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Matter of Tenants of 323-325 W. 37th Street

OATH Index No. 692/06, mem. dec. (Oct. 27, 2006)

[Loft Bd. Dkt. No. TR-0768]

ALJ denied those parts of landlord’s motion to dismiss coverage application on grounds of laches, waiver by prior stipulation, and tenants’ ineligibility for protected status. Motion granted as to that part of petition that asserts entitlement to overcharges that accrued prior to filing of coverage application.

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NEW YORK CITY OFFICE OF

ADMINISTRATIVE TRIALS AND HEARINGS

In the Matter of

TENANTS OF 323-325 WEST 37TH STREET

Petitioner

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MEMORANDUM DECISION

TYNIA RICHARD, Administrative Law Judge

This case involves a coverage application filed by the tenants of 323-325 West 37th Street. The original application, filed on April 1, 2005, alleges that the building is an IMD, petitioners are protected occupants, and their units are entitled to protected status with regulated rents established under the Loft Law. The application was indexed by the Loft Board as TR-0768. On July 6, 2005, the owner, 37 West Realty Company, filed an answer generally denying liability as to all the allegations and asserting various defenses to petitioners’ claims. Subsequently, petitioners moved to disqualify respondent’s counsel, because he had represented petitioners in a prior action against the landlord, which motion was granted on December 2, 2005. Respondent later sought permission to file an amended answer, which was granted; the amended answer was filed on April 12, 2006. After conferences held in this case were unsuccessful in settling the parties’ dispute, respondent moved to dismiss the petition on the grounds set forth below. During a conference call with the parties on August 15, 2006, this tribunal rendered a verbal ruling on the motion, which has been reduced to writing herein. For the reasons set forth herein, respondent’s motion is denied. The trial of this matter will be held on November 20, 21, 22, and 28, 2006.

I. Motion to Dismiss

Respondent’s motion to dismiss is grounded in the following four contentions: that (i) the coverage application is stale and barred by laches, (ii) the application as to ten of the tenants is barred by a waiver effected in a prior stipulation by which they settled all rent claims with the landlord, (iii) certain tenants cannot establish protected occupant status because they took occupancy after the window period, June 21, 1982, and (iv) petitioners’ overcharge claims are limited by Loft Board rule 1-06.1(c) only to claims occurring after the date of filing the coverage application, in this case April 1, 2005. As to points “(i),” “(ii),” and “(iii),” above, respondent’s motion is denied; as to point “(iv),” the motion is granted. Each argument is addressed in turn, below.

Laches

Respondent asserts that this proceeding is barred by the doctrine of laches, because petitioners’ 18-year delay in seeking coverage and will result in prejudice to the owner. Respondent also asserts the doctrine of equitable estoppel and claims this proceeding violates its due process rights.[1] These contentions have no legal merit. The Appellate Division has spoken on the matter and has found that “coverage under a rent regulatory scheme is governed by statute and may not be created or destroyed by laches, waiver and estoppel.” Matter of Jo-Fra Properties, Inc., 27 A.D.3d 298, 299, 813 N.Y.S.2d 63, 64 (1stDep’t 2006); see also Ruiz v. Chwatt Assoc., 247 A.D.2d 308, 669 N.Y.S.2d 47 (1stDep’t 1998); Gregory v. Colonial DPC Corp. III, 234 A.D.2d 419, 651 N.Y.S.2d 150 (2d Dep’t 1996). Notwithstanding these rulings, for years, the Loft Board has declined to consider claims of laches finding that it has no equitable jurisdiction upon which to do so. See Matter of Tenants of 51-55 West 28th Street, OATH Index No. 1019/05, mem. dec., at 5 (Nov. 7, 2005); Matter of Teitelbaum, OATH Index No. 424/96, at 7 (May 3, 1996), aff’d, Loft Bd. Order No. 1984, 16 Loft Bd. Rptr. 256A (June 27, 1996); Matter of Lorberblatt, Loft Bd. Order No. 1334, 13 Loft Bd. Rptr. 359A, 363 (June 25, 1992); Matter of Hoppe, Loft Bd. Order No. 1314, 13 Loft Bd. Rptr. 289A, 297 (Feb. 27, 1992).

Even if respondent’s claim were not faulty as a matter of law, it has failed to make any factual showing to establish laches, and it is the movant’s burden to prove not only delay but actual prejudice caused by the delay. See Sori-Goalya Realty, LLC v. New York City Loft Bd., 284 A.D.3d 137, 138, 726 N.Y.S.2d 93, 94 (1st Dep’t 2001); Matter of MKF Realty Corp., Loft Bd. Order No. 2822 (Sept. 18, 2003); Dep’t of Buildings v. Sarabella, OATH Index Nos. 2258-59/00, at 3 (July 2, 2001) (“while respondents asserted that the delay had made it nearly impossible for them to ‘access any relevant documentation or reliable witnesses to the matter in question,’ they had not identified specific documentation or witnesses that were lost as a result of their delay”). Here, relying upon a mere bald assertion of prejudice, respondent failed to make an adequate showing upon which laches could be found in a proper forum. Accordingly, respondent has failed to assert a proper basis for dismissal.

