Incompatible Use

There may be a business in your building that does something that would be considered Light Industry, Manufacturing, Servicing, some kinds of Storage, etc, thus constituting an assumed Incompatible Use disqualification from Loft Law coverage. Tenants shouldn’t at all panic or give up, because there is enormously more leeway on this than they may guess.

A Quick Summery

The Loft Law expansion of 2010 has a new restrictive provision inserted by the Bloomberg administration called Incompatible Use.  (“Uses Inherently Incompatible With Residential Use In The Same Building.”)  On the face of this provision as it appears in the Law, it would seem to be quite sweeping, basically seeming to say that any business use in a building that involves making something, fixing something, maintaining something, storing something, etc, etc,  (“Use Groups 15 through 18”)  –basically anything from oil refineries on down to animal shelters and “arcades purveying games of skill or chance” would seem to be incompatible; but, in the rules that have been written by the Loft Board to define and carry this provision out, the bar has actually been set pretty high in terms of what kinds of uses, and more importantly, what degree of usage(s) might actually disqualify a building from coverage due to an incompatible use.  There have been no cases to date as of Mar 2014 in which tenants have lost coverage due to incompatible use, and it has not even been raised by owners except in a small handful of cases, and even then, the claims were often spurious.

That said, what are tenants up against if they think they may have to defend against a claim of incompatible use?  There is just one small paragraph with three subsections in the rules; below is the entirety of what needs to be dealt with:

(k) Uses in Use Groups Inherently Incompatible With Residential Use.

Pursuant to MDL §281(5), a use that falls within Use Groups 15-18, as defined in Article III Chapter 2 and Article IV Chapter 2 of the Zoning Resolution in effect on June 21, 2010 and continuing at the time of the submission of an application for coverage by any party, that is also set forth in the Appendix to these Rules, is inherently incompatible with residential use in the same building if it:

(i)  has or should have a New York City or New York State environmental rating of “A”, or “B” under Section 24-153 of the New York City Administrative Code for any process equipment requiring a New York City Department of Environmental Protection operating certificate; or

(ii)  is or should be required under the Community Right-to-Know Law, at Chapter 7 of Title 24 of the Administrative Code of the City of New York, to file a Risk Management Plan for Extremely Hazardous Substances; or

(iii) is or should be classified as High-Hazard Group H occupancy as set forth in Section 307 of the New York City Building Code.

What Does This All Mean?

Both the good and the bad thing about the above criteria is that they are based on well-established and nearly universally accepted scientific, engineering, and safety standards that are reasonable, and, are not in terms of either/or, but in terms of degreeThat’s the good part. The bad part is that any burden of proof, (that is, that there is not an Incompatible Use in the building) is laid squarely on the tenants, and not on the owner, should they raise the claim. Also bad is that it can all be very technical to many people, and may make you feel like you can’t get to the bottom of this without hiring an expensive expert. But it really is essentially very  straightforward, clear, and understandable. -More specific explanations of this, below.

Where To Start

One of the most important things that tenants needs to do, if an owner is claiming Incompatible Use, or even if tenants are just worried about a claim coming up, is not to panic, but to become well armed in their own defense by trying to see just what is going on inside of that business in detail, as much detail as possible, and to document this in any ways that you can. -More below.

The Rules Again, Hardcore Version

Getting back to the Rules, the letter of which are all that there is for tenants to contend with in terms of Incompatible Use:

 –Although one might logically think that the first one the loft board’s rules on Incompatible Use, “i” would be the place to start first, the actual best place to start is “iii”, which refers to the “High Hazard 307” section of the NYC building code. This is because 307 is where you will find every definition of substances, technical terms, and allowable amounts of all types of substances. Also 307 is the best way to  give you a framework for understanding, in great detail, the way that engineers look at  substances and manufacturing processes. And, the other two sections of the loft board rules follow from this kind of engineering reference. 307 is actually very widely used worldwide, and can be found all over the internet in the exact same wording and configuration as in the NYC building code.  -This is really the key to what most people’s worries will be about, namely substances, but it also covers processes and uses. Interestingly, the bottom line on 307 is in large part about fire safety, and not much about notions of toxicity. 

The Rules, “A or B”, Section “i”

–From 307 we can briefly circle back to section “i”,  referring to 24-153 NYC Administrative code.  This is the Department of Environmental Protection  A or B rating prohibitions which refer to emissions of volatile organic compounds  (VOC’s) into the air. One common way that smaller-scale emissions of voc’s happens is spray painting (think auto body shops, and wood shops that do their own finishing) but there are of course others.  There are A through D ratings, in descending amounts of output into the air, and they are measured in pounds-by-weight of  VOC’s emitted per hour. (A useful way to understand VOC lbs/gal is that typical industrial (and some consumer) containers of paint or solvent will have the pounds per gallon by weight of the VOC’s listed on the label of the container. It’s typically 4.5 – 5.5 lbs/gal VOC for paints and solvents.)  There is a table defining output emissions according to lbs/hr. (As an aside, in the case of one single spray booth in a wood shop: one operator, spraying and stopping, and spaying and stopping, over the course of an hour, as would be the case in typical use, couldn’t put out anywhere near enough to be even a “B” rating, based on some local shop experience.)  Section 24-153 also lists additional mitigating factors, like distance from the source.  

