293, 449). After Kelly moved back to the loft, they installed a kitchen at the end of the training room, which they also refer to as “kitchen/dining area” (Tr. 438, 834). The kitchen consisted of a counter with electric burners and a sink. In addition there is a full-size refrigerator and shelving with pots and pans and non-refrigerated dry foods. Until 2010, when they installed the kitchen in the training room, the only sink in the loft was in the bathroom (Tr. 22-23, 46, 90- 91, 93, 114-15, 128, 149, 151, 812, 886, 1071, 1073). During the time that the architect was renting the office for two months in the summer of 2010, Boyers and Kelly moved their bed into Boyers’ studio and slept there (Tr. 448, 1085).

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Kelly testified that although they were sleeping at the London Terrace apartment between 2004 and 2008, they “spent all of their time” at the loft (Tr. 259). She maintained that they continued to use the loft exactly as they had before with the exception of not sleeping there (Tr. 891). Yet, she acknowledged that when they moved out of the loft in 2004 to move to the London Terrace apartment, that “no one was living on the [second] floor at the time” (Tr. 250). When asked where they were living in 2008, Kelly replied, “we were living on 24th Street” referring to the London Terrace apartment (Tr. 259). Between 2004 and 2010, while residing at the London Terrace apartment, Kelly would arrive at the loft between 5:30 and 7:00 a.m. and would leave at the end of the day at 10:00 or 11:00 p.m. Boyers testified similarly that while they were both living at the London Terrace apartment, they would wake up very early around 5:30 or 6:00 a.m. They would take the dog for a walk and go to the loft. They fed the dog at the loft. They would make themselves breakfast, read the paper, and prepare for the early morning physical fitness clients. They would train their clients until around noon. Boyers would take the dog for a walk and when he returned they would have lunch. Boyers testified in the afternoons “we would make our art” (Tr. 1000). Boyers would paint and Kelly would rehearse, dance, write, or sew. Kelly would also work online on her laptop computer. They would walk the dog again in the late afternoon and then meditate. Afterwards they would prepare and eat dinner. Following dinner, they would make more art and then return to the London Terrace apartment to shower and sleep (Tr. 893, 1000- 01). Boyers testified that on the weekends, “all we did was make art at the loft” (Tr. 1001). Boyers’ and Kelly’s testimony minimized the appeal of the London Terrace apartment, emphasizing how small it was and that it was used solely as a place to sleep. Indeed, Kelly testified that she did not like spending time at the London Terrace apartment because it was unfamiliar to her and depressing to be there (Tr. 893). Yet, an advertisement Kelly placed on November 21, 2010, in The New York Times’ real estate section contradicts this contention. The advertisement glowingly describes The London Terrace apartment as follows, The 650 sq. foot 1 bedroom has soaring 13 foot ceilings that give it a feeling of grandeur. It is sumptuously decorated with Persian carpets, fine antique furniture and beautiful paintings . . . The kitchen is sleek stainless steel illuminated by a wall of frosted glass. There are ebony hardwood floors, a master bedroom separated from the living area by sliding mahogany doors and a full living room and dining area . . . French country benches surround a full size hand painted wooden table where you could easily host dinner for 8. Perhaps the best feature

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of the apartment is the enormous bathroom of Italian marble outfitted with a European bidet and steam shower . . . Located in London Terrace, a famous doorman building in Chelsea, the apartment has a private ground floor entrance.

(Resp. Ex. I). The amenities listed in the ad include: fireplace, swimming pool, doorman, elevator, fitness center, washer/dryer in Unit, Cable/Satellite TV, high speed internet, spa/Jacuzzi, central A/C. In addition, there is a full kitchen with cooking and dinnerware, full linens/bath sheets, towels (Resp. Ex. I). One of the reviews of the apartment praises, “the kitchen comes with everything you can think of” (Resp. Ex. I). Even understanding that this is an advertisement seeking to rent the space and that a certain amount of hyperbole was likely employed in drafting the text, it is a stark contradiction to the hovel-like studio described by Boyers and Kelly. First and foremost, Boyers and Kelly testified repeatedly that it is a studio apartment, yet they advertised it as a one-bedroom apartment. In addition, Boyers and Kelly refused to acknowledge that they spent any time at the London Terrace apartment other than to sleep. Kelly called it depressing and they repeatedly stressed how small it is. They insisted that they prepared and ate all of their meals in a makeshift kitchen in the loft and ate either at a tiny table in the fitness room or a larger table in Boyers’ artist studio. Meanwhile, they lived in a luxury apartment in a luxury, doorman-building with a full kitchen, not a kitchenette as they contended, which was stocked “with everything you can think of” and “a full size hand painted wooden table where [they] could easily host dinner for 8.” Notably, according to the advertisement Boyers and Kelly placed in the newspaper, the bathroom at the London Terrace apartment sounds as though it belongs in a lavish hotel. Yet, Boyers and Kelly insisted that they used the “master bathroom” at the loft, which was shared with Threshold clients and the architect, his employees, and clients while the architect was renting the space. Moreover, the bathroom sink was allegedly used not only for their daily ablutions, but to wash their dishes and clean Boyers’ painting equipment. Nevertheless, Boyers and Kelly stressed that all of their amenities of “living” were at the loft. Boyers and Kelly hosted dinners for the artists from The Field, and held Buddhist prayer meetings in the dance studio (Resp. Ex. H; Tr. 94-95, 131-32, 260, 424-25, 850). They would also have friends over for dinner (Tr. 850). The loft is also Kelly’s office work space (Tr. 324). When asked if the loft was their home between 2004 and 2008, Kelly responded “it was like our home” (Tr. 401). Kelly testified that Boyers used his studio for more than painting, but he went

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“home” to sleep, referring to the London Terrace apartment (Tr. 435). They testified that there was no television at the London Terrace apartment, and that they would watch television in Boyers’ artist studio. Kelly denied that she only used the loft during the window period for commercial purposes, testifying that she did “some living” at the loft (Tr. 321). She testified that all of her daytime activities were at the loft, including meals, spending time with her pets, and artistic pursuits with dance and creative endeavors. They maintained that their only access to Wi-Fi was at the loft. In addition, she watched television at the loft and entertained there (Tr. 323, 890-91). Additionally, they washed their clothes at the loft. Yet, the rental advertisement for the London Terrace apartment delineates a number of amenities, including Wi-Fi, DVD flat- screen television, stereo with input for a portable music device, cable/satellite TV, high speed internet, and a washer and dryer in the unit (Resp. Ex. I). I find that Boyers and Kelly were disingenuous in contending that all of their life activities took place in the loft and that they only used the London Terrace unit for sleeping. Boyers and Kelly are both artists that appear to have a very fluid lifestyle. They both indicated that the fitness business was affected by the recession and that they were training fewer clients. As a consequence, they were “freaking out about money” (Tr. 1097-98). In 2010, they rented the “bedroom” at the loft to an architect to help supplement their income and rented out the London Terrace apartment periodically as a vacation rental. The evidence submitted demonstrated that during most of May, June, and July, 2010, the London Terrace apartment was rented to various vacationers wishing to stay in Chelsea while visiting New York City (App. A Ex. 13; Tr. 1097- 98). They moved their bed into Boyers’ artist studio and slept on the floor to accommodate the architect’s office. Boyers’ studio is an extremely messy, disorganized artist’s workspace. The studio not only accommodates a hodge-podge of painter’s supplies but is also used for storage. Boyers and Kelly do not appear to be opposed to being inconvenienced or roughing it to earn extra rental money on the loft or the London Terrace apartment. It is plausible, however, that they were willing to use the loft as a back-up place to sleep on those occasions when they rented out their apartment to earn extra money. To qualify for coverage under the Loft Law, this building must have been “occupied for residential purposes as the residence or home of any [two] or more families living independently from one another for a period of twelve consecutive months” during the applicable window

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period. Mult. Dwell. Law § 281(5) (Lexis 2013). The applicable window period for Boyers’ and Kelly’s loft commenced January 1, 2008, and ended December 31, 2009. Loft Board Rule 2-08(a)(3) defines “living independently” as: …having attributes of ‘independent living’ by a family in each residential unit, such as: (i) a separate entrance providing direct access to the residential unit from a street or public area, such as a hallway, elevator, or stairway within a building; (ii) one or more rooms such as a kitchen area, a bathroom, a sleeping area and a living room area arranged to be occupied exclusively by the members of a family and their guests, which room or rooms are separated, and set apart from all other rooms within a building; and (iii) such other indicia of independent living which demonstrate the residential unit’s use as a residence of a family living independently.

