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Matter of 67 Vestry Street, LLC

OATH Index Nos. 1818/06 & 2095/06 (Sept. 20, 2006), adopted, Loft Bd. Order No. 3476 (Nov. 20, 2008)

[Loft Bd. Dkt. Nos. LB-0153 & LB-0156; 67 Vestry Street, Unit 3C a/k/a 3N, N.Y., N.Y.]

Building owner filed applications seeking determinations that former tenant had abandoned a registered interim multiple dwelling unit and that current residents of the unit were not protected by Article 7-C of the Multiple Dwelling Law. Applications should be denied because current tenants are long-term residents who took possession after signing a lease and abandonment claim was never raised until tenants filed an overcharge application.

The Loft Board adopted the ALJ’s recommendation but on a different ground. The Loft Board found the owner did not prove the former tenant abandoned the unit where it departed in accordance with its lease (it gave prior notice and did not owe back rent). The Loft Board distinguished between turnover in a unit’s occupants, which occurred here, and abandonment of the unit.

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NEW YORK CITY OFFICE OF

ADMINISTRATIVE TRIALS AND HEARINGS

In the Matter of

67 VESTRY STREET, LLC

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REPORT AND RECOMMENDATION

KEVIN F. CASEY, Administrative Law Judge

67 Vestry Street, LLC (Vestry) filed separate applications with the Loft Board for a finding of abandonment and a determination that Paul Klein and Veronique Nguyen, occupants of apartment 3C, also known as 3N (the unit), at 67 Vestry Street, New York, New York, are not protected by Article 7-C of the Multiple Dwelling Law. The Loft Board referred both applications to this tribunal in accordance with title 29, section 1-06 (j) (2) (ii), of the Rules of the City of New York (RCNY).

At a pre-hearing conference on June 13, 2006, the parties acknowledged that there were no material factual disputes and agreed that the applications could be decided without an evidentiary hearing. On June 29, 2006, the applications were consolidated and Mr. Klein and Ms. Nguyen submitted a memorandum setting forth arguments for dismissal or denial of Vestry’s claims. On August 9, 2006, Vestry submitted an opposing memorandum.

For the reasons stated below, Vestry's applications should be denied.

PROCEDURAL BACKGROUND

In May 2005, Mr. Klein and Ms. Nguyen filed an overcharge application. The Loft Board referred the matter to this tribunal, which recommended that the application should be granted. Matter of Klein, OATH Index No. 300/06 (May 3, 2006). Familiarity with that report and recommendation is assumed.

On November 18, 2005, while the overcharge application was pending, Vestry filed two applications with the Loft Board. In one application, LB-153, Vestry requested a finding that a prior lessee had abandoned the unit. In the other application, LB-156, Vestry sought a determination that, due to the abandonment, Mr. Klein and Ms. Nguyen no longer qualify for coverage under Article 7-C of the Multiple Dwelling Law. Vestry submitted the same affidavit in support of both applications. Mr. Klein and Ms. Nguyen submitted answers opposing the applications and the Loft Board referred the matter to this tribunal.

ANALYSIS

As the parties recognize, there are no material facts in dispute. Thus, there is no need for a hearing. See Zuckerman v. City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595 (1980); Matter of Barth, OATH Index No. 1574/97 (June 27, 1997), aff’d, Loft Bd. Order No. 2137 (Aug. 28, 1997).

The building is a nine-floor structure previously owned by David Ellis Real Estate, LLP (Ellis). From October 1974 to April 1998, Ellis leased the unit to Appalachian State University Foundation, Inc. (ASU) for use by its students and faculty who were staying in New York. Under the lease and subsequent renewals, ASU paid rent increases ranging from 2% to 6.5% plus additional increases tied to the Consumer Price Index (Application, ¶ 2, Answer, ¶ 2; Affirmation of David R. Brody in Opposition to the Motion to Dismiss (Brody Affirmation), ¶¶ 8-10).[1]

Ellis voluntarily registered the unit, and other units on the second and third floors, with the Loft Board in 1990 and filed annual renewals (Application, ¶ 3; Answer, ¶ 3). In its applications dated November 17, 2005, Vestry conceded that the unit “has qualified as a protected unit as an Interim Multiple Dwelling” (Application, ¶ 4). On August 8, 2006, however, Vestry asserted, “with the benefit of hindsight,” that there was no reason for Ellis to register the unit as rent-regulated because it “did not qualify as a protected unit” (Brody Affirmation, ¶ 8).

In February 1998, ASU notified Ellis that it intended to vacate Unit 3C as of April 30, 1998. ASU never received reimbursement for any improvements that it made to the unit. Nor was there any purchase of rights from ASU (Application, ¶¶ 12-13; Brody Affirmation, ¶ 25).

Mr. Klein and Ms. Nguyen signed a five-year lease for the unit in March 1998 (Brody Affirmation, Ex. G). Under the terms of the lease, which began on May 1, 1998, Mr. Klein and Ms. Nguyen agreed to install new kitchens and refurbish two bathrooms (Id., Ex. G, ¶ 50-51). After making the required improvements at their expense, Mr. Klein and Ms. Nguyen and two others, Miguel Abreu and Jacqueline Miro, moved into Apartment 3C on May 15, 1998 (Answer, ¶¶ 15-17).

Vestry purchased the building and took control of it on April 1, 2005 (Affidavit of Neil P. Ritter in Opposition to Motion to Dismiss, ¶ 10). Although Vestry initially accepted rent from Mr. Klein and Ms. Nguyen, it refused to accept rent after a lease extension expired on April 30, 2005 (Answer ¶ 11-12). In May 2005, Mr. Klein and Ms. Nguyen filed their overcharge application (Id., ¶ 27).