Bar by prior stipulation

Respondent asserts that ten of the tenants waived their rights under the Loft Law in a stipulation executed in 1984 settling another action filed against the landlord. In that stipulation, the landlord and tenants agreed to specified rent-stabilized rent increases. Respondent asserts that the parties “understood” at the time of the stipulation “that the Building was not covered by the Loft Law, because the Building was in a zoning district that precluded residential use” (Resp. motion, at 2).

Loft Board rule 2-10(d)(1), however, preserves rights inuring to tenants under the 1987 amendments to the Loft Law, under which petitioners claim entitlement to coverage. The rule states that:

No sale or agreement made prior to June 21, 1982, or prior to July 27, 1987 for units subject to Article 7-C solely pursuant to MDL 281(4), in which an occupant purported to waive rights under the statute shall be accorded any force or effect.

29 RCNY § 2-10 (d)(1). Therefore, respondent’s argument fails as a matter of law inasmuch as any such stipulation is void. See Matter of Chin, OATH Index No. 1142/97, at 4, 9 (Apr. 18, 1997) (while potential future claims may be waived or released prospectively in a stipulation or agreement, the intent to do so must be evident in the document, and it was not in this case; even if there were a waiver, it would be invalid under rule 2-10(d)(1)), aff’d, Loft. Bd. Order No. 2154 (Oct. 10, 1997), reconsideration granted in part and denied in part, Loft Bd. Order No. 2918 (Apr. 21, 2005) (decision rendered on unrelated grounds).

In addition, respondent failed to establish there was any intent to waive future rights acquired under the Loft Law. The disputed language in the stipulation states as follows: “As long as they shall remain in occupancy and unless the Loft Law shall be applied to the above-named Tenants, Tenants shall continue to have the same right of renewal as rent stabilized Tenants pursuant to the Rent Stabilization Code” (Resp. motion, at 2, Ex. A) (emphasis added). Rather than waiving rights, this language suggests an intention to preserve rights that may be subsequently acquired under the Loft Law. In either case, the stipulation fails to provide an appropriate basis for dismissal.

The tenants are ineligible for coverage

Respondent claims that many of the tenants are not entitled to coverage,[2] because they signed commercial leases and took possession after the 1982 window period; moreover, respondent contends that the Loft Law does not cover anyone who took occupancy for the first time after July 27, 1987 (Resp. motion, at 10). Plainly, the first argument is without merit because the Loft Board, by rule, explicitly authorizes protection for post-window period residential occupants who are prime lessees with a current lease in effect, or who took possession with the landlord’s consent. See 29 RCNY § 2-09 (b)(3)(i). Consent may be established by proof of the landlord’s acceptance of rent for a number of years. See Matter of 400 West 14th Street Tenants’ Committee, Loft Bd. Order No. 1554, 14 Loft Bd. Rptr. 332 (May 4, 1994) (landlord’s consent signaled by receipt of rent payments from tenant); Matter of Law, Loft Bd. Order No. 1319, 13 Loft Bd. Rptr. 313, 333 (Mar. 26, 1992) (occupancy consented to when landlord accepted tenants’ rent directly).

Respondent relies upon Wolinsky v. Kee Yip Realty Corp., 2 N.Y.3d 487, 779 N.Y.S.2d 812 (2004), to support its contention that tenants who took occupancy after the window period are not protected by the Loft Law, but its reliance is misplaced. In Wolinsky, the Court held that residential tenants who were the first to use the units as a residence more than a decade after the window period were not protected occupants under the Loft Law; it did not hold that non-window period residents of regulated units are never protected. See also Matter of Klein, OATH Index No. 300/06, at 6 (May 3, 2006) (rejecting the same argument). Indeed, respondent’s concession that petitioners all have possession pursuant to leases, albeit commercial leases, is a factor that tends to establish the landlord’s consent. The fact that the leases are commercial leases works no different result as long as an actual residential occupancy can be proven; the lease itself may still imply consent. See Matter of Andrew Bradfield, LLC, OATH Index No. 1345/03, at 3-4 (Nov. 18, 2003), aff’d and modified on other grounds, Loft Bd. Order No. 2845 (Feb. 19, 2004), citing Law, Loft Bd. Order No. 1319, 13 Loft Bd. Rptr., at 333. In any event, petitioners are entitled to submit proof of their entitlement to protected status in this proceeding, inasmuch as respondent has not established a basis for dismissal as a matter of law.

