March 22, 2026

The Loft Law in New York is complicated, and unlike housing laws in other places. The Rent Stabilization Law in New York is complicated, and unlike housing laws in other places. This story lives at the very complicated and misunderstood intersection of the Loft Law and the Rent Stabilization Law.

In this story, I was representing a residential landlord. A tenant in a luxury building, who had fallen behind on the rent, adopted the best-defense-is-a-strong-offense tactic (which, almost never works) and claimed that he was Rent Stabilized. But he was not. And here is why.

In 1982, Multiple Dwelling Law (“MDL”) Article 7-C § 280, commonly known as the “Loft Law”, was enacted in response to the large number of commercial spaces in New York City converted to mixed-purpose dwellings through their tenants’ investments and sweat equity. Many landlords sought to capitalize on the increased value of such apartments by demanding increased rents or refusing renewal. The Loft Law was enacted to address the litigation that ensued and to legalize de facto multiple dwellings that were not up to code. MDL § 286(13); Lower Manhattan Loft Tenants v New York City Loft Bd., 66 NY2d 298 [1985].

Perhaps the most important decision regarding the Loft Law and Rent Stabilization came to us in 2022. The Court of Appeals in Aurora Associates LLC v. Locatelli, 38 NY3d 112 [2022], in relevant part, holds:

…The Loft Law, Multiple Dwelling Law article 7–C, was enacted in 1982 to resolve the “serious public emergency … created by the increasing number of conversions of commercial and manufacturing loft buildings to residential use without compliance with applicable building codes and laws” (Multiple Dwelling Law [MDL] § 280)…

 

To that end, the Loft Law provisions created a pathway to legalization for former commercial and manufacturing loft buildings used as residences despite a lack of residential occupancy certificates pursuant to a process overseen by the Loft Board (see MDL § 282)….Although occupancy of a multiple dwelling without a certificate of occupancy is generally prohibited by the Multiple Dwelling Law (id. § 301), the Loft Law permits “continued occupancy” of converted units in eligible buildings during the legalization process and protects tenants “from eviction by reason of illegal occupancy, violation of a lease provision prohibiting residential use, or the lack of a residential certificate of occupancy” (id. § 283, 286[1], [2]).

 

Two provisions of the Loft Law found in a section titled “Tenant protection” are of significance here. Under section 286(6), “a residential tenant … may sell any improvements to the unit made or purchased by [the tenant] to an incoming tenant provided, however, that the tenant shall first offer the improvements to the owner for an amount equal to their fair market value.” If the owner purchases the improvements, “any unit subject to rent regulation solely by reason of this article … shall be exempted from the provisions of this article requiring rent regulation…

 

A separate provision, often exercised in tandem with a purchase of improvements, provides that “an owner and a residential occupant may agree to the purchase by the owner of such person’s rights in a unit” (MDL § 286[12]). Upon purchase of the rights, the owner may return the unit to commercial use, relieving the owner of all Loft Law obligations, or continue residential use, subject to all Loft Law legalization requirements with the exception that “the unit is no longer subject to rent regulation where coverage under [the Loft Law] was the sole basis for such rent regulation” (29 RCNY 2–10 [d] [2])…

 

Despite the breadth of its purported reach, the extension of rent stabilization pursuant to the ETPA is not unlimited, as we made clear in Wolinsky, a case involving tenants who sought ETPA protection for units converted from commercial to residential use outside the Loft Law eligibility period [citations omitted]. In addressing tenant’s claim for protection, we held that the ETPA did not apply to the converted units, because “[i]f the prior-enacted ETPA already protected illegal residential conversions of manufacturing space, significant portions of the Loft Law would have been unnecessary” [citations omitted]. While “not expressly exempted from ETPA coverage,” we noted that “the Legislature did not view the ETPA as safeguarding the interests of the loft pioneers” and concluded that the tenants’ illegal conversions did “not fall under the ambit of the ETPA…

 

We…hold that a unit covered by the Loft Law, exempted from that statute’s rent stabilization regime by operation of a sale of a prior tenant’s rights and improvements, is not subject to the rent stabilization provisions of the ETPA [Emergency Tenant Protection Act – enabling legislation for Rent Stabilization]. As we held in Wolinsky, illegal loft conversions are not covered by the ETPA. It follows that conversions made legal solely by operation of the Loft Law, that obtain relief from that statute’s rent regulation regime pursuant to its provisions, do not default to rent stabilization under the ETPA…”

[Emphasis supplied.]

Aurora v. Locatelli stands for the principle that, once a Loft Law unit’s fixtures and a Loft Law tenant’s rights are sold pursuant to MDL § 286, that such unit will not exit Loft Law coverage subject to Rent Stabilization, even if a building has more than six units and was built before 1974. Thus, in today’s story, in 2001, the subject building was released from the Loft Law by a final Loft Board order, and the subject apartment was designated as subject to a sale of rights and, therefore, free of rent regulation.

Thus, the tenant’s claim to Rent Stabilization had to fail. I got a favorable decision from DHCR for the Landlord in this matter in record time. I find the problem is that there are still lawyers operating on behalf of tenants out there who, for some crazy reason, have not heard of (or do not understand the significance of) Aurora Associates LLC v. Locatelli, 38 NY3d 112 [2022].

Locatelli is an extremely important case because it resolved a split between the First and Second Appellate Departments. Prior to Locatelli, in the First Department, the rule was dictated by Acevedo v. Piano Bldg. LLC, 70 AD3d 124 [1st Dept 2009], which held that final Loft Board orders, such as the one operative in today’s story, were not necessarily the final word on the regulatory status of a unit in a post-Loft-Law context. The Court of Appeals in Locatelli, however, rejected Piano and rather followed the Second Department, which had been following the Court of Appeals in Wolinsky v. Kee Yip Realty Corp., 2 NY3d 487 [2004], which held that final Loft Board orders, such as the one operative in today’s story, are, indeed, the final word on the regulatory status of a unit in a post-Loft-Law context. Locatelli and Wolinsky stand for the proposition that illegal loft conversions, which is the dominion of the Loft Law, are not covered by the enabling legislation that gives rise to Rent Stabilization. Put simply, a purely commercial building illegally occupied as a residence can never be covered by Rent Stabilization, because Rent Stabilization only applies to multiple dwellings.

Today’s story does not end on a terrible note for the tenant, however. The landlord was very compassionate with this tenant (and very smart to avoid a year in Housing Court turning the DHCR victory into an eviction), and gave the tenant an arrears waiver and over a year to move, in exchange for the tenant paying the same rent in his last lease and agreeing to a judgment of possession and a warrant of eviction.

Respectfully submitted,

Michelle Itkowitz