29 RCNY § 2-08(a)(3) (Lexis 2013). The First Department has elaborated on the residential use requirement, stating: For a unit to qualify as a residence under Multiple Dwelling Law § 281 it must possess sufficient indicia of independent living to demonstrate its use as a family residence. It is then not enough to show residential use alone. The showing of residential use must be accompanied by a showing that the formerly commercial premises, the domestic use of which is claimed, physically reflect that use, i.e., that the premises have been converted, at least in part, into a dwelling.

Anthony v. NYC Loft Bd., 122 A.D.2d 725, 727 (1st Dep’t 1986) (citations omitted); see also Madeline D'Anthony Enterprises, Inc. v. Sokolowsky, 101 A.D.3d 606, 607 (1st Dep’t 2012) (“In order for a unit to qualify as a covered residence, ‘it must possess sufficient indicia of independent living to demonstrate its use as a family residence’. This includes a showing that the premises have been converted, at least in part, into a dwelling”); Amann v. NYC Loft Bd., 262 A.D.2d 234, 235 (1st Dep’t 1999) (building not covered where “units reviewed were not sufficiently converted to residential use”); Loft Realty Co. v. Aky Hat Corp., 131 Misc. 2d 541, 542 (1st Dep’t, App. Term 1984) (unit not covered where “there was no ‘conversion’ of the space to residential use or joint commercial and residential use in the sense contemplated by the Loft Law”); Matter of Pels, OATH Index No. 2481/11 at 4 (June 20, 2012), adopted Loft Bd. Order No. 4161 (June 20, 2013) (“To establish the residential nature of a loft unit during the window period, the applicant must show ‘sufficient indicia of independent living’ to demonstrate the unit’s use as a family residence as well as some physical conversion of the unit.”).

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Determining whether there are sufficient indicia of residential use and physical conversion requires a case by case analysis in which no one factor is determinative. Matter of Tenants of 323-325 W. 37th Street, OATH Index No. 692/06 at 17 (May 18, 2007), adopted in part, modified in part, Loft Board Order No. 3457 (Sept. 18, 2008), application for reconsideration granted in part and denied in part, Loft Bd. Order No. 3496 (Apr. 23, 2009); Matter of South 11th Street Tenants’ Ass’n, OATH Index Nos. 1242/96, 1243/96 & 1244/96 at 34 (Mar. 30, 1999), adopted, Loft Bd. Order No. 2397 (Apr. 29, 1999). The factors considered in determining whether the physical conversion is sufficient have included the presence of permanent improvements, such as bathrooms, bathing facilities, closets, and walls erected to separate living areas, and the presence of non-permanent items reflecting residential use such as refrigerators, stoves, and beds. See, e.g., Matter of Pels, OATH 2481/11 at 5-6 (finding the installation of a kitchen, stove, refrigerator, cabinets, a desk and shelves, and the addition of walls to separate the living area and an additional doorway, were sufficient indicia of independent living and conversion); Matter of 333 PAS CoO Tenants Group, OATH Index No. 968/08 at 16 (June 30, 2009), adopted, Loft Bd. Order No. 3552 (Nov. 19, 2009) (finding refrigerator, stove, bedroom with built-in closets, and a bathroom with mirrors “sufficient proof of conversion to residential use”); Matter of South 11th Street Tenants’ Ass’n, OATH 1242/96, 1243/96 & 1244/96 at 38-39, 41 (sufficient indicia of residential conversion where tenant cleared out debris, erected sheet-rock walls and hung a heavy curtain to enclose his living area, built a loft bed and shelving, installed a bathtub and a mail slot, and had various personalty in the loft including, a table, chairs, hot plates, refrigerator, and stereo); C.f. Matter of Wada, OATH Index No. 1519/96 at 23 (July 25, 1997), adopted, Loft Bd. Order No. 2156 (Oct. 10, 1997) (insufficient physical conversion where though tenant placed bed in the loft behind a movable partition, he had no bathroom, kitchen, running water, appliances or fixtures in his space); Matter of Citrin, Loft Bd. Order No. 231, 2 Loft Bd. Rptr. 112, 115 (Apr. 24, 1985) (insufficient conversion where kitchen was constructed for still life photography work). In a mixed use loft such as the Boyers/Kelly unit, the nature of the residential and commercial uses must be carefully examined before determining coverage. While mixed commercial and residential use does not bar a finding that an entire unit should be considered residential in character for coverage purposes, the residential use must be the primary use of the

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unit. See 29 RCNY § 2-08(l) (Lexis 2012); Matter of South 11th Street Tenants’ Ass’n, OATH 1242/96, 1243/96 & 1244/96 at 49. Factors considered in determining whether a residential use is incidental or primary include the percentage of the space and the amount of time the unit is used residentially. See, e.g., Franmar Infants Wear, Inc. v. Rios, 143 Misc. 2d 562 (1st Dep’t, App. Term 1989) (where only a small corner space, approximately 5 feet by eight feet, of a 625 square foot artist’s studio was used residentially, court found the character of the space remained commercial); Loft Realty Co. v. Aky Hat Corp., 123 Misc. 2d 440, 445 (Civ. Ct. N.Y. Co.), aff’d, 131 Misc.2d 541 (App. Term, 1st Dep’t 1984) (where tenant used approximately 2% of a unit residentially, the rest of which was used as a hat factory, unit not covered because residential use was incidental to commercial use); Matter of Pels, OATH 2481/11 at 7 (noting that the applicants’ “living quarters are a significant in proportion to the overall size”); Matter of Addis, OATH Index Nos. 1574/02, 1575/02 at 12 (Nov. 25, 2002), adopted, Loft Bd. Order No. 2772 (Jan. 9, 2003), reconsideration denied, Loft Bd. Order No. 2954 (Sept. 15, 2005) (insufficient residential use where commercial tenant slept in loft only a few nights per month); Matter of Bal, Loft. Bd. Dkt. No. TR-0050 at 15 (Oct. 8, 1997), adopted, Loft Bd. Order No. 2175 (Oct. 30, 1997), aff’d sub nom, Amann v. NYC Loft Bd., 262 A.D.2d 234 (1st Dep’t 1999) (where applicant occupied two units, sleeping in one and using the other primarily for storage, the unit used primarily for storage was not covered despite the fact that the applicant occasionally used it for cooking on a hotplate). The tenants’ purpose for occupying the unit is also considered in determining whether a unit is primarily residential or commercial. For example, in Anthony v. NYC Loft Bd., 122 A.D.2d 725, 727-28 (1st Dep’t 1986), the court found that a unit leased as a dance studio was not covered where the tenant resided there due to the need to prepare for dance performances. Likewise, in Matter of Tenants of 323-325 W. 37th Street, OATH Index No. 692/06 at 18-19 (May 18, 2007), adopted in part, modified in part, Loft Board Order No. 3457 (Sept. 18, 2008), application for reconsideration granted in part and denied in part, Loft Bd. Order No. 3496 (Apr. 23, 2009), aff’d, 79 A.D.3d 488 (1st Dep’t 2010), the ALJ found that a unit leased by a museum display company was primarily commercial, despite the tenants creation of a “hangout space” with a bed and a couch in the back of the workshop and the presence of a refrigerator and stove in the lunch area, where one of the tenants testified that he temporarily used the place as a

