(a) Prime Lessee or Sublessor not in residence. The Loft Board may find a Prime Lessee or a Sublessor, either of whom does not residentially occupy an IMD unit, to be a Protected Occupant only if the individual proves that such unit is the individual's primary residence. If the individual fails to prove that such unit is a primary residence, any rights of such individual to recover the unit are extinguished.
(1) The Prime Lessee or Sublessor must exercise, in a court of competent jurisdiction, his or her right to recover the unit upon the expiration or termination of a sublease under the terms of which the Prime Lessee or Sublessor is the immediate overtenant, provided that the sublease was in effect on:
(i) September 25, 1983, for a unit covered under MDL § 281(1);
(ii) November 22, 1992, for a unit covered under MDL § 281(4); or
(iii) September 11, 2013, for an IMD unit covered by MDL § 281(5) that became subject to Art. 7-C pursuant to Chapter 135 or 147 of the Laws of 2010.
(iv) June 25, 2019, for an IMD unit covered by MDL § 281(5) or 281(6) that became subject to Art. 7-C pursuant to Chapter 41 of the Laws of 2019.
(2) Where the sublease was no longer in effect on the relevant date above, the Prime Lessee or Sublessor must exercise, in a court of competent jurisdiction, his or her right to recover the unit on or before:
(i) December 24, 1983, for IMD units that are subject to Art. 7-C by reason of MDL § 281(1); or
(ii) February 21, 1993, for IMD units that are subject to Art. 7-C solely by reason of MDL § 281(4).
(iii) If the IMD unit became subject to Art. 7-C pursuant to Chapter 135 or 147 of the Laws of 2010, and the sublease is no longer in effect, the Prime Lessee or Sublessor must exercise the right to recover the unit on or before December 10, 2013, or if the unit is not subject to Art. 7-C on September 11, 2013, ninety (90) days following the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction, or the issuance of an IMD registration number after filing of a registration Application, whichever is earlier.
(iv) June 30, 2023 for an IMD unit covered by MDL § 281(5) or 281(6) that became subject to Art. 7-C pursuant to Chapter 41 of the Laws of 2019.
(b) Where a Prime Lessee is in possession of a portion of the space which he or she leased from the Landlord, such Prime Lessee is entitled to remain in possession, and is qualified for protection under Art. 7-C, only with respect to the portion of such space which he or she occupied as a Residential Unit, including any portion thereof used for home occupations or as the working portion of a joint-living-working quarters for artists. The Prime Lessee is not entitled to claim any of the remaining portion of the leased space as primary residence against the Occupant of any other Residential Unit within such space, except to the extent provided for in 29 RCNY § 2-09(c)(5) below, and subject to the provisions of 29 RCNY §§ 2-08(s)(4) and 2-09(a). The current residential Occupants of the remaining unit(s) created through subdivision are qualified for protection under Art. 7-C with regard to their respective Residential Unit(s) covered by Art. 7-C, except as provided in 29 RCNY §§ 2-08(s)(4) and 2-09(a) of these rules.
(c) Rights, obligations and legal relationships among the parties.
(1) Legalization and cost of legalization. The Owner of an IMD Building is responsible for legalization of each residential IMD unit pursuant to MDL § 284, regardless of whether the Occupant is the Prime Lessee or a Person or Persons with whom the Prime Lessee entered into an agreement permitting such Persons to occupy units in space covered by the prime lease. The costs of legalization, as reflected in rent adjustments made pursuant to MDL § 286(5), and apportioned among the covered Residential Units, shall be borne directly by the residential Occupants qualified for protection of such units.
(2) Privity.
(i) Privity between residential Occupant and Prime Lessee. The residential Occupant qualified for protection under Art. 7-C, if other than the Prime Lessee, is deemed to be in Privity with the Prime Lessee, if either:
(A) There is a lease or rental agreement in effect for the Residential Unit between the Prime Lessee and the residential Occupant; or
(B) There is a lease or rental agreement in effect for the Residential Unit or the space in which it is located, between the Landlord and the Prime Lessee. No lease or rental agreement between the Prime Lessee and the residential Occupant has any force or effect beyond the term of the lease or rental agreement between the Prime Lessee and the Landlord, except as provided in 29 RCNY § 2-09(c)(6) or (c)(7).