The tenants are not entitled to seek overcharge

Finally, respondent contends that petitioners are not entitled to overcharges that accrued prior to the filing of the coverage application, pursuant to Loft Board rule 1-06.1 (c). The rule states that:

An application for rent overcharges shall be filed within four years of such overcharge. Overcharges shall not be awarded for the period prior to the date of filing of a coverage or registration application, nor for more than four years before the date on which the application for overcharge was filed.

29 RCNY § 1-06.1 (c) (emphasis added); see Thornley v. Al-Farah, OATH Index Nos. 1819/06, 1935/06, at 8 (Aug. 11, 2006).

No application for registration has been filed in this case, and the coverage application was filed in this proceeding on April 1, 2005. Thus, although petitioners would be entitled to reimbursement for four years of overcharges, its claim for overcharge did not begin to accrue until April 1, 2005, when the coverage application was filed. Petitioners cite Matter of Teitelbaum as a case in which overcharges were awarded for claims that accrued prior to the filing of the coverage application. See Matter of Teitelbaum, Loft Bd. Order No. 2133 (Aug. 26, 1997) (overcharges awarded from October 1992, even though the coverage application was filed in March 1994). However, rule 1-06.1 was not asserted by any party to that proceeding. Moreover, nothing in Teitelbaum invalidates or questions the plain meaning of rule 1-06.1(c), which clearly sets claim accrual at the time of filing the coverage application; thus, Teitelbaum establishes no precedent that commands a result at variance with the rule.

As a result, if petitioners can establish coverage, the overcharge claim would survive for the period from April 1, 2005, forward and the total rent will be determined as follows, according to rule 2-06.1:

base rent and escalators due the landlord from the tenant during the last payment period pursuant to a lease or rental agreement in effect on July 27, 1987, except that the total rent attributable to escalators shall only include the amount demanded by the landlord and paid by the tenant pursuant to said lease or rental agreement. Where no lease or rental agreement was in effect on July 27, 1987, total rent is the rental amount paid by the tenant to the landlord on or before July 27, 1987 pursuant to the last lease or rental agreement in effect.

29 RCNY 2-06.1 (c).

Accordingly, respondent’s motion is granted to the extent that petitioners’ claims for overcharge that predate the date they filed this coverage application are dismissed.

II. Other pre-trial matters

The petition asserts that petitioners are entitled to coverage under section 281(1) of the Multiple Dwelling Law, and, in the alternative, are entitled to coverage under the 1987 amendments to the Loft Law, section 281(4). If petitioners intend to pursue alternative forms of relief, the parties should be prepared to brief the applicability of these sections of the Loft Law in post-trial papers. In addition, prior to the commencement of trial, the parties should advise whether petitioners’ ability to establish subsections (i) and (ii) of section 281(4) is in dispute.

The parties should have completed the exchange of discovery; they should provide final witness lists to each other and to the tribunal by November 10, 2006. Any matters regarding the completion of discovery should be brought to my immediate attention so as not to delay trial.

Tynia D. Richard

Administrative Law Judge

October 27, 2006

APPEARANCES:

ROBERT PETRUCCI, ESQ.

Attorney for Petitioners

BELKIN BURDEN WENIG & GOLDMAN, LLP

Attorneys for Respondent

BY: JOSEPH BURDEN, ESQ.

[1] As to respondent’s due process argument, not only is this tribunal incompetent to pass on the constitutionality of its own proceedings, but the constitutionality of the Loft Law itself, which makes no prohibition of the result arrived at today, has already been affirmed by the highest court of this state. See Spring Realty Co. v. New York City Loft Bd., 69 N.Y.2d 657, 511 N.Y.S.2d 830 (1986); Matter of Hinman, Loft Bd. Order No. 759, 7 Loft Bd. Rptr. 50, 66 (Apr. 28, 1988). In addition, claims of a deprivation of due process are premature at this juncture where respondent has not exhausted its administrative remedies. Matter of Jo-Fra Properties, Inc., 27 A.D.3d 298, 299, 813 N.Y.S.2d 63, 64 (1stDep’t 2006). Moreover, respondent is not alone in defending such a proceeding, as this tribunal recently has heard other building coverage cases. See, e.g., Matter of Tenants of 51-55 West 28th Street, OATH Index No. 1019/05, mem. dec. (Mar. 30, 2006) (seeking coverage as horizontal multiple dwelling); Matter of Addis, OATH Index No. 1574-75/02 (Nov. 25, 2002), aff’d, Loft Bd. Order No. 2772 (Jan. 9, 2003), reconsideration denied, Loft Bd. Order No. 2954 (Sept. 15, 2005).

[2] Respondent excludes from this contention tenants Warner Wada, Sonia Wagner and Ford Wheeler, because they were window period occupants (Resp. motion, at 11).