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crash pad when he was evicted from his apartment and the other tenant testified that he slept there during periods of marital discord and never intended to make it his home. When Boyers and Kelly renegotiated their lease for the second-floor loft in 2004, they undertook a major reconstruction of the unit. They removed the kitchens, and converted the front of the loft into a dance studio and an office/yoga studio. They testified that after Kelly asked Boyers to leave the London Terrace apartment in June 2008, he moved back into the loft to sleep. Boyers and Kelly both maintained that Boyers continued to sleep in the loft for the remainder of the window period and that Kelly moved back into the loft in February 2010. It is undisputed that there were no physical alterations to the loft during the window period. The layout and physical structure of the loft remained the same. A kitchen was not re- installed. The only change was that Boyers moved a mattress that he kept in his art studio to the office/yoga studio, and placed it on the floor. This is insufficient to establish a physical conversion. See Matter of Wada, OATH Index No. 1519/96 at 22-23 (July 25, 1997), adopted, Loft Bd. Order No. 2156 (Oct. 10, 1997) (finding tenant failed to show physical conversion of the unit; “that he placed a bed in the front space and slept there did not, by itself, establish it as a residence for Loft Law purposes.”). Notably, during the window period, there was not even a kitchen in the loft. See Madeline D’Anthony Enterprises, Inc. v. Sokolowsky, 101 A.D.3d 606, 607 (1st Dep’t 2012) (“Where only a small portion of the space is devoted to residential use, and residential amenities are lacking, the premises are not covered.”); see also 29 RCNY § 2-08(a)(3)(ii) (Lexis 2013) (listing a kitchen is as an indicator of independent living in a residential unit). Boyers and Kelly asserted that between 2004 through 2010, there was some sort of makeshift kitchen in Boyers’ studio. But, there was no plumbing or gas. The only sink was in the bathroom, which was also used commercially to accommodate Threshold clients and to clean Boyers’ paint supplies. The “kitchen” in Boyers’ studio was nothing more than a few small electrical appliances and pots stored on a bookshelf and a refrigerator. Moreover, the kitchen that was added to one of the training rooms in 2010, after the window period, appears to have been added for a commercial purpose, specifically to aid in the nutritional services the applicants offered. See Matter of Citrin, Loft Bd. Order No. 231, 2 Loft Bd. Rptr. 112, 115 (Apr. 24, 1985) (insufficient conversion where kitchen was constructed for still life photography work). Indeed, Ian Shand, a long-term client, testified that he was served beverages in the training room/kitchen/dining room

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after his workouts and when he and his wife took an eight-week nutrition course with Kelly (Tr. 47-48). Moreover, in order for the unit to be covered, there needs to be some evidence that it was physically converted to reflect a residential use. Anthony v. NYC Loft Bd., 122 A.D.2d 725, 727 (1st Dep’t 1986). The case enunciating this standard, Anthony, did so in the context of explaining what was necessary to show residential occupancy during the window period. 122 A.D.2d at 727; see also BOR Realty Corp. v. NYC Loft Bd., 129 A.D.2d 496, 498 (1st Dep’t 1987) (“the statutory language [of MDL § 281] embraced space that had been converted to residential use, and was being occupied by someone as ‘the residence or home’”). Thus, it suggests that at least some of the physical conversion needs to have been completed prior to the close of the window period. See also Matter of Citrin, Loft Bd. Order No. 231, 2 Loft Bd. Rptr. 112, 115 (Apr. 24, 1985) (disregarding improvements made after the window period, and determining applicant was not covered based on lack of physical conversion). The tenants cite Matter of Tenants of 141-155 S. 5th Street, Loft Bd. Order No. 1739 (Jan. 19, 1995), to support their argument that the conversion need not have taken place during the window period. In that case, the tenant made physical improvements to the unit before the window period, including adding walls to separate the space, a kitchen, a bathroom, and a sleeping area, and installing electricity and plumbing. After the window period, he added an electric stove. This is distinguishable from the case at hand where the tenants had to remove all of the residential features of the unit prior to the window period, and did not make changes to the unit again until after the window period. In this case, unlike 141-155 S 5th Street, the premises during the window period lacked the requisite physical improvements. The layout of the unit also suggests that it should not be covered. The space seems primarily used for commercial purposes, with only a small room set up for residential use. See Franmar Infants Wear, Inc. v. Rios, 143 Misc. 2d 562 (1st Dep’t, App. Term 1989) (where only a small corner space, approximately 5 feet by eight feet, of a 625 square foot artist’s studio was used residentially, court found the character of the space remained commercial). The loft, using Boyers’ and Kelly’s measurements, is approximately 3,400 square feet and the bedroom space is approximately 266 square feet, which is only 8% of the entire unit. While this is not determinative, it does indicate that the primary use of the space is commercial. Moreover, Boyers and Kelly were willing to vacate their “bedroom” so that they could rent the space out to

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an architect. While it is true that the architect only stayed for two months, May and June 2010, the original intention was to have him rent the space for a year (Tr. 1097-98). Boyers and Kelly refer to the smaller training room as their living room. Kelly testified that what makes it a living room is how they use the room. In addition, she maintained that it is furnished like a living room, because of the Indonesian daybed, Kelly’s grandmother’s hope chest and a little chair (Tr. 501). Between 2004 and 2008, when they were sleeping at London Terrace, the room was furnished the same way (Tr. 501). Despite Kelly’s contention that the Indonesian daybed was never used as part of the fitness training, several clients mentioned sitting on it or using it for exercise, referring to it as the wooden bench (Tr. 57, 105, 869). With respect to the training room/kitchen/dining room, between 2004 and 2008, the “dining room table and chairs” were always present, even when they were residing at the London Terrace apartment. Although, Boyers and Kelly contended that the chairs were dining room chairs, the record reflected that the chairs were also used by their fitness clients at times (Tr. 490, 506). Boyers testified that they “situated these gyms inside the culture of life” and that they have an “Asian esthetic” (Tr. 1005). Both he and Kelly took great pains to downplay the “Asian esthetic” as a selling point for their fitness business. Instead, they emphasized that this was their home and it was merely decorated to reflect their style and artistic vision. This, however, was contradicted by Threshold’s website and Facebook page, which highlights the décor of the fitness rooms. On the business’ website, it states, Welcome to Threshold, a boutique private gym facility located in West Chelsea, offering one-on-one instruction in a unique setting – a completely private, meditative, art-filled environment.

The unique ambience is a welcome alternative to other gyms, it’s a white-washed artist’s loft accented with burgundy walls, Moroccan doors and Persian rugs – an original vision for rough-hewn luxury – expert training, advanced scientific methods, quality equipment but in a private room with no tv, no treadmills, no music and no mirrors. An oasis for the body mind and spirit.

