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. - 2 - ______________________________________________________ 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 - 3 - 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). - 5 - 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.