(ii) Privity between Landlord and Prime Lessee. The Prime Lessee and the Landlord are deemed to be in Privity when there is a lease or rental agreement in effect between them.
(iii) Privity between residential Occupant and Landlord. The residential Occupant and the Landlord are deemed to be in Privity when the residential Occupant is the Prime Lessee; or when the lease or rental agreement between the Prime Lessee and the Landlord, covering the residential Occupant's unit or the space in which it is located, is no longer in effect. All leases or rental agreements, except subleases entered into pursuant to § 226-b of the Real Property Law ("RPL") and 29 RCNY § 2-09(c)(4), which have not expired will be deemed to be no longer in effect upon certification by the DOB of the Landlord's compliance with the fire and safety protection standards of Art. 7-B. Upon such certification, a residential lease subject to the Emergency Tenant Protection Act of nineteen seventy-four must be offered to the residential Occupant, pursuant to § 286(3) of the MDL.
(3) Services.
(i) When the Landlord or Responsible Party and residential Occupant are in Privity, the Landlord is responsible for meeting the minimum housing maintenance standards established by the Loft Board in 29 RCNY § 2-04.
(ii) When the Prime Lessee and the residential Occupant are in Privity, there must not be any diminution of services provided by the Prime Lessee to the residential Occupant. The Prime Lessee is responsible for meeting the minimum housing maintenance standards established by the Loft Board, to the extent such standards are required pursuant to the lease or rental agreement between the Prime Lessee and the residential Occupant, and to the extent those services are within the control of the Prime Lessee. Otherwise, all services must be provided by the Owner, Landlord or Responsible Party.
(4) Subletting rights of Occupants qualified for protection under Art. 7-C.
(i) Right to Sublet. All Occupants qualified for protection under Art. 7-C have the right to sublet their units pursuant to and in accordance with the procedures specified in § 226-b of the New York State Real Property Law ("RPL"), notwithstanding that such Occupants may reside in an IMD Building having fewer than four (4) Residential Units, and may not have a current lease or rental agreement in effect. The residential Occupant of a unit located in a subdivided space, who is not in Privity with the Landlord, must obtain the consent of both the Prime Lessee of such space and the Landlord to a proposed sublet of such unit, which may not be unreasonably withheld in accordance with RPL § 226-b.
(ii) Subletting provisions. The right to sublet is subject to the following provisions:
(A) The rent charged to the subtenant may not exceed the legal rent, as established pursuant to Art. 7-C and these rules, plus a ten percent (10%) surcharge payable to the residential Occupant if the unit sublet is furnished with the residential Occupant's furniture;
(B) The residential Occupant must be able to establish that the Residential Unit is his or her primary residence;
(C) The residential Occupant may not sublet the unit for more than a total of two (2) years, including the term of the proposed sublease, out of the four (4) year period preceding the termination date of the proposed sublease;
(D) The term of the proposed sublease may extend beyond the term of the residential Occupant's lease, if such a lease is in effect, or beyond the date of the DOB certification of the Landlord's compliance with Art. 7-B of the MDL. In such event, the sublease is subject to the residential Occupant's right to continued occupancy pursuant to Art. 7-C of the MDL, including the right of the residential Occupant to issuance of a lease in accordance with the terms and provisions of MDL § 286(3) and these rules, upon Art. 7-B compliance. It is considered unreasonable for a Landlord to refuse to consent to a sublease solely because the residential Occupant has no lease or rental agreement in effect or because the sublease extends beyond the residential Occupant's lease or beyond the anticipated date of achieving Art. 7-B compliance.
(E) Where a residential Occupant violates the provisions of this subparagraph (ii) of paragraph (4), the subtenant is entitled to damages of three (3) times the overcharge and may also be awarded attorney's fees and interest from the date of the overcharge at the rate of interest payable on a judgment pursuant to § 5004 of the Civil Practice Law and Rules.