(Resp. Exs. E, F, I). Nothing on the website indicates that space is also used as Boyers’ and Kelly’s home. Indeed, Threshold’s website has links to a number of articles featuring the gym, all of which refer to the décor but none mention that it is also a residence. In a Body & Soul article, entitled

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Zen in the Weight Room, the writer describes Threshold as an “exercise studio.” She further writes that, Boyers and Kelly, “have brought their personal interest in things Eastern to their whitewashed studio space in Manhattan’s Chelsea neighborhood. Wooden temple doors lead to the workout space, where the atmosphere is distinctly anti-gym” (Resp. Exs. E, I). Dailycandy.com featured Threshold in an online article, that reads, “Moroccan doors, jaw-dropping art, Persian rugs, and a claw-foot tub. Not a designer showroom. Not a boutique hotel. A gym.” The remainder of the article highlights the exercise routines, nutritional counseling and Kelly’s Thai massages. Similarly an article in Travel Girl magazine stated, “Gym meets Asian retreat at Threshold, a hidden West Chelsea studio, outfitted with carved Moroccan doors, Persian carpets and Asian-inspired paintings” (Resp. Exs. E, I). An article in Vogue magazine highlighted the boutique gym atmosphere and ambiance, stating, Threshold is not your stereotypical gym. When I arrived for a consultation, a boxer dog and a Siamese cat hurried over to greet me. The place was blissfully silent: no blaring club music, no CNN. Boyers’ artwork covered the walls . . .

The Vogue magazine article discussed Kelly’s nutritional counseling and Thai massages. The journalist also described her initial fitness consultation with Kelly that took place on the Indonesian daybed. It stated, Kelly led me briskly into a workout room, replete with a lush wine-colored Persian rug, Moroccan doors, and six weight machines. We sat on a bench . . .

(Resp. Exs. E, I). Jennifer Wright-Cook, Executive Director of The Field, testified that she was conscious “not to disturb [Kelly] and [Boyers] in their living and working environment” (Tr. 642) and The Field wanted the artists to be mindful that this was someone’s home (Tr. 652). It is notable, however, that while The Field Artist Residency application describes the dance studio at the loft, mentioning how to access it, keys, locks, dimensions, fixtures, and equipment, it does not state that the loft is Boyers’ and Kelly’s home. To the contrary, the application states that “[The Field] share[s] the second floor with a fitness company called Threshold.” (Resp. Ex. M -28). Joanne Marie Burgess, a former employee of The Field, testified that the physical fitness business was a “little business” and the workout rooms were a very small part of the operation. For the most part the loft was “very homey” and it appeared to be where Boyers and Kelly lived

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(Tr. 208). Burgess, however, was not a very persuasive witness. Her testimony was disjointed, ambiguous, and vague. Moreover, Threshold’s website belies Burgess’ contention that the fitness training rooms are a small part of their business. In addition to direct testimony about residential use, this tribunal also looks at circumstantial evidence of the tenants’ intent to make the unit their residence, such as the receipt of mail at the unit, whether the unit’s address is used for voter registration, driver’s license, and other official documents, and whether the tenant has maintained another residence. See, e.g., Matter of Gareza, OATH Index Nos. 2061/12 & 760/13 at 8 (Dec. 12, 2012) (indicia of residential use included receiving mail and tax documents at the address, using the address on a bank account, and being registered to vote at the address); Matter of the Tenants of 141-155 S. Fifth Street, Loft Bd. Order No. 1739, 15 Loft Bd. Rptr. 199, 212 (Jan. 19, 1995) (finding that tenant “moved into the loft intending to build himself a home,” based in part on his listing it as his home address on tax returns and marriage certificate, and his home owner’s insurance policy on the unit); Matter of Mussman, Loft Bd. Order No. 905, 9 Loft Bd. Rptr. 50, 59 (May 25, 1989) (finding that tenant did not residentially occupy the unit based in part on automobile registration, automobile insurance, and voter registration showing another address and the tenant’s failure to explain why his wife resided at that address without him); Matter of Citrin, 2 Loft Bd. Rptr at 115 (the fact that tenant had another apartment supported the argument that he did not use the unit at issue as a residence); Matter of William Muschel, Inc., Loft Bd. Order No. 33, 1 Loft Bd. Rpt. 27, 30 (Nov. 23, 1983) (considering documents, including tax returns, checks, and a passport, indicating the loft was applicant’s residence as “the Board considers where one holds oneself out as residing as probative of where one resides in fact”). Boyers and Kelly used the loft address for their marriage license, voter registration, bank statements, credit card statements, cell phone bills, and their separate health insurance policies (App. A Ex. 5, 6, 7, 8, 9, 10, 25; Tr. 281-82, 285, 315, 317, 320, 327, 339, 812, 1018-19, 1023). This, however, is not determinative that the loft was their residence. Boyers and Kelly spent a predominant amount of their time at the loft and acknowledged that it was more convenient to get their bills and statements mailed to the loft. Indeed, between 2004 and 2008, when Boyers and Kelly were both residing in the London Terrace apartment, they still received their mail, including bills and statements at the loft (Tr. 1054, 1095). Moreover, in 2008, when Kelly was presumably living at the London Terrace apartment by herself, she opened a new bank account,

- 21 - using the loft address (App. A Ex. 9; Tr. 284, 315, 318-19). Similarly, when Boyers was still living at the London Terrace apartment he obtained a new Freelancer’s insurance policy, using the loft address (App. A Ex. 26; Tr. 1020, 1035). There is signage outside the stairwell entrance for Threshold Fitness and it is also listed in the building’s directory in the lobby, as well as a sign on the exterior of the building near the entrance door. The same is true of The Field. There is, however, no listing of Boyers or Kelly, individually, in the lobby directory (Tr. 194, 503-05, 637, 655). Kelly’s driver’s license, which expired in 2010 and was not renewed, had the London Terrace address on it (Tr. 289, 450). Boyers’ Department of Motor Vehicles abstract shows that on January 1, 1995, his driver’s license reflected an address in Saratoga Springs, New York. Nine months later on October 24, 1995, Boyers changed the address on his license to 521 West 26th Street, Floor 7. Four years later, when he and Kelly moved to the loft on the second floor, he changed his license to 521 West 26th Street, Floor 2. In April 28, 2008, after Boyers and Kelly moved out of the loft and were residing at the London Terrace apartment, Boyers changed the address on his license to 470 West 24th Street, #1A. When asked why he used the London Terrace address as opposed to the loft’s, Boyers replied, “I was not intending to return to live at the loft” (Tr. 1063). Even though Boyers changed the address on his driver’s license every time he moved, he kept the London Terrace address throughout the window period. On August 25, 2010, shortly after the Loft Law was amended, Boyers’ changed his license once again to reflect the loft’s address (App. A. Ex. 24; Resp. Ex. S; Tr. 1017, 1028-31, 1063, 1149). Boyers’ testimony regarding his driver’s license was confusing and inconsistent. It is clear, however, that he changed the address on his driver’s license to the London Terrace address when they moved there. Indeed, even in 2008, when he was presumably not living at the London Terrace apartment, his driver’s license still reflected the London Terrace address. In 2010, after the Loft Law was amended, Boyers changed the address on his driver’s license to the loft. He testified that he deliberately changed his driver’s license to the loft address because the “Loft Law had been cleared” (App. A Ex. 24; Tr. 1028, 1149). Although he later denied changing his license because he thought it would be helpful to obtain coverage for the loft, he admitted that he changed it because he “was legally allowed to be on the up and up now” (Tr. 1030-31). Finally, the owner argued that by taking 100 percent of the rent, insurance, utilities, and other items as a business deduction on Threshold’s 2008, 2009, and 2010 tax returns for the