New York State environmental emissions regs:  -Same numbers as 24-153, but with more info, and exceptions (spray finishing only needs to be below an “A” rating, for example):

The Rules, 307 Some More

In High Hazards 307, there are intricate tables listing allowable thresholds of flammable and combustible materials, caustic materials, and descriptions of allowable setups for using them. This is very illuminating and useful because of the engineering framework that you see here, and you see that  it is very logical and rational.  One notable aspect here are numerous caveats and exceptions that are referred to in tiny footnotes for each listing, that allow extra multiple amounts of flammable and combustible materials, if: -they are stored in legal cabinets; -if there are proper sprinklers; -if local fire codes are met for the substances and uses; etc. (there is an exception in High Hazards 307 granted for paint spraying operations, if an FD permit is in place, for example).

If the amounts on the premises, after the multiplications granted by the footnoted exceptions and caveats, tally up to less than the limits in 307, then it’s not High Hazard H, and not “incompatible” by the loft board’s rules. Again, in technical definitions about v.o.c.’s, it’s pounds by weight per liquid gallon, which can usually be found on the labeling. Fine dust particles, large amounts of paper, rags, etc, are also spelled out in 307, and allowable amounts are listed (with extra caveats and exceptions, of course).

Section “ii”,The Community Right-to-Know law

Refers to a US EPA law of the same name which says that if there are very large quantities of hazardous substances, (there is a long list of them, with threshold quantities),  a Risk Plan must be filed. If a business has to file, the building would have an I.U.   The thresholds are pretty high, though.  For most substances it’s 500-1000 pounds (again, most VOC’S contain roughly 5 lbs/gal); for a few, such as pure chlorine, it’s 100.  Practically nobody’s building will have this much of any substance.

More On Evidence Gathering, and Misc

One of the most important things that needs to be done, if an owner is claiming incompatible, or even if tenants are just worried about a claim coming up, is to see just what is going on inside that business, in detail, as much detail as possible. If tenants, or lawyers, or an architect, engineer, or bona fide expert are allowed inside the business’s operation, they should do so, and  they should get scores and scores and scores of photos, plus notes on all pertinent conditions that can be observed. It is smart to get an early jump and build evidence on just what they are doing, what their processes are, and what substances and materials they use, and try to ascertain, through documentation, especially with photos, how much.  They should make sure to examine all containers for their contents, and get clear pictures of of their labels, back and front, that show their contents. They should also note if the containers are new and unopened, or have been opened; because that makes a difference in terms of storage requirements. Unopened containers don’t have to be stored in cabinets. Get multi-angled pictures of all storage cabinets. They should get lots of in-situ shots of processing areas, equipment, floors, ceilings, walls, windows, plumbing, electrical, heating, and especially important, the existence of sprinklers. Also very important: make sure to look everywhere in the space, especially in or near an office space, for permits and any other certificates that might be posted, from agencies such as the Fire Dept., DEP, and others for Fire Dept. permits and certificates posted, and any other kinds, and also, ask if there are any permits and certificates and to see and document them. Get good clear photos or copies of these. The existence of permits and certificates can greatly help your case, because in 307 there are exceptions allowed if proper permits are in place.

All of this will be evidence that can help establish the actual truth of the situation. Owners have often made grossly exaggerated claims as to the uses and the degree of it and the amounts.

If you are not welcomed in to look around, you at least will have the right to do an inspection with your lawyer as a part of the Discovery process in the weeks before your trial, but try to note and document things if it seems that changes are going on in that business prior to the time that you will have access.

Trying to get to the bottom of all the technical codes, rules, and definitions referred to in the Loft Board Rule on Incompatible Use seems pretty daunting on the face of it, but once you burrow through everything, it can actually be straightforward and clear enough that the whole thing could be presented by non-experts, and understood clearly by non-experts.

But, since the burden of proof is unfortunately on the tenants, and if an “authority” must be brandished for credibility in a court, at least the average architect could go to bat for you and present this part of the case. Since the loft board permits architects as well as engineers to sign off on the IMD application that there is no incompatible use present. So you wouldn’t necessarily need to hire a very costly engineering expert.

Not that that is how things would actually work in a real-life OATH trial. As far as anybody knows, no loft tenants have had to defend against any (substantial) claim of incompatible use yet, all the way through a trial. (There are current pending cases as of March 2014.)

If the rules, and the codes they refer to, are what is looked at thoroughly, as well as the substantial documentary evidence of the amounts of materials in questions, and the manner of their use, and the existence of permits for their use, then even tenants co-existing with bona-fide light manufacturing taking place in their building have a good chance to prevail.