(F) The provisions in clauses (A) through (E) of this 29 RCNY § 2-09(c)(4)(ii) apply to all subleases for IMD units which are subject to Art. 7-C by reason of MDL § 281(1), commencing on or after September 25, 1983, the original effective date of these rules. Subleases entered into on or after June 21, 1982, but before September 25, 1983 are not subject to clauses (A), (C) and (E) of 29 RCNY § 2-09(c)(4)(ii), but are subject to clauses (B) and (D) of § 29 RCNY § 2-09(c)(4)(ii) and the provisions of § 226-b of the RPL, in effect at the time of the commencement of the sublease.
(G) Notwithstanding the provisions of clause (F) of this 29 RCNY § 2-09(c)(4)(ii), the provisions in clauses (A) through (E) of 29 RCNY § 2-09(c)(4)(ii) apply to all subleases for IMD units which are subject to Art. 7-C solely by reason of MDL § 281(4) commencing on or after November 23, 1992. Subleases for such units entered into on or after July 27, 1987, but before November 23, 1992, are not subject to clauses (A), (C) and (E), but are subject to clauses (B) and (D) of 29 RCNY § 2-09(c)(4)(ii) and the provisions of § 226-b of the RPL, in effect at the commencement of the sublease.
(H) Notwithstanding the provisions of clauses (F) and (G) of 29 RCNY § 2-09(c)(4)(ii), the provisions in clauses (A) through (E) of 29 RCNY § 2-09(c)(4)(ii) apply to all subleases for IMD units that are subject to Art. 7-C by reason of MDL § 281(5) commencing on or after September 11, 2013, the effective date of this amended rule. Subleases for such units entered into on or after June 21, 2010, but before September 11, 2013 are not subject to clauses (A), (C) and (E), but are subject to clauses (B) and (D) of 29 RCNY § 2-09(c)(4)(ii) and the provisions of § 226-b of the RPL, in effect at the commencement of the sublease.
(I) Notwithstanding the provisions of clauses (F), (G) and (H) of 29 RCNY § 2-09(c)(4)(ii), the provisions in clauses (A) through (E) of 29 RCNY § 2-09(c)(4)(ii) apply to all subleases for IMD units that are subject to Art. 7-C by reason of MDL § 281(6) commencing on or after March 31, 2023, the effective date of this amended rule. Subleases for such units entered into on or after June 25, 2019, but before March 31, 2023 are not subject to clauses (A), (C) and (E), but are subject to clauses (B) and (D) of 29 RCNY § 2-09(c)(4)(ii) and the provisions of § 226-b of the RPL, in effect at the commencement of the sublease.
(iii) If any clause, sentence, paragraph, subdivision or part of this 29 RCNY § 2-09(c)(4) is adjudged by any court of competent jurisdiction to be invalid, the judgment shall not render invalid this entire section on subletting rights of residential Occupants.
(5) Prime Lessee's right to recover subdivided space.
(i) Lease between Prime Lessee and Landlord is in effect and residential Occupant voluntarily vacates the subdivided portion. Where the Prime Lessee is the residential Occupant of a portion of the space leased from the Landlord and the lease or rental agreement between the Prime Lessee and the Landlord is in effect, the Prime Lessee may recover for his or her own personal use, a Residential Unit located within the leased space voluntarily vacated by the residential Occupant before the establishment of Privity between such residential Occupant and the Landlord. The right to recover space pursuant to this rule is not available to a Prime Lessee found by the Loft Board to have harassed any residential Occupant(s). The recovered space will be deemed part of the Prime Lessee's Residential Unit, and in no event may the Prime Lessee relet such space for any purposes whatsoever, except that the Prime Lessee retains the same rights to sublet the entire Residential Unit as provided in 29 RCNY § 2-09(c)(4).
(ii) Prime Lessee's right to compensation for improvements when the residential Occupant Voluntarily Vacates the Subdivided Portion. Where a Prime Lessee waives the right to recover a Residential Unit in space leased by a Prime Lessee and vacated by the residential Occupant, the Prime Lessee may sell improvements to the unit made or purchased by the Prime Lessee to an incoming tenant, provided that the Prime Lessee first offers the improvements to the Landlord for an amount equal to their fair market value pursuant to § 286(6) of the MDL and the Loft Board rules. If the incoming tenant purchases the improvements, the incoming tenant is deemed in Privity with the Landlord, and the initial maximum rent is to be determined in accordance with 29 RCNY § 2-09(c)(6)(ii)(A). If the Landlord purchases the improvements, the rent due shall be the initial market rental subject to subsequent rent regulation if the IMD has six (6) or more Residential Units and if the sole basis for rent regulation is Art. 7-C.