- 22 - entire second floor loft, Boyers and Kelly admitted that the loft was completely used for commercial purposes. Boyers and Kelly disagree, arguing that the information stated on the tax return is not controlling. Kelly is a one hundred percent shareholder of Threshold Fitness and the physical fitness business has been the primary source of her income since 1997 (Tr. 348, 476). In 2008, 2009, and 2010, Kelly took a tax deduction for Threshold’s portion of the rent. She admitted that she reported to the IRS that the entire loft was used for business purposes, that it was not treated as a home (Resp. Ex. J, K, L, O, P, Q; Tr. 471). She signed the tax returns and submitted them swearing that they were true statements (Tr. 472, 478). Moreover, on schedules B and D on Threshold’s 2008, 2009, and 2010 tax returns, Kelly indicated that the London Terrace apartment was her home address (Resp. Ex. J, K, L, O, P, Q; Tr. 479-81). Boyers’ testimony regarding his role in Threshold was vague and ambiguous. He testified that Kelly operates a business at the loft and he is a painter. He does not consider himself as an owner or employee of Threshold, but admitted that “I work for it” and acknowledged that he helped start it (Tr. 1036). Threshold’s website, however, states that Boyers started Threshold with his wife in 2003. He testified that he assists in the operation of Threshold (Tr. 1037). He then qualified his testimony by stating he has something to do with the business because he is a trainer (Tr. 1037). Later he referred to Threshold as “our business,” explaining, “we’re a mom and pop in the traditional sense” (Tr. 1038). Boyers testified that he considers the loft his business address and started paying rent for his artist studio to Threshold for tax purposes (Tr. 1039-40). Boyers deducted the rent for his studio as a business expense on his taxes in 2008, 2009, and 2010 (Resp. Exs. Z, AA). Boyers deducted $10,200 in rent for his studio on their 2009 joint income tax return. It was later disclosed during the hearing, however, that he did not pay rent to Threshold in 2009, and that the inclusion of studio rent as a business expense on the tax return was “an error” (Tr. 1454-56). In addition, even though Boyers testified that he was living at the loft during 2008 and 2009, he never filed form 8829, Expenses for Business Use of Your Home, with the Internal Revenue Service, which is required when a taxpayer uses part of his home for home business purpose (Tr. 1452). See 26 USC §§ 162, 262. Moreover, Boyers and Kelly filed joint income tax returns for 2008 and 2009, stating that the London Terrace apartment was their only home residence (Tr. 288, 450, 943).

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The owner argued that since Boyers and Kelly swore to the Internal Revenue Service under penalty of perjury, they are judicially estopped from taking a contrary position during this hearing. Boyers and Kelly, on the other hand, argued that neither this tribunal nor the Loft Board has jurisdiction to entertain equitable claims. Matter of Benaresh, OATH Index No. 2276/09 (Sept. 22, 2009), adopted, Loft Bd. Order No. 3577 (May 20, 2010); 323-25 W. 37th Street, OATH Index No. 692/06, mem. Dec. at 2-3 (Oct. 27, 2006) adopted in part modified in part, Loft Bd. Order No. 3457 (Sept. 18, 2008). Judicial estoppel, however, is not an equitable remedy. Judicial estoppel, which is also known as the doctrine of preclusion of inconsistent positions, is defined as estoppel that prevents a party from contradicting previous declarations made during the same or an earlier proceeding if the change in position would adversely affect the proceeding or constitute a fraud on the court. See Black’s Law Dictionary, at 631 (9th ed. 2009). See also, D&L Holdings, LLC v. RCG Goldman Co., LLC, 287 A.D.2d 65, 71-72 (1st Dep’t 2001) (the doctrine of judicial estoppel is intended to prevent abuses of the judicial system by which a party obtains relief by maintaining one position, and later, in a different action, maintains a contrary position). This doctrine has also been applied to situations involving contrary statements on tax returns. As was noted above, Threshold deducted its entire rent paid to the owner as a business expense in 2008, 2009, and 2010 (Tr. 471). Under the tax code, a person can only deduct the entire rent if the premises is being used exclusively for business purposes; if it is been partially used for residential purposes, only a portion of the rent is deductible. See 26 U.S.C. § 280A; 26 C.F.R. § 1.262-1(b)(3) (Lexis 2012). In Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 422 (2009), the Court of Appeals stated that “A party to litigation may not take a position contrary to a position taken in an income tax return”. In Matter of Gurkin, OATH Index No. 489/12 (Aug. 23, 2012) adopted, Loft Bd. Order No. 4186 (Oct. 17, 2013), Judge Alessandra F. Zorgniotti noted the relevance of Mahoney- Buntzman v. Buntzman, but found that the tenant had not made a contradictory statement on his tax return. Judge Zorgniotti stated, Mr. Gurkin’s statements on his tax returns that 595 Broadway was his home address and that 206 Bowery was his business address do not directly contradict his position that he residentially occupied 206 Bowery during the window period. Mr. Gurkin did not state that the addresses were used exclusively for residential or business purposes and respondents have not cited any section of the Tax Code requiring that the addresses listed be exclusively used for the purposes identified.

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Indeed, such a requirement is not contained in the instructions for the income tax forms. Dep’t of Treasury, Internal Revenue Service, Instructions for Form 1040 (2009), available at http://www.irs.gov/pub/irs-prior/i1040--2009.pdf. Had Mr. Gurkin used his unit at 206 Bowery exclusively for business purposes he would have been entitled to list his entire rent as a business expense which he did not do. 26 U.S.C. §§ 162(a)(3), 280A. Instead, he seems to have refrained from any representation on his tax returns that he used 206 Bowery exclusively for business purposes.

Gurkin, 489/12 at 16. The same is not true for Boyers and Kelly. Indeed, Threshold represented on its taxes that the loft was exclusively used for business purposes when it deducted its rent as a business expense. Recognizing that the Loft Board has been disinclined to consider tax returns as determinative, See Matter of William Muschel, Inc., Loft Bd. Order No. 33, 1 Loft Bd. Rptr. 27, 30 (Nov. 23, 1983) (“the Board considers where one holds oneself out as residing as probative of where one resides in fact . . . [however] testimony taken in connection [with a tax return] might very well lead to an analysis based on the tax laws, rather than Article 7-C, taking the inquiry away from the issue of residency”); see also Pittis v. NYC Loft Bd., 201 A.D.2d 388, 389 (1st Dep’t 1994) (“The testimony could reasonably be interpreted as applying to the critical period and simply because the Zox’s may have deducted the rent as business expenses on their tax returns does not mandate a finding that the premises was used for business purposes within the meaning of the Loft Law.”), does not mean that contradictory statements made on a tax return should be completely ignored. At a minimum Boyers and Kelly’s contradictory statements on their tax returns should be assessed in analyzing their credibility and should be considered as one of several factors in determining whether the loft was primarily used for business purposes. After reviewing the testimony and the numerous exhibits in conjunction with making a site visit to the loft, I do not find that this unit should be covered under the Loft Law. Boyers’ and Kelly’s testimony was self-serving and not entirely credible. A significant part of their testimony was exaggerated and several aspects were contradicted by information on the internet, their taxes, and other witnesses. Not only did they make contradictory statements on their taxes, Boyers actually claimed rent as a business deduction in 2009, despite not paying any rent. While it is possible that Boyers and Kelly separated at some point during the window period, the timeframe between the separation and the reconciliation coinciding with the window period was almost too convenient to be believable. Despite their creative turn of a phrase, Kelly

