Opinion
29825/02.
Decided June 6, 2006.
Plaintiff Attny: Smith Shapiro David E. Frazer.
Defendant's Attny: Goodfarb Sandercock.
Plaintiff American Package Company, Inc. (APC) moves, by order to show cause, for an order pursuant to CPLR 2221(e) granting leave to renew its prior motion for summary judgment and upon renewal granting APC's motion. By separate order to show cause, APC moves for an order, pursuant to CPLR 4403, confirming the report of referee Dominic J. Lodato, dated November 16, 2004, fixing the amount of use and occupancy due and owing APC, and directing defendants to immediately remit to APC all past due use and occupancy and pay all future use and occupancy on the first day of every month during the pendency of this action.
APC is the owner of the subject building at 226 Franklin Street in Brooklyn. By loft lease agreement dated January 8, 1997, defendants Robert Kocik and Daria Kocik took occupancy of a space in the building. The lease specified that defendants were to utilize the space as "Designer[s] Builder[s]." Though the lease expired on January 31, 2002, defendants continue to occupy the space and have not paid rent or use and occupancy since the date of expiration. On July 31, 2002, APC commenced the instant action for ejectment. Defendants' answer set forth three defenses and six counterclaims, some of which allege that the space is subject to the Rent Stabilization Law and Code and the protections attendant thereto. APC previously moved for summary judgment which was denied by short form order dated November 14, 2003. In opposition to the prior motion for summary judgment defendants argued, inter alia, that their unit was subject to rent stabilization. APC seeks to renew the prior motion for summary judgment in light of the decisions which have since been issued by the Court of Appeals in Wolinsky v. Kee Yip Realty Corp. ( 2 NY3d 487) and the Appellate Division, Second Department in Gloveman Realty Corp. v. Jefferys, ( 18 AD3d 812).
It is not in dispute that defendants entered into commercial leases for loft spaces in a building with a commercial certificate of occupancy and that they use the spaces as residences. The Wolinsky case involved the residential conversion of commercial spaces in a building zoned for manufacturing and the issue of whether the occupants of those spaces were afforded the protection of either the Loft Law or the Emergency Tenant Protection Act (EPTA), a statutory expansion of the Rent Stabilization Law. After finding that the tenants' residential occupancies of the commercially leased units were not within the purview of the Loft Law, since the residential occupancies did not exist during the "window period" of April 1, 1980 to December 1, 1981, the Wolinsky court determined that the tenants were not entitled to protection under the broad language and scope of the EPTA. The Wolinsky court stated: "Reading the ETPA and Loft Law together, we agree with the courts below that tenants' illegal conversions do not fall under the ambit of the ETPA. As reflected in the legislative history and intent of the Loft Law, the fixed eligibility period was designed to address the public safety and municipal zoning emergency caused by the expansion of illegal conversions at that time. The statute was not intended to foster future illegal conversions or undermine legitimate municipal zoning prerogatives. If the prior-enacted ETPA already protected illegal residential conversions of manufacturing space, significant portions of the Loft Law would have been unnecessary. Thus, although such illegal conversions are not expressly exempted from ETPA coverage, it is evident that the Legislature did not view the ETPA as safeguarding the interests of the loft pioneers'" ( Wolinsky, 2 NY3d at 493 [citations omitted]). Some courts have interpreted the Wolinsky decision to stand for the proposition that commercial spaces used residentially which were not covered by the Loft Law may still be entitled to coverage under rent stabilization, so long as the premises are capable of being legalized ( 480-496 Broadway, LLC v. No Mystery Sound, Inc., NYLJ, Feb. 16, 2006, at 19, col 3; First Flatiron LLC v. Irizarry, NYLJ, Mar. 30, 2005, at 23, col 1). However, in Gloveman Realty Corp. v. Jefferys ( 18 AD3d 812), the Appellate Division, Second Department, citing Wolinsky, held that the Supreme Court erred in determining that illegal conversions of loft space were entitled to the protections of the ETPA. While not explicitly addressed by the Appellate Division, the subject building in Gloveman was not prohibited by the zoning law from residential use. Very recently, the Appellate Term, Second Department, citing both Wolinsky and Gloveman, determined that illegal loft conversions not subject to the Loft Law which occurred in a building which was capable of and in the process of being legalized were not subject to the ETPA ( Corastor Holding Co. v. Mastny, 2006 WL 623092). Until the Appellate Division vacates its order or the order is reversed on appeal, this court is constrained by Gloveman to hold that the illegally converted spaces in this matter, which undisputedly are not covered by the Loft Law, are not entitled to rent stabilization protection even where residential use of the spaces may become legalized ( see generally DaSilva v. Musso, 76 NY2d 436, 440 ["It is elementary that a final judgment or order represents a valid and conclusive adjudication of the parties' substantive rights, unless and until it is overturned on appeal. Furthermore, while an appeal from a final judgment or order may leave an inchoate shadow on the rights defined therein, those rights are nonetheless fully enforceable in the absence of a judicially issued stay pending disposition of the appeal"]).
