Jul. 18, 2006 - The strange case of the rent-free loft / the dicey math of illegal lofts
Fascinating piece in the Village Voice about the peculiar oh-so-New-York dance that can happen when a landlord accepts residential tenants into a non-residential building. Among other things, landlords are severely restricted in using the courts to collect rent or to evict tenants for non-payment of rent. On the other hand, tenants have limited rights in court to enforce minimal residential standards for heat, safety or services.
I thought I knew most of what has been going on, and I remember what it was like in the ‘early loft’ era in Manhattan, but I was definitely surprised by the concept of tactically free rent in illegally residential buildings.
It might suit only a specific lifestyle
The three roommate sin the Voice article got upset when the landlord tried to raise the rent $40 a month. When they – first – refused to pay the higher rent, and then stopped paying rent completely … silence ensured.
After a year of leaking roofs, soaked furniture, and a locked freight elevator that was only occasionally available for use, the landlord raised their monthly rent from $1,850 to $1,890. "As musicians living on the fourth floor, we need the elevator [to move our equipment]," says Jamal Ruhe. "So that was a primary instigator in our being pissed enough to risk getting thrown out of our apartment." The roommates balked at the thought of paying even more for their crumbling space and decided that they would neither sign the new lease nor acknowledge the rent increase. They waited for the building manager to say something, but as Jamal Ruhe recalls, "Nothing happened, and by nothing I mean nothing at all. Not a tenuous nothing, no word from anyone. And that went on for the better part of the year."
Eventually they figured out something important about NYC rent law:
But after conducting a little research, Jamal Ruhe began to understand the silence. Apartment buildings that have at least three residential units must be registered as a multiple dwelling and must have a certificate of occupancy for residential use—a difficult-to-obtain piece of paperwork. If landlords don't have those documents, as was the case at 170 Tillary, they can neither compel tenants to pay rent nor evict them for nonpayment.
Only in New York kids, only in New York
Can this happen anywhere else? I hope not….
The roommates in the Voice knowingly lived in a space that was a fire trap, that leaked, where the elevator did not often work – let alone that lacked the other “niceties” of the residential building code that did not protect them. On a personal level, they figured it was worth it for free rent.
They figured out that the landlord could not easily sue for eviction for non-payment of rent because it was not a legal residence. But they also knew that they could not sure to enforce any ‘usual’ residential prerogatives – like heat.
For the landlord, apparently it works – until it doesn’t. Once tenants figure out the landlord is a bit hamstrung, they can – and seemingly do – often simply stop paying rent and wait.
Not a lifestyle that will appeal to a lot of tenants, and not a cash flow or liability profile that will appeal to a lot of landlords.
What does the City care?
Once renters stop paying rent, one has to assume they figure they feel they are getting a better deal than if they moved into a place that they actually paid for. Theoretically, they can make the mature decision about risk allocation and – to be in total bad taste -- to leave it to their heirs and assigns to bring a wrongful death lawsuit if the worst happens.
Apparently, this is not a big priority for City housing regulators.
"Usually nothing happens" after a case like this, says April Newbauer, attorney in charge at Legal Aid's civil practice in Queens. "We see the same units being rented out over and over. It could go on indefinitely like that. It is not an individual judge's job to become a whistle-blower for future cases."
When manufacturing or industrial loft buildings became illegal residences, the space available for businesses shrinks – not necessarily a good thing.
Illegal loft apartments are increasingly part of the scenery in many industrial areas of Brooklyn—including DUMBO, Williamsburg, and Bushwick—as demand from manufacturer tenants has fallen. In fact, some housing lawyers estimate that there are hundreds of illegally converted loft buildings in Brooklyn. In East Williamsburg alone, the New York Industrial Retention Network (NYIRN) identified 27 illegally converted loft buildings in an industrial park. The NYIRN, a nonprofit that promotes economic development, is hoping to prevent more illegal conversions and preserve space for manufacturing….
But when people need places to live and spaces are under-utilized by business, there is an opportunity for owners and renters to accommodate each other. Who is exploiting whom? If rent is id for “substandard” living space, maybe it is the owner who takes unfair advantage. When it is the renter who stops paying rent, maybe the owner is the screw-ee.
This is yet another example of a dynamic city re-inventing itself (sometimes, block by block) as times change.
How did it end?
For those paying really close attention, this case from the Voice ended with some money changing hands from the landlord to the tenants. The landlord was in the Second Judicial Department (Queens and Brooklyn), is gained the right to sue to evict in a more summary proceeding than landlords in the First Judicial Department (Manhattan and the Bronx).
Let’s close with another savvy renter quote:
"Do you pay someone an astronomical amount of rent just to have a roof over your head, or do you pay for a certain amount of safety, or do you pay for convenience? Because we haven't had any safety or convenience living here."
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