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was not living at the loft at all during the window period. Moreover, I was not persuaded that Boyers was residing in the loft continuously for twelve months during the window period. According to their testimony, Boyers started sleeping in the loft at the end of June 2008. Kelly forgave Boyers in February 2009 and they started marriage counseling in March 2009 (Tr. 1016). Although they maintained that Kelly moved back into the loft in February or March 2010, after the Loft Law was amended, it is quite possible that Boyers moved back to London Terrace apartment before the end of June 2009. Even if one were to believe that Boyers was living at the loft for 12 consecutive months during the window period, I still find that the loft should not be covered. There was not a significant physical conversion of the unit during the window period to make it residential. While Boyers and Kelly stressed that the loft had been reconfigured in 1997 to create two residential spaces, that was no longer the case in 2008 or 2009. To the contrary, by agreement with the landlord in 2004, Boyers and Kelly moved out of the loft and reconfigured it into a commercial space. They removed the kitchens and constructed a dance studio in the front of the space. They contended that Boyers moved back into the loft to live residentially in June 2008 and resided there ever since. Even if true, the space was never converted to a residential space. The physical layout remained the same and Boyers merely moved a mattress stored in his artist studio and placed it in the office/yoga studio. It is not enough to show residential use alone; rather, there must also be a showing that the formerly commercial premises, the domestic use of which is claimed, physically reflects that use. Matter of South 11th Street Tenants’ Association, OATH Index No. 1242-44/96 at 50-51 (Mar. 30, 1999) (citations omitted). Notably, there was no kitchen during the window period, despite their assertion, to the contrary, that a few small electrical appliances stored on a bookshelf in Boyers’ studio constituted a kitchen. There was no plumbing in Boyers’ studio, nor was there any gas. Moreover, Boyers’ studio, in which this makeshift kitchen was located, was extremely commercial. It is not uncommon for a commercial space to have a refrigerator and small electrical appliances. It still does not change the commercial aspect of the premise. Despite what Boyers and Kelly named the fitness rooms, they are both still a gym, each with six large pieces of commercial exercise equipment. I did not credit that the “living room/training area” was a living room. It does not look like a living room and everything that is in the room is reflective of the ambiance that Boyers and Kelly strove to create for their boutique

- 26 - gym. All of the items in this particular training area were used by Threshold’s fitness clients. The Indonesian daybed which was discussed extensively at the hearing is in essence a wooden bench or couch, which one of Boyers’ and Kelly’s witnesses testified that he used for exercise purposes. Furthermore, one of the articles linked to Threshold’s website mentions that this bench was used by Kelly for an initial fitness consultation with the article’s author. The “dining room/kitchen/fitness room” was nothing more than a fitness room during the window period. Pulling two oversized wooden chairs around a tiny marble table does not constitute a dining room. Like the other fitness room, the composition of equipment in this training room made it look exactly like what it is – a gym. It is a nice gym, but it is still a gym. Moreover, the kitchen that is currently present in this training room was not installed until after the Loft Law had been amended in 2010. It was not even present in the room during the window period. The character of the loft is overwhelmingly commercial. The entire layout of the loft, with the exception of the “bedroom” which is also sometimes a yoga studio or an office, is commercial in nature. In addition to the two commercial fitness rooms, there is a waiting area for Threshold clients and a shared bathroom. The bathroom was not only used by Boyers and Kelly, it was used by fitness clients who sometimes showered there. When the “bedroom” was leased to the architect, the architect, his employees, and clients also used this bathroom. Boyers leases his studio in the rear of the loft from Threshold. It is a cluttered commercial artist’s studio comprised of a big open space with paint supplies and paintings everywhere and it is also used for storage. In 2004, Boyers and Kelly had a dance studio installed in the front of the loft which is leased to The Field. Since 2004 to the present the dancers have access to the loft via the doorway at top of the stairwell. They are provided a key to enter and use the space at various periods of time. The executive director of The Field testified that there could be as many as one hundred dancers using the space over the course of a year. It is highly unusual to give such a high volume of people largely unfettered access to one’s home. Although Boyers and Kelly received their mail at the loft, this appeared to more of a convenience than an indication of residency. Even when they were both admittedly living at the London Terrace apartment, they still received their mail at the loft. After they separated in 2008, Kelly opened her own bank account and had the statement mailed to the loft even thought she

- 27 - was not living there. Moreover, both Threshold Fitness and The Field are listed in the building directory in the lobby, but Boyers and Kelly are not. Similarly, there is signage on the exterior of the building and outside the loft stairwell door for both Threshold Fitness and The Field. Granted that Boyers and Kelly do some non-business activities at the loft, such as eating their meals, resting, meditating, and sewing, these activities are incidental to their commercial use of the space. The residential use of this loft appears to be incidental to the commercial uses and is insufficient to warrant Loft Law coverage. I recommend that the second-floor unit should be denied coverage and that Boyers and Kelly do not qualify for protected occupancy status.

Karen Nourse and Zachary Bennett Nourse’s and Bennett’s eighth-floor unit consists of residential space and a small office that they maintain in the loft for their film-making business. Nourse and Bennett have been living on the eighth floor of the building in the residential space since 1998. In 2006, they acquired the adjacent unit which is only accessible by a separate entrance in the building corridor. There was a significant amount of testimony that this adjacent unit is used by them for both commercial and residential uses. In addition to conducting business in the office, their children use that space as a playroom and to watch television. Nourse and Bennett also use the office space to store personal items such as clothing and bicycles. Moreover, on occasion, they use it as a guest room (App. B Exs. 3, 4, 5, 6, 9, 11, 14, 20; Tr. 522-23, 526-27, 677, 680, 683, 685, 781, 1118, 1164, 1170, 1220-22, 1244-45, 1250, 1254, 1261, 1282-84, 1312-14, 1318, 1320, 1339, 1468-70, 1478, 1494-97, 1500). The other spaces on the eighth floor that Nourse and Bennett contend are part of their residential unit consist of a storage room and a laundry room (App. B Ex. 15-2, 15-8). The rest of the eighth floor is occupied by Levi Nayman, who uses the space commercially for Crazy Levi’s Pinball Repair. This is a side business and hobby for Nayman, who has a full-time job with the wholesale department store union. Nayman refurbishes old pinball machines and sells them, and for his own entertainment he fixes the machines to play them. The pinball repair shop has somewhere between 30 to 50 pinball machines in various states of repair. Approximately 20 to 30 machines are standing upright and are operable. The remainder is stacked on their side either to be repaired or used for parts (App. B Ex. 3; Tr. 1174, 1176-77, 1179, 1564, 1594).