(iii) Lease between Prime Lessee and Landlord is in effect and Prime Lessee wants to recover the subdivided portion. Where the Prime Lessee is the residential Occupant of a portion of the space the Prime Lessee has leased from the Landlord and the lease or rental agreement between the Prime Lessee and the Landlord is in effect, the Prime Lessee may recover for his or her own personal use, a Residential Unit located within the leased space, if the residential Occupant of the unit agrees to the purchase by the Prime Lessee of the Occupant's rights in the unit. The recovered space will be deemed part of the Prime Lessee's residential IMD unit, and in no event may the Prime Lessee relet such space for any purpose whatsoever, except that the Prime Lessee retains the same rights to sublet the entire residential IMD unit as provided in 29 RCNY § 2-09(c)(4).
(iv) Lease between Prime Lessee and Landlord no longer in effect and Prime Lessee wants to recover subdivided portion. Where the lease or rental agreement between the Prime Lessee and the Landlord is no longer in effect, the Prime Lessee's right to recover space pursuant to this subsection expires on:
(A) July 5, 1988, for an IMD unit subject to Art. 7-C by reason of MDL § 281(1);
(B) January 22, 1993, for an IMD unit subject to Art. 7-C solely by reason of MDL § 281(4); or
(C) November 12, 2013, or if the unit is not subject to Art. 7-C on the effective date of this amended rule, sixty (60) days following the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction, or issuance of an IMD registration number after the filing of a registration Application by the Owner or Responsible Party, whichever is earlier, for IMD units subject to Art. 7-C by reason of MDL § 281(5); or
(D) May 30, 2023, sixty (60) days after the effective date of this amended rule, or if the unit is not subject to Art. 7-C on the effective date of this amended rule, sixty (60) days following the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction, or issuance of an IMD registration number after the filing of a registration Application by the Owner or Responsible Party, whichever is earlier, for IMD units subject to Art. 7-C by reason of MDL § 281(6).
(v) Factors to consider when Prime Lessee seeks to recover subdivided space. Where the Prime Lessee is the residential Occupant of a portion of subdivided space that the Prime Lessee uses as his or her primary residence, and which the Prime Lessee has rented directly from the Landlord, the Prime Lessee is entitled to recover as part of his or her primary residence, a Residential Unit, located within the leased space, even if the space is occupied by another Person or Persons, if the Prime Lessee can establish that:
(A) There was an express written agreement between the Prime Lessee and the Occupant of such space, other than the mere expiration of the lease, entitling the Prime Lessee to recover such space, and that the Prime Lessee has not taken actions inconsistent with exercising the option entitling the Prime Lessee to recover such space;
(B) The Prime Lessee has occupied the entire demised premises as his or her own primary residence for at least one year before the subdivision and subletting of the unit;
(C) The Prime Lessee has a compelling need to recover such space; and
(D) The Prime Lessee has not been found to have harassed any residential Occupants.
(vi) Space recovered pursuant to this paragraph (5) is deemed part of the Prime Lessee's residential IMD unit, and in no event may the Prime Lessee relet any recovered space for any purpose whatsoever, except that the Prime Lessee has the same rights to sublet the entire residential IMD unit as provided in 29 RCNY § 2-09(c)(4) above, provided, however, that no such sublet is permitted for the first two (2) years after recovery. The Prime Lessee retains the right to make a claim to recover space pursuant to this provision, before the Loft Board, where there is a lease or rental agreement in effect between the Prime Lessee and the Landlord, or, where a lease or rental agreement is no longer in effect, on or before:
(A) July 5, 1988 for an IMD unit subject to Art. 7-C by reason of MDL § 281(1);
(B) January 22, 1993 for an IMD unit subject to Art. 7-C solely by reason of MDL § 281(4); or
(C) November 12, 2013, or if the unit is not subject to Art. 7-C on the effective date of this amended rule, sixty (60) days after the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction or the issuance of an IMD registration number after the filing of registration Application by the Owner or Responsible Party, whichever is earlier, for IMD units subject to Art. 7-C by reason of MDL § 281(5); or
(D) May 30, 2023, sixty (60) days after the effective date of this amended rule, or if the unit is not subject to Art. 7-C on the effective date of this amended rule, sixty (60) days following the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction, or issuance of an IMD registration number after the filing of a registration Application by the Owner or Responsible Party, whichever is earlier, for IMD units subject to Art. 7-C by reason of MDL § 281(6).