In light of the foregoing, APC's motion to renew is granted, and that part of APC's motion to dismiss those defenses and counterclaims based on defendants' claims of rent stabilization protection is granted.
This court further finds defendants' allegations that APC violated General Business Law § 349 and that APC must reimburse defendants for fixtures and appurtenances improvements are without merit. Defendants have not established that the alleged deceptive acts by APC were "consumer oriented" or have a "broad impact on consumers at large." Further, even if defendants were deceived into believing that the units were legal for residential use, there is no assertion that APC represented that defendants would be able to reside in the units beyond their subject lease terms. As defendants have achieved the full benefit of their leases, which are now expired, defendants cannot argue that the alleged deception caused them injury. With respect to defendants' claim seeking reimbursement for fixtures and appurtenances, the lease executed by plaintiff expressly provides in paragraph 3 that the tenant shall make no alterations without the written consent of the owner (which is not presented here) and that all fixtures, paneling, partitions, railings and like installations shall, upon installation, become the property of the owner. The court has considered the remainder of defendants' defenses and counterclaims and finds them to be without merit. Accordingly, APC's motion for summary judgment is granted in all respects.
By order dated January 9, 2004, this court referred the issue of whether APC was entitled to use and occupancy to a referee to hear and report. Pursuant to Multiple Dwelling Law §§ 301, 302, and 325, no rent or use and occupancy may be collected where an owner has failed to obtain a proper certificate of occupancy or multiple dwelling registration ( Jalinos v. Ramkalup, 255 AD2d 293, 294; 99 Commercial Street, Inc. v. Llewellyn, 240 AD2d 481, 483; 468-470 Ninth Ave. Corp. v. Randall, 199 AD2d 13; Hornfeld v. Gaare, 130 AD2d 398, 400). However, there have been courts which permitted a landlord as a matter of equity to collect rent or use and occupancy absent a conforming certificate of occupancy upon landlord's proof of substantial conformity to building code standards and conditioning such payments on landlord's actual procurement of the requisite certificate ( Zane v. Kellner, 240 AD2d 208, 209; Lipkis v. Pikus, 99 Misc 2d 518, 521 affd 72 AD2d 697 appeal dismissed 51 NY2d 874). Following the hearing before the referee, at which testimony was offered by Mr. Kocik and APC's principal, Martin Kofman and at which the affidavit of Mr. Kocik's architect was introduced as evidence, the referee found that APC was entitled to use and occupancy. The referee stated: "Defendants knew or should have known under the terms of its lease, together with the surrounding conditions known to them, that their occupancy could be found to be illegal. They were in possession for a period of five years, paid rent fully knowledgeable of the existing realities. The plaintiff is in the process to legalize the conversion and obtain a valid certificate of occupancy. Defendant should not be permitted to occupy the premises and not be responsible for payment of it." An examination of the evidence presented at the Kocik hearing as well as relevant case law leads this court to conclude that APC is not precluded from recovering use and occupancy, despite the non-conforming certificate of occupancy. This court takes particular note of the affidavit of Mr. Kocik's architect which supports a finding that the building as a whole, and plaintiffs' units in particular, substantially conform to building code standards.
Where a referee's findings are supported by the record, the court should confirm the referee's report and adopt the recommendation made therein ( see Slater v. Links at N. Hills, 262 AD2d 299; Frater v. Lavine, 229 AD2d 564). This court finds that the evidence considered by the referee at the hearing supports his finding. As a result, APC's motion to confirm the referee's report and for an award of use and occupancy is granted.
Accordingly, this court directs that each defendant pay to APC on the first day of each month following the date of this decision use and occupancy equal to the monthly amount charged for the final year of each lease through the date of defendants' surrender of the premises.
Settle order.