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Karen Nourse and Zachary Bennett filed an application pursuant to section 281(5) of the Multiple Dwelling Law seeking coverage of their eighth-floor unit in the building and protected occupant status (ALJ Ex. 4). The owner filed an answer opposing the application (ALJ Ex. 5). Nourse and Bennett moved for summary judgment prior to the commencement of the coverage hearing, asserting that they were entitled as a matter of law to a finding that they were protected occupants (ALJ Ex. 7). The owner submitted a partial opposition to the motion and Nourse and Bennett submitted a reply (ALJ Ex. 8). With respect to residential occupancy, the owner admitted that Nourse and Bennett used parts of the eighth floor space as their residence during the window period and on June 21, 2010. The owner disagreed, however, that the entire space was reserved for residential use. Indeed, the owner contended that the office, which is not accessible internally from the remainder of the unit, does not have any residential amenities such as a living area, plumbing, and a kitchen. Moreover, the doorway of the office has signage indicating that it is used for the applicants’ business “KZ FILMS” (Resp. Ex. Y). The owner argued that the office is a separate commercial space, distinct from the applicants’ residential space (ALJ Ex. 8). Prior to the commencement of the hearing, I issued a decision regarding Nourse’s and Bennett’s motion for summary judgment, granting it in part with respect to portion of the unit for which the owner acknowledged residential occupancy. The summary judgment motion was also denied in part since there were disputed issues of fact material to the case regarding the office and the storage closet (ALJ Ex. 10). See Matter of Nourse, OATH Index No. 1381/12, mem. dec. (June 15, 2012). On August 14, 2012, before the coverage hearing was completed, the owner registered the tenants’ eighth-floor unit and another residential unit on the seventh floor of the building with the Loft Board (ALJ Ex. 11). Thereafter, on October 15, 2012, the owner filed an application with the Loft Board “contesting coverage to part of the space occupied by Zachary Bennett and Karen Nourse,” specifically the office and storage closet (ALJ Ex. 13). The owner’s application contesting coverage was consolidated with the tenants’ applications for coverage. Nourse and Bennett filed an answer on October 22, 2012 (ALJ Ex. 14). On January 29, 2013, the tenants submitted a motion to dismiss the owner’s de-coverage application, arguing that it was untimely and references a non-existent unit, and a motion for summary judgment on their coverage application, arguing that the owner allegedly conceded

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coverage of the tenants’ unit by registering it and the seventh-floor unit and failing to timely contest coverage thereafter (ALJ Ex. 15). In its opposition dated February 4, 2013, the owner argued that the storage closet was not part of the space leased to the tenants (ALJ Ex. 16). I denied the motion for summary judgment because there was a disputed material issue of fact regarding the storage space and reserved decision on the motion to dismiss (ALJ Ex. 18). The Loft Law and the Loft Board Rules require owners of buildings or portions thereof that are covered by the Loft Law to register such buildings or portions thereof with the Loft Board. Mult. Dwell. Law § 284(2) (Lexis 2013); 29 RCNY § 2-08 (Lexis 2013). The registration application “must specify which residential units are being registered as IMD [Interim Multiple Dwelling] units and include the unit designations and location in the building.” 29 RCNY § 2-05(b)(1). Under the rules, when an owner registers a building or unit, the owner has a limited timeframe in which it may contest coverage. Specifically, Loft Board Rule 2-05(b)(4) provides: Completion and submission of a registration application form does not constitute a waiver of the applicant’s right to contest before the Loft Board the coverage of the premises described therein as an IMD building under Article 7-C of the MDL, nor shall the act of filing the registration application form constitute evidence before the Loft Board that the building described therein is an IMD building. Notwithstanding the foregoing, the failure of an owner, a building occupant or prime lessee to contest the registration application within 45 calendar days after service of the registration application or 45 calendar days after the filing date with the Loft Board, whichever is later, shall constitute a “waiver” to contest coverage of the units registered, and shall preclude the landlord from contesting such coverage status.

(emphasis added). Likewise, Loft Board Rule 2-05(b)(5) provides: “Any and all applications filed by a landlord, . . . to contest coverage of a building or individual unit under Article 7-C must be received by the Loft Board within 45 calendar days after service of the registration application form on the building occupants and prime lessee(s) or within 45 calendar days after filing of the registration application form with the Loft Board, whichever is later.” Service is deemed complete five days after the date of mailing. 29 RCNY § 1-06(b)(3) (Lexis 2013). In this case, the owner registered the building with the Loft Board on August 14, 2012. The registration identifies the tenants’ “SE Unit” on the eighth floor and a “North Unit” on the seventh floor as the units being covered (Tenants’ Ex. A). The attached list of commercial units indicates that Crazy Levi’s Pinball Repair is the only commercial unit on the eighth floor. No

- 30 - other spaces on the eighth floor are mentioned on the registration form. The owner mailed the tenants a copy of this registration form on the same day that it submitted the form to the Loft Board. Thus, service on the tenants is deemed complete on August 19, 2012, see 29 RCNY § 1- 06(b)(3), and any applications contesting coverage of the tenants’ unit needed to be filed by October 3, 2012, see 29 RCNY § 2-05(b)(4), (5). The owner’s application contesting coverage, however, was not filed until October 15, 2012 (ALJ Ex. 11). It states that the owner is “contesting coverage to part of the space occupied by Zachary Bennett and Karen Nourse,” specifically their “room facing West 26th Street,” which the owner alleges was “used for Business purposes,” and a “storage space,” which it asserts was not part of the space leased to the tenants and was not used residentially. However, the application states that these spaces are part of “The 7th Floor front Portion” (ALJ Ex. 13). As indicated by the registration form, testimony (Tr. 671, 674, 677, 760, 1025, 1116, 1165), an affidavit by the building’s managing agent (Schik Aff.), and a site visit I conducted on June 27, 2012 (Tr. 734), Bennett and Nourse do not occupy space on the seventh floor; their unit is on the eighth floor. Though the Nourse’s and Bennett’s motions notified the owner of this error, the owner did not move to amend its application. Thus, it appeared that the owner was contesting coverage of space that does not exist. Even if the owner had amended its application to identify the appropriate floor, the application would still be flawed with respect to the office facing West 26th Street because it was filed more than 45 calendar days after the registration application was filed with the Loft Board. The registration covered the Nourse’s and Bennett’s entire unit; it did not separately list the office as a distinct commercial unit. Accordingly, any objections to the coverage of that portion of the Nourse/Bennett unit needed to be brought by October 3, 2012. By failing to do so, the owner has conceded its coverage. See Thornley v. Al-Farah, OATH Index Nos. 1819/06, 1935/06 at 4 (Aug. 11, 2006), adopted, Loft Bd. Order No. 3405 (Feb. 21, 2008), aff’d, Nur Ashki Jerrahi Community v. NYC Loft Bd., 80 A.D.3d 323 (1st Dep’t 2010) (owner precluded from contesting coverage where it registered the unit at issue and failed to contest coverage within the relevant timeframe thereafter); Matter of Katz, OATH Index No. 1648/96 at 5 (Sept. 10, 1996), adopted, Loft Bd. Order No. 2037 (Nov. 21, 1996) (“the owner is collaterally estopped from contesting coverage because it voluntarily registered the second floor and then failed to file any challenge to coverage within [the relevant timeframe]”); Matter of Granet, Loft