(6) Rent.
(i) Maximum permissible rent when residential Occupant is in Privity with Prime Lessee. When the residential Occupant is in Privity with the Prime Lessee, the maximum permissible rent payable by the residential Occupant to the Prime Lessee shall be:
(A) The rent established in the residential Occupant's lease or rental agreement, subject to the limitations in the applicable Loft Board Interim Rent Guidelines; or
(B) If such lease or rental agreement is no longer in effect, the amount permissible in accordance with 29 RCNY § 2-06 for an IMD unit subject to Art. 7-C by reason of MDL § 281(1); or in accordance with 29 RCNY § 2-06.1 for an IMD unit subject to Art. 7-C solely by reason of MDL § 281(4); or in accordance with 29 RCNY § 2-06.2 for an IMD unit subject to Art. 7-C by reason of MDL § 281(5); or in accordance with 29 RCNY § 2-06.3 for an IMD unit subject to Art. 7-C by reason of MDL § 281(6); and subject to any other relevant orders or rules of the Loft Board.
(ii) Maximum permissible rent when residential Occupant is in Privity with Landlord. When the residential Occupant is in Privity with the Landlord, the residential Occupant must pay rent as follows:
(A) If the residential Occupant is not the Prime Lessee, the maximum permissible rent is the amount last regularly paid under the terms of the lease or rental agreement with the Prime Lessee, or the Sublessor, if other than the Prime Lessee, plus any increases permissible and subject to any limitations under 29 RCNY § 2-06 for an IMD unit subject to Art. 7-C by reason of MDL § 281(1); or under 29 RCNY § 2-06.1 for an IMD unit subject to Art. 7-C solely by reason of MDL § 281(4); or under 29 RCNY § 2-06.2 for an IMD unit subject to Art. 7-C by reason of § 281(5); or in accordance with 29 RCNY § 2-06.3 for an IMD unit subject to Art. 7-C by reason of MDL § 281(6); and subject to any other relevant orders or rules of the Loft Board.
(B) Maximum permissible rent when Prime Lessee is residential Occupant of entire leased space. If the Prime Lessee is the residential Occupant of the entire space leased from the Landlord, the maximum permissible rent is:
(a) The amount specified in the lease or rental agreement, subject to any limitations in the applicable Loft Board Interim Rent Guidelines; or
(b) If the lease or rental agreement is no longer in effect, the amount permissible pursuant to 29 RCNY § 2-06 for an IMD unit subject to Art. 7-C by reason of § 281(1); or 29 RCNY § 2-06.1 for an IMD unit subject to Art. 7-C solely by reason of MDL § 281(4); or 29 RCNY § 2-06.2 for an IMD unit subject to Art. 7-C by reason of § 281(5); or in accordance with 29 RCNY § 2-06.3 for an IMD unit subject to Art. 7-C by reason of MDL § 281(6); and subject to any other relevant orders or rules of the Loft Board.
(C) (a) Maximum permissible rent when Prime Lessee is residential Occupant of a portion of leased space and lease is in effect. If the Prime Lessee is the residential Occupant of a portion of the space leased from the Landlord and the lease or rental agreement between the Prime Lessee and the Landlord is in effect for the entire space, the maximum permissible rent is the amount specified in the lease or rental agreement for the entire space and any permissible increases pursuant to any relevant orders or rules of the Loft Board.
