In Re Bridge Associates Of Soho, Inc.

589 B.R. 512 (2018)

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Nature of the Case

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Facts

P is the owner of real property located in New York. It is designated an 'interim multiple dwelling' or 'IMD' under Article 7-C of the New York Multiple Dwelling Law. P seeks to sell the Property free and clear of any liens, claims, and encumbrances, including any possessory rights that may be held by the current occupants of the Building. The Building's occupants (Statutory Tenants) object in that they have possessory rights under the Loft Law which cannot be altered by a §363 sale. The New York City Loft Board objects to the sale. P's senior secured creditors, and tax lien holders, object to the sale which was stayed by the P's bankruptcy filing on the eve of foreclosure. P proposes to conduct an auction sale with a reserve price of $12.5 million which, according to P, will be sufficient to ensure payment of secured claims thus satisfying § 363(f)(3) as to the secured creditors. P argues that the Statutory Tenants have no possessory interest in the Property, and are merely holdover tenants who have not paid rent in decades and are subject to eviction under state law. The Loft Law addresses illegal conversions of a large number of buildings within New York City that wanted to transition from commercial to residential use. The Laws were enacted in order to bring these buildings into conformity with governing statutory, regulatory, and/or code requirements for residential occupancy, protect tenants in those buildings and protect public health, safety, and general welfare. P's property has been subject to the Loft Law since approximately 1991 when prior owners of the Building conceded coverage as an 'interim multiple dwelling' or 'IMD' and formally registered the Building with the 'Loft Board' in 1993. P acquired the Property in 2002, subject to the rules and regulations of the Loft Law. The building does not have a certificate of occupancy for residential use, nor is P in compliance with the process to bring the Building into compliance. If a building is occupied without a certificate of occupancy, no rent may be collected. The Loft Law allows an owner to collect rent even if there is no certificate of occupancy, as long as it is in compliance with the rules and regulations of the Loft Law necessary to move the Building towards legalization. P argues that absent the payment of rent, the Statutory Tenants have no possessory rights to occupy the premises. The Statutory Tenants argue that their continued occupancy rights are conditioned only upon the requirement that the unit they occupy be their primary residence. P argues that any occupancy rights conferred by this statute are conditioned upon both the primary residence requirement and upon the payment of rent.