We are a loft tenant advocacy group, so we think most people should apply for Loft Law coverage. We won’t tell you what to do, but here is a breakdown of the issues you should think about before you decide.
Milestone Rent Increases (6/8/6 or 3/3/4)
The 2010 Loft Law originally allowed for one-time milestone rent increases of 6% – 8% and 6%, but in 2013 the Loft Law Clean Up Bill adjusted these milestones to a more reasonable 3% – 3% – 4%. Read more about allowable rent increases under the Loft Law. These increases might seem too much for you to handle, but keep in mind two things: it will usually take many years to get through the process so usually each milestone is spaced out, and if you can get through these increases the long-term payoff is something most tenants can only dream of: rent stabilization (see below).
If you have an active lease with rent increases, you may end up having to pay those increases ON TOP of the
6/8/6 3/3/4 increases that go along with legalization of your building. Why do we say you “may” have to? We just don’t have an answer: the rules are not clear, and while some lawyers have said you won’t have to pay lease-defined increases, some say you will. No cases have gone through the system yet to determine which way this will go. (Note: this is rare, most landlords seem to be giving out leases with an “option to renew”, which is not binding, rather than multi-year leases. If it’s an option to renew then you won’t have to pay those increases.)
WHAT’S YOUR PLAN?:
If are a long-term tenant who wants to stay in your place another 5 years, 10 years, or until you drop dead — apply for coverage. Long-term it makes sense. The
6/8/6 3/3/4, the legal fees, the hassle, etc. are short-term costs that will pay off in the end with one simple thing: Security.
If you don’t plan on staying in your place, maybe applying for Loft Law coverage won’t seem worth it. Maybe you aren’t worried and figure you’ll find the next cool neighborhood. Look around and make sure first: rents are going up everywhere, and cheap lofts are basically extinct.
Face it: you don’t have any rights under your commercial lease. You can’t go on rent strike, you can’t get your bathroom fixed, the FDNY or DOB can vacate you and your neighbors with no warning, and you have zero leverage to negotiate a lease. The Loft Law is the chance to get tenants’ rights. This means the right to demand repairs and to stay as long as you want, the security of rent stabilization and the ability to sell your rights if you decide to leave.
The DOB has repeatedly threatened to vacate all illegal lofts after the end of the application deadline. We don’t find this threat very credible because it’s hugely expensive for them, but the threat is there.
Your landlord may be giving you a good deal, so why rock the boat? That deal will last only as long as your landlord wants it to. If he wants to cash in by hiking rents or by selling the building, you will be totally out of luck without tenant rights.
Then on the other hand, if your landlord is at all decent, this doesn’t have to be an antagonistic process. Many landlords are not happy about the Loft Law, but it’s business and the cost of business is working within the law. Keep in mind that loft buildings have been VERY profitable for owners, and the Loft Law is not going to bankrupt anyone.
If you are convinced that there is a really nasty commercial activity in your building that might disqualify you from coverage, you should put that into the pro/con mix. It is really unclear how the rules on Incompatible Use will be applied, so we can’t say for sure whether your building would be disqualified or not.
In the end, this really is your decision. If you want a legal residence, tenant rights, and rent stabilization, this is the way to get it. If that security isn’t worth anything to you, maybe you shouldn’t apply… but if enough other people in the building do care enough to apply, you’ll probably find yourself joining on, and it would be more neighborly and stronger to all go into the process together.