(b) Maximum permissible rent when the Prime Lessee is residential Occupant of a portion of leased space and lease between the Prime Lessee and the Landlord is not in effect. If the Prime Lessee is the residential Occupant of a portion of the space leased from the Landlord and the lease or rental agreement between the Prime Lessee and the Landlord is no longer in effect for a Residential Unit or unit located in a portion of such leased space, because Privity has been established between the residential Occupant(s) of the subdivided unit or unit(s) and the Landlord pursuant to 29 RCNY § 2-09(c)(2)(iii), the maximum permissible rent shall be based on the rent paid by the Prime Lessee to the Landlord under the most recent rental agreement for the entire space, plus any increases permissible under 29 RCNY § 2-06 for an IMD unit subject to Art. 7-C by reason of MDL § 281(1); or, under 29 RCNY § 2-06.1 for any IMD unit(s) subject to Art. 7-C solely by reason of MDL § 281(4); or under 29 RCNY § 2-06.2 for an IMD unit subject to Art. 7-C by reason of MDL § 281(5); or in accordance with 29 RCNY § 2-06.3 for an IMD unit subject to Art. 7-C by reason of MDL § 281(6); and subject to any other relevant orders or rules of the Loft Board. The maximum permissible rent payable by the Prime Lessee to the Landlord is equal to the percentage of the rent so calculated, equivalent to a fraction:
(1) The numerator of which is the square footage of the leased space occupied by the Prime Lessee's unit, plus the square footage of any other unit regarding which the Prime Lessee remains in Privity with the residential Occupant, and
(2) The denominator of which is the entire square footage of the space leased from the Landlord.
(D) (a) Maximum permissible rent when Prime Lessee is a residential Occupant of a portion of leased space and the lease between the Prime Lessee and residential Occupant is not in effect. If the Prime Lessee is the residential Occupant of a portion of the space leased from the Landlord, but the lease or rental agreement for all other units within the space is no longer in effect because the Occupants of such units have entered into Privity with the Landlord, the maximum permissible rent shall be based on the rent paid by the Prime Lessee to the Landlord under the most recent lease or rental agreement for the entire space, plus any increases permissible under 29 RCNY § 2-06 for an IMD unit subject to Art. 7-C by reason of MDL § 281(1); or, under 29 RCNY § 2-06.1 for any IMD unit(s) subject to Art. 7-C solely by reason of MDL § 281(4); or under 29 RCNY § 2-06.2 for an IMD unit subject to Art. 7-C by reason of MDL § 281(5); or in accordance with 29 RCNY § 2-06.3 for an IMD unit subject to Art. 7-C by reason of MDL § 281(6); and subject to any other relevant orders or rules of the Loft Board. The maximum permissible rent payable by the Prime Lessee to the Landlord is equal to the percentage of the rent so calculated, equivalent to a fraction:
(1) The numerator of which is the square footage of the leased space which the Prime Lessee's unit occupies, and
(2) The denominator of which is the entire square footage of the space leased from the Landlord.
(b) Maximum permissible rent when the rent paid by the residential Occupant and Prime Lessee is greater than the total rent for the unit. Where the rent paid by the residential Occupant(s) of such space who were in Privity with the Prime Lessee to the Prime Lessee and the Prime Lessee's proportionate share of the rent as calculated under 29 RCNY § 2-09(c)(6)(ii)(D)(a) above, without inclusion of any increases permissible under the applicable Loft Board Interim Rent Guidelines or any other increase permitted in the Loft Board rules or Art. 7-C, is greater than the rent specified in the most recent lease or rental agreement for the entire space leased between the Prime Lessee and the Landlord or, if applicable, the rent as calculated under 29 RCNY § 2-09(c)(6)(ii)(C)(b), the Landlord has the option to treat the excess amount as follows:
(1) Reduce the monthly legal rent payable by the Prime Lessee by one-half of the excess amount as calculated on a monthly basis, provided the monthly legal rent may not be less than $100; or
(2) Make a single lump sum payment to the Prime Lessee equal to one-half of the monthly excess amount multiplied by 36.
The Landlord may exercise the option to make a single lump sum payment at any time. If the Landlord chooses the option of a single lump sum payment, after the Prime Lessee has commenced paying a rent calculated under item (1) above, the single lump sum payment due to the Prime Lessee from the Landlord may not be diminished by the amount of the prior reductions in rent. Upon payment of the single lump sum payment, the Landlord may increase the Prime Lessee's monthly rent to the maximum permissible rent allowable under 29 RCNY § 2-09(c)(6)(ii)(D)(a) above. Any Prime Lessee found to have harassed any residential Occupant is not entitled to the rent reduction or single lump sum payment provided for in items (1) and (2) above, respectively.
