NYCLT testimony on Rule 2-09 Coverage

Our testimony from last week.  Tomorrow is the hearing on 2-02 Harassment, 2-07 Sale of Improvements, and 2-10 Sale of Improvements.  Please show up and support your fellow tenants!  2pm July 19 at 280 Broadway 3rd Floor

Rule 2-09 on coverage and subletting is a very difficult and divisive rule. There are two aspects of Rule 2-09 which we feel should be updated to meet the new realities of tenants covered under 281.5.

First, we feel it is unfair that landlords will receive a jump in their rent roll for units with subtenants who become separately covered under the Loft Law. In the 1980’s the Loft Board chose to enforce the contract between the subtenant and prime tenant over the contract between prime tenant and landlord, in determining the rent going forward. They chose to keep the subtenant rent the same and divide the excess rent between the prime tenant (if in occupancy) and the landlord.

There were circumstances in the 1980’s that may have made this the logical choice. For one, many landlords had rented their buildings to prime tenants just glad to make any rent at all, with little awareness of what the prime tenants would do with them. So the Loft Board may have felt it was fair to freeze the residential rent the subtenants were paying, rather than the bargain rents the prime tenants were paying. The extra rent was partly an inducement to landlords to accept privity with the former subtenants.

In addition, rent strikes were prevalent in the 1980’s, but prime tenants often still collected rent from subtenants without paying rent to the landlords. So using the subtenant rent as a basis also makes sense in this context.

However, with residential lofts strongly established today, the situation is very different. In almost all cases, landlords knew full well that the spaces they rented to primes would be split up into residential apartments, and were able to charge good rent accordingly. Rather than a desperate move to get any rent for a building, it was a mutual agreement with strong cooperation between landlord and prime. Landlords understood that they would eventually be in privity with all tenants, and many forced prime tenants out of the picture before 2010.

Rent strike is also far less common today.

So we ask the loft board of 2012 to consider whether the choice to freeze subtenant rent rather than prime tenant rent still makes sense today.

Secondly, we are concerned about the definition of qualified tenants who moved in after June 21, 2010 in 2-09(b)(3), as there has been much confusion among these tenants and even among loft lawyers whether they may be covered. The three clauses clearly lay out that a post-June 2010 tenant will be covered, whether or not they have a lease, or if they are a subletter, or if sale of improvements was offered, as long as the landlord has consented to their tenancy. But it is unclear what the definition of “consent” is. We believe that a landlord accepting rent directly from a tenant implies consent, and hope that the Loft Board will state this in the rule.

Leave a Reply

Your email address will not be published. Required fields are marked *