It comes as no surprise that some residential tenants are illegally living in buildings not intended for residential use. Illegally living in a building however, does not leave you without rights. The “loft law,” part of the Multiple Dwelling Law passed in 1982, is designed to protect tenants illegally living in commercial or factory buildings. The loft law has two goals: to bring such buildings up to code for residential safety and fire purposes, and to protect the tenants who live there.
In its current form, the law allows qualifying tenants or landlords to apply to the New York City Loft Board to legalize their rental if it is located in a commercial or manufacturing building without a residential Certificate of Occupancy where three or more families have lived independently from one another for twelve consecutive months from January 1, 2008 through December 21, 2009. Such rentals must also have at least one window that faces a street, legal yard or legal courtyard, must be at least 400 square feet and may not be located in a basement, cellar, or in an industrial business zone (other than Greenpoint or Williamsburg, North Brooklyn and certain areas of the Long Island City industrial business zone).
In practice, the loft law is friendlier to tenants than it is to landlords. The process to legalize a building can take years and be rather costly, depending on what is required to bring the building up to code. Additionally, assuming successful legalization, a landlord may now have legal residential apartments to rent out, but those apartments may be subject to rent stabilization laws giving tenants more protections and limiting annual rent increases under the Rent Guidelines Board, which freezes rent increases to 0% between October 1, 2015 and September 30, 2016 for one-year renewal leases.
With all of that in mind, what is perhaps the greatest harm to landlords relates to rent collection. Under the law, if a building does not have a residential Certificate of Occupancy, the owner of the space cannot collect rent. Once a landlord obtains a residential Certificate of Occupancy, rent can be charged going forward, but the landlord is barred from seeking back-due rent – meaning you may end up footing the bill to bring your space within the law and have nothing to show for it.