(c) Effective date of rent adjustments. The rent adjustments provided in 29 RCNY § 2-09(c)(6)(ii)(A) and (c)(6)(ii)(D) apply to the next regular rent payment due on or after:
(1) July 5, 1988, for IMD units subject to Art. 7-C pursuant to MDL § 281(1);
(2) January 22, 1993, for IMD units subject to Art. 7-C solely pursuant to MDL § 281(4); or
(3) November 12, 2013, for IMD units subject to Art. 7-C by reason of MDL § 281(5), if the lease or rental agreement between the Prime Lessee and the Landlord is no longer in effect; or
(4) May 30, 2023, sixty (60) days after the effective date of this amended rule, or if the unit is not subject to Art. 7-C on the effective date of this amended rule, sixty (60) days following the finding of coverage by a Loft Board order, a finding of coverage by a court of competent jurisdiction, or issuance of an IMD registration number after the filing of a registration Application by the Owner or Responsible Party, whichever is earlier, for IMD units subject to Art. 7-C by reason of MDL § 281(6).
(5) Otherwise, the rent adjustments apply to the next regular rent payment due after such lease or rental agreement, or portion thereof, is no longer in effect, but in no event earlier than:
(i) July 5, 1988, for IMD units subject to Art. 7-C pursuant to MDL § 281(1);
(ii) January 22, 1993, for IMD units subject to Art. 7-C solely by reason of MDL § 281(4);
(iii) November 12, 2013, for IMD units subject to Art. 7-C pursuant to MDL § 281(5); or
(iv) May 30, 2023, sixty (60) days after the effective date of this amended rule, for IMD units subject to Art. 7-C by reason of MDL § 281(6).
(7) Prime Lessee's or Sublessor's right to compensation for costs incurred in developing Residential Units.
(i) Right to Compensation. Where a Prime Lessee, or a Sublessor who is not the Prime Lessee, has incurred costs for improvements made or purchased in developing Residential Unit(s) in any space for which the Prime Lessee or Sublessor had or has a lease or rental agreement and for which the Prime Lessee or Sublessor is not the residential Occupant qualified for protection under Art. 7-C, such Prime Lessee or Sublessor is entitled to compensation from the residential Occupant(s), for the Prime Lessee's or Sublessor's actual costs incurred in developing the Residential Unit in question.
(ii) Agreements for compensation for improvements. The Prime Lessee or Sublessor and the residential Occupant may agree to payment of such compensation upon any terms that are mutually acceptable, at any time before the deadline for the filing of an Application as described in subparagraph (iii) below. All such agreements must be submitted to the Loft Board within ninety (90) days following their execution.
(iii) Limitation on right to compensation. If the parties are unable to agree upon the amount and terms of compensation before the establishment of Privity between the residential Occupant and the Landlord, as defined in 29 RCNY § 2-09(c)(2), the Prime Lessee, Sublessor, or residential Occupant, may apply to the Loft Board for resolution of the dispute over compensation of the Prime Lessee or Sublessor. Such Application may be brought after the Residential Unit has been registered with the Loft Board without timely contest of coverage or determined to be covered under Art. 7-C by Loft Board order or a court of competent jurisdiction, but no later than one hundred and eighty (180) days after the later of:
(A) May 6, 1988, for IMD unit(s) subject to Art. 7-C by reason of § 281(1); or
(B) November 23, 1992, for any IMD unit(s) subject to Art. 7-C solely by reason of MDL § 281(4); or
(C) September 11, 2013 for an IMD unit covered by MDL § 281(5) that became subject to Art. 7-C pursuant to Chapter 135 or 147 of the Laws of 2010; or
(D) March 31, 2023, the effective date of this amended rule, for an IMD unit covered by MDL § 281(5) that became subject to Art. 7-C pursuant to Chapter 41 of the Laws of 2019 or a unit covered by MDL § 281(6); or
(E) The establishment of Privity between the residential Occupant and the Landlord; or
(F) he earlier of the date the Landlord's registration of the Residential Unit without timely contest of coverage or the date of the determination of coverage of the Residential Unit by the Loft Board or a court of competent jurisdiction.