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Bd. Order No. 705, 6 Loft Bd. Rptr. 118, 120 (Dec. 17, 1987) (where owner listed entire floor as being residentially occupied as one unit on the registration form, it was precluded from challenging coverage of front portion of that floor after the timeframe for contesting coverage of the registered unit had expired); Matter of Bennett, Loft Bd. Order No. 625, 5 Loft Bd. Rptr. 169-70 (June 17, 1987) (“when an owner registers a building and does not challenge coverage within [the prescribed timeframe], the owner cannot dispute that the building is covered.”); Matter of Racheotes, Loft Bd. Order No. 278, 3 Loft Bd. Rptr. 3 (July 17, 1985) (“no timely application was filed by the owner to contest coverage under MDL Article 7-C of the registered units. The owner is thus precluded from contesting coverage at this time of any registered units, due to its failure to file the necessary application within the prescribed time period.”). Consequently, the owner cannot legally contest coverage of the tenants’ main living space, their office or the laundry room. Since the relief sought in the owner’s application with respect to the office is not permitted by Loft Board Rule 2-05(b)(4), that portion of the application must be dismissed as a matter of law. Thus, the only issue of fact remaining is whether the storage space constitutes a part of the tenants’ covered unit. In 2008, Nourse and Bennett realized that they were paying the entire electric bill for the eighth floor and that the pinball repair shop, which occupies about one third of the floor, was not paying for electricity. In addition to the pinball machines that require electricity, there are also electrical tools, a refrigerator, and two air conditioners in the space. There are four light switches to turn on the overhead lights (App. B Ex. 3; Tr. 1566, 1595-96). Bennett testified that he asked Joseph Schik, the managing agent, to split the electric bill between the two tenants. Schik refused to so, but suggested that Bennett try to work something out with Levi Nayman (Tr. 1410, 1593, 1623, 1625, 1629-30). Nourse and Bennett spoke with Nayman, who said that he would contribute a little money towards the electric bill. For two to three months, Nayman gave them $100, which was not even half of the bill. Nayman appeared reluctant to pay them and Nourse and Bennett were having a difficult time collecting the money. As an alternative, they approached Nayman about using part of the pinball repair shop for storage. Between 2008 and 2010, Nourse and Bennett stored some of their belongings in the corner of the pinball repair shop by the door to the fire escape, including boxes of children’s clothing, children’s toys, infant furniture and the overflow from their clothes closets (App. B.

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Exs. 22, 23; Tr. 1166, 1409, 1424, 1472, 1566-67, 1569, 1572, 1578, 1593-94, 1597-98, 1622- 23, 1625). In 2010, Nayman decided to share his space with another pinball repair person. He asked Nourse and Bennett if they would be willing to move their storage items to a different part of his loft. Instead of using the space near the fire exit, they could leave it against the interior wall which was a shared wall with Nourse’s and Bennett’s kitchen. Nourse and Bennett were happy to move their items to this new location because they could build a wall and had access to the area through an existing locked door in the hallway (Tr. 1410, 1566, 1573, 1575, 1599-1600). Three of the building employees over the course of two days constructed a wall for the storage closet inside Nayman’s unit (App. B Ex. 3, 15-8; Tr. 1403, 1471-72, 1568-70, 1601-02). When Nourse and Bennett first moved into their unit in 1998, the pinball repair shop was occupied residentially. The occupant also had a storage closet built in exactly the same space that Nourse and Bennett’s storage closet was constructed in 2010. When the residential neighbor vacated the space in 2006, all of the interior walls in the unit were removed, including the closet wall, but the exterior door to the hallway remained (Tr. 1602-03, 1621, 1627). When the residential tenant was living in what is now the pinball repair shop, Nourse and Bennett did not have any storage in their neighbor’s space (Tr. 1621). Between the time that the residential tenant vacated and Nayman rented the space in 2007, Nourse and Bennett did not rent or use the space for storage (Tr. 1565, 1622). After Nayman moved into the space he paid rent for the space that is currently the storage closet but in 2008 and 2009 he was using the space for his pinball repair business (Tr. 1569). Nayman testified that he was allowing Nourse and Bennett to use the storage space as a favor. Nourse and Bennett did not pay Nayman or the landlord rent for use of the space. Moreover, Nayman still considered the storage space as part of his unit and believed that he could ask Nourse and Bennett to remove their possessions from the closet (Tr. 1578). Nourse and Bennett argued that under the 2010 amendments to the Loft Law that they are entitled to services and the use of amenities to which they were entitled under their lease on June 21, 2010, and to those services and amenities actually provided whether or not they were embodied in a lease. 29 RCNY §2-04(b) and (c). Nourse and Bennett conceded that the storage closet is part of Nayman’s unit and that their use of the storage area was the result of an agreement between them and Nayman. Nevertheless, they contended that regardless to whom

- 33 - the space is leased to, it has been used by Nourse and Bennett since 2009. Therefore, they argued that they are entitled to continued use of the storage closet as protected Interim Multiple Dwelling space. The owner asserted that this space is not part of the space leased to the tenants. The owner presented an affidavit from Schik, the building’s managing agent, stating that the storage closet is part of the pinball repair unit. Schik further maintained that the storage space was the result of an arrangement between Nourse and Bennett and Nayman. The owner was not a party to this agreement (ALJ Ex. 16). The owner further correctly asserted that Nayman cannot bind the owner through his private agreement with Nourse and Bennett. The storage closet is indeed part of the commercial pinball repair unit. Consequently, the owner did not waive coverage of the closet since the pinball repair unit was not registered as a covered unit. See 29 RCNY § 2-05(b)(4) (failure to contest coverage within 45 days “shall constitute a ‘waiver’ to contest coverage of the units registered” (emphasis added)). The storage closet is not a part of Nourse’s and Bennett’s unit. Therefore, Nourse and Bennett are not entitled to continued use of the closet space as a matter of law. The storage closet should not be considered as a part of Nourse’s and Bennett’s covered unit. Under the Loft Board Rules an individual qualifies for protection if he or she is the residential occupant of a covered unit. 29 RCNY § 2-09(b)(1). Even if the tenant does not have a direct lease with the landlord, the tenant will still qualify for protection if he or she occupied the unit prior to June 21, 2010. 29 RCNY § 2-09(b)(2). The owner swore on the registration form that the tenants occupied their unit between January 1, 2008 and December 31, 2009, and that they are the current residential tenants of their unit. Accordingly, I find that Nourse and Bennett qualify for protected occupant status and the residential portion of the unit, including the office and laundry room should be covered under the Loft Law. The storage closet, however, should not be covered.

FINDINGS AND CONCLUSIONS

1. 521-523 West 26th Street, New York, New York, has been registered with the Loft Board as an Interim Multiple Dwelling as of August 14, 2012.

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2. Boyers and Kelly failed to demonstrate that they qualify for protection under the Loft Law as protected occupants and failed to establish that the second-floor unit should be covered under the Loft Law.

3. Nourse and Bennett demonstrated that they qualify for protection under the Loft Law as protected occupants and established that their eighth-floor unit, comprised of the residential space, office, and laundry room should be covered under the Loft Law.

4. Nourse and Bennett failed to demonstrate that the storage closet on the eighth floor should be considered part of their covered unit.

5. The owner’s application contesting coverage of the Nourse/Bennett unit was untimely.

6. The owner demonstrated that the storage closet is a part of a commercial unit adjacent to the Nourse/Bennett unit on the eight floor and that their use of the storage space was through a private agreement between them and the commercial tenant.

RECOMMENDATION Boyers’ and Kelly’s application seeking coverage of the second floor unit should be denied. Nourse’s and Bennett’s application seeking coverage of their residential space, office and laundry room on the eighth floor should be granted. Nourse’s and Bennett’s application seeking coverage of the storage space adjacent to their unit located in the commercial tenant’s unit should be denied. Nourse’s and Bennett’s motion to dismiss the owner’s application contesting coverage should be granted with respect to the office and denied with respect to the storage space.

Kara J. Miller Administrative Law Judge

February 10, 2014

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SUBMITTED TO:

THOMAS FARIELLO, R.A. Acting Commissioner

APPEARANCES:

ROBERT PETRUCCI, ESQ. Attorney for Applicants Boyers and Kelly

GOODFARB & SANDERCOCK, LLP. Attorneys for Applicants Nourse and Bennett BY: MARGARET B. SANDERCOCK, ESQ.

SMITH & SHAPIRO Attorneys for Owner BY: HARRY SHAPIRO, ESQ.