Code Compliance & Pass-Along Costs

For loft tenants, code compliance means:

“Compliance with the fire protection and safety standards of Article 7-B of the Multiple Dwelling Law, or alternative building codes as authorized by MDL §287.”  (Rules of the City of New York)

Translation: building code standards for Live/Work spaces are a bit looser than for standard apartments, but in general the categories that will affect many loft tenants are: requirement of two means of egress (exit to the street), minimum light and air requirements for bedrooms, and sprinkler heads under mezzanines/lofted rooms. In addition, electrical and plumbing work might have to be modified to fit code requirements.

Read Rule §2-01 Code Compliance Deadlines, the Narrative Statement Process, Code Compliance Work and Removal from the Loft Board’s Jurisdiction. If you scroll waaay down to (p) Schedule of costs you’ll find a table breaking down the maximum allowable pass-along costs and the formula used to calculate each tenant’s portion.

S = (TC × RA/TA)
R

CODE COMPLIANCE CONSTRUCTION & PASS-ALONG COSTS: by Arthur Atlas

When construction begins, after a Building Permit has been issued by the DOB and posted in the building, the building owner can request access to your private residence to perform work. The work permitted is only the work indicated on the approved plans and Narrative (which is why the tenant review process is so important). The construction can take a while and it will be noisy and messy. Despite this you should not vacate your loft during the construction unless there is a written agreement drawn up by your attorney. Take all necessary precautions to protect your possessions. Rest assured that at some point the mess and the noise will end.

Once the construction throughout the building is completed the building owner may call for an inspection from the DOB. This will be by appointment. If the DOB inspection is approved, the building owner may obtain a Certificate of Occupancy for residential use. Your loft is now a legal residential space entitled to the services and protections of multiple dwellings in New York State.

Now comes the part that frightens most loft tenants. The building owner can submit an application to the Loft Board to recoup some of the construction costs. It is extremely important to note that the building owner does not have the right to ask for reimbursement before this milestone is reached. It is also extremely important to note that the building owner is not to be reimbursed dollar-for-dollar for the cost of construction no matter what he/she/it may say. General estimates range at about 30 to 35% of the actual cost to be paid out over a 10 or 15 year period of time. The 120 month reimbursement period is for instances when the building owner does not finance the construction. The 180 month reimbursement pertains to when the building owner takes out a legitimate loan, but also includes the interest on the loan

The allowable construction pass along costs are initially capped by a Schedule of Maximum Allowable Costs. This schedule controls the base cost that is allowed by the Loft Board for the purpose of determining the tenants obligation to the building owner. The next layer of tenant protection is the separation of the costs into three categories. The categories are the Public Area and Commercial Area costs, the Systems costs, and the individual residential unit costs.

The Public Area and Commercial Area costs, where generally speaking the largest expenses are allocated, are to be split between the building owner and the IMD tenants based on the percentage of net residential space in the building versus the gross square footage of the building. This reduced number will be equally shared by the number of residential dwellings in the building (even the ones the building owner has bought out).

The Systems costs are those installations that are capable of only serving the residential tenants. These costs may include items such as heating, plumbing or electrical service. The costs from the schedule for the Systems work will be split equally among all of the dwelling units. The building owner will pick up the shares for the residential units it controls.

The cost of bringing the individual residential unit(s) up to Code will be borne by each individual tenant.

The application must be submitted to the Loft Board for review. The IMD tenants also have the right to review the application and contest any items they may not agree with. The final point about the Code Compliance Application is the application itself. The application is a beast. Many building owners choose not to file the application when confronted with the sheer volume of paperwork involved.