The Application must comply with the rules of the Loft Board governing Applications, including 29 RCNY § 1-21. The Affected Parties are limited to the Prime Lessee or Sublessor, the residential Occupant, and the Owner or Responsible Party. The Application fee is due and payable at the time of filing the Application.
(iv) Factors to determine whether compensation is due. The Loft Board must first determine whether any compensation is due and payable to the Prime Lessee or Sublessor, as applicable, based on consideration of the following factors:
(A) Whether the Prime Lessee or Sublessor incurred any costs, as defined in clause (A) of subparagraph (v) below, allocable to the particular unit in question; and
(B) Whether the Prime Lessee or Sublessor has already been compensated in accordance with the terms of a prior agreement. The amount of rent paid to the Prime Lessee or Sublessor, in excess of a proportionate share of the rent paid by the Prime Lessee to the Landlord, based on the percentage of the total square footage of space occupied, will not be credited towards compensation of the Prime Lessee or Sublessor, in the absence of a specific agreement.
(v) Factors to determine the amount due for improvements. If it is determined that the Prime Lessee or Sublessor, as applicable, did incur costs for improvements for which he or she has not yet been compensated, the Loft Board will determine the amount due and payable in accordance with the following criteria:
(A) All improvements as defined in 29 RCNY § 2-07, are compensable;
(B) The Loft Board will establish the value of the improvements by determining the actual costs incurred for the improvements based on evidence presented;
(C) Compensation determined to be due and payable may be made in accordance with a payment schedule agreed to by the Prime Lessee or Sublessor, as applicable, and the residential Occupant, or, if no agreement is reached, a payment schedule not to exceed 6 Months, set by the Loft Board, contained in the Loft Board's order.
(vi) Compensation made pursuant to this paragraph (7) provides residential Occupants with an opportunity to purchase improvements but does not constitute a sale of improvements pursuant to § 286(6) of the MDL.
(vii) (A) Compensation by the Owner or Responsible Party. A residential Occupant may offer the Landlord an opportunity to compensate the Prime Lessee or Sublessor for costs incurred for improvements made or purchased in developing a residential IMD unit. The compensation to be paid by the Landlord is the amount determined by agreement of the Prime Lessee or Sublessor, as applicable, and the residential Occupant, pursuant to subparagraph (7)(ii) above, or as determined by the Loft Board pursuant to subparagraph (7)(v) above. If the Landlord chooses to pay this compensation to the Prime Lessee or Sublessor, the residential Occupant remains the Occupant qualified for Art. 7-C protection, except that the residential Occupant will have no right to sell such improvements purchased by the Landlord pursuant to § 286(6) of the MDL. Compensation of the Prime Lessee or Sublessor by the Landlord does not affect the rent due from the residential Occupant;
(B) if the Landlord compensates the Prime Lessee or Sublessor pursuant to (A) above, the Prime Lessee or Sublessor will have no right to recover the unit for his or her own personal use pursuant to 29 RCNY § 2-09(a) and (c)(5). When the residential Occupant vacates the unit, the Landlord is entitled to lease the unit at market rent, absent a finding by the Loft Board of Harassment by the Landlord of Occupants;
(C) if the Landlord declines the opportunity to compensate the Prime Lessee or Sublessor, the residential Occupant remains responsible for the compensation payment established pursuant to subparagraphs (ii) or (v) above.
(8) Residential Occupant's right to sale of improvements pursuant to MDL § 286(6). In accordance with MDL § 286(6) and the Loft Board rules, a residential Occupant is entitled to sell all improvements to the unit made or purchased by the residential Occupant:
(i) Upon filing an agreement with the Loft Board pursuant to 29 RCNY § 2-09(c)(7)(ii), or
(ii) Following a Loft Board determination of an Application filed pursuant to 29 RCNY § 2-09(c)(7)(iii), or
(iii) Upon the expiration of the deadline for filing an Application, if none has been filed.
(Amended City Record 3/1/2023, eff. 3/31/2023)