As post-1987 lessees who took possession of a registered unit with the landlord’s consent, Mr. Klein and Ms. Nguyen are protected by the Loft Law. 29 RCNY § 2-09(b)(3)(i); Klein, OATH 300/06, at 6. Vestry now claims that Mr. Klein and Ms. Nguyen are no longer protected occupants because ASU abandoned the unit in 1998.

Under the Loft Board rules, abandonment is “the voluntary relinquishment of possession of a unit and all rights relating to a unit with the intention of never resuming possession of or reclaiming the rights surrendered.” 29 RCNY § 2-10(f)(2). The rules specify some of the factors that may be considered in deciding an abandonment application. Those factors include: (i) the length of time since the occupant abandoned the unit; (ii) whether the occupant owed rent at the time of the departure; (iii) whether the occupant’s lease had expired; (iv) whether the occupant provided a notice of intent to vacate; (v) whether the occupant purchased or made improvements and was reimbursed for those improvements; (vi) whether there were any pending harassment applications, or findings of harassment, concerning the occupants; (vii) whether there were any violations of Minimum Housing Standards; (viii) whether the owner attempted to locate the occupant to purchase rights or improvements; and (ix) whether Loft Board staff inspected the unit and found that it was currently vacant. 29 RCNY § 2-10(f)(3). But this list is not all-inclusive. The Loft Board has also denied abandonment claims that are only submitted in retaliation for an overcharge application. See, e.g., Matter of White, Loft Bd. Order No. 2194, 17 Loft Bd. Rptr. 386 (Dec. 18, 1997).

Vestry’s abandonment application is very similar to a claim that the Loft Board denied in White. There, with the owner’s consent, a tenant took occupancy of a registered unit in 1985 and continued to live there for several years. When the tenant filed an overcharge application in 1993, five years after the expiration of the lease, the owner responded by filing an abandonment application based upon a former tenant’s actions nine years earlier. In a report adopted by the Loft Board, the Director of Hearings surveyed the history of the abandonment rule and found that it was never intended to be used as a sword against protected occupants who seek to exercise their rights. Id., 17 Loft Bd. Rptr., at 400-01.

Here, as in White, protected tenants filed an overcharge application after living in a registered unit for several years. In response, the owner filed an abandonment application based upon actions of a former tenant. For the reasons stated in White, the abandonment application should be denied.

Vestry suggests that White is a fluke decision, with no continuing vitality. But the Loft Board has had repeated opportunities to revisit this issue and it has consistently denied belated abandonment claims raised for the first time in response to overcharge applications. See Matter of Delong, OATH Index No. 266/99, at 28 (Oct. 4, 1999), aff’d and remanded on other grounds, Loft Bd. Order No. 2457 (Dec. 13, 1999) (citing with approval the language in White that abandonment claims cannot be raised for the first time in response to an overcharge application); Matter of McIntosh, OATH Index No. 604/02, at 19-20 (Oct. 15, 2002), aff’d, Loft Bd. Order No. 2763 (Nov. 19, 2002) (same).

It is now well-settled that the Loft Board will not grant abandonment applications that are submitted in response to the exercise of rights by protected occupants. Vestry offers no reason to depart from that precedent. When ASU relinquished the unit in 1998, the building owner had ample opportunity to file an abandonment application. Instead, the owner signed a lease with new tenants and continued to register the unit as an interim multiple dwelling.

Vestry claims “with the benefit of hindsight” that the prior owner, Ellis, had no reason to register the unit (Brody Affirmation, ¶ 28). But Vestry acknowledges, “we are stuck with that act” (Id., ¶ 43). There is no question that Vestry is bound by Ellis’s decision to voluntarily register the unit. See, e.g., Matter of Daustreme, Loft Bd. Order No. 1020, 10 Loft Bd. Rptr. 134 (Apr. 26, 1990) (current landlord responsible for prior overcharges); see also Turner v. Spear, 134 Misc. 2d 733, 512 N.Y.S.2d 335 (Civ. Ct. N.Y. Co. 1987). To hold otherwise, would jeopardize tenants’ rights under the Loft Law whenever there was a change in building ownership.

Vestry’s remaining claims, including its contention that Mr. Klein and Ms. Nguyen waived their rights under the Loft Law, were addressed in my earlier report and recommendation on the overcharge application. See Klein, OATH No. 300/06, at 7-9. There is no reason to reach a different result here.

FINDINGS AND CONCLUSIONS

1. Petitioner failed to prove that it was entitled to a finding that Apartment 3C, also known as 3N, at 67 Vestry Street, New York, New York, was abandoned.

2. Petitioner failed to prove that, because of an abandonment, Paul Klein and Veronique Nguyen, are no longer entitled to the protection of Article 7-C of the Multiple Dwelling Law.

RECOMMENDATION

Petitioner’s consolidated application for a findings of abandonment and de-coverage should be denied.

Kevin F. Casey

Administrative Law Judge

September 20, 2006

SUBMITTED TO:

MARC RAUCH

Chairperson

APPEARANCES:

BORAH, GOLDSTEIN, ALTSCHULER, SCHWARTZ & NAHINS, P.C.

Attorneys for Petitioner

BY: DAVID R. BRODY, ESQ.

ROBERT M. PETRUCCI, ESQ.

Attorney for Mr. Klein and Ms. Nguyen

[1] Vestry notes that the unit would not have qualified for rent regulation under the Rent Stabilization Code when ASU leased it for the benefit of its students and faculty. See R.S.C. § 2520/11(f); Hatanaka v. Lynch, 304 A.D.2d 325, 756 N.Y.S.2d 578 (1st Dep’t 2003). But the Loft Law does not have a similar exemption for non-profit educational organizations. Thus, whether a registered unit was previously exempt from the Rent Stabilization Code is not an especially relevant consideration in an abandonment application.