By Joy Bergmann
On Tuesday, Justice James d’Auguste decided not to decide whether Hank Freid must immediately cease operations of three hotels he owns on the Upper West Side: Marrakech Hotel [2688 Broadway at 103rd], Broadway Hotel [230 W. 101st between Broadway and West End Avenue] and Royal Park Hotel [258 W. 97th between Broadway and West End Avenue].
In late June, the City of New York filed a lawsuit against Freid and his affiliated real estate corporations alleging that the three hotels were operating illegally by providing transient accommodations to tourists rather than permanent housing to New Yorkers as required by the buildings’ Class “A” SRO [Single Room Occupancy] Certificates of Occupancy under the 2010 Municipal Dwelling Law [MDL].
In court affidavits, Freid and his attorneys admitted transient occupancy of the properties, but proclaimed such use to be legal, “All three Hotels were converted into transient hotels in the 1940’s and have been used continuously since as such,” and because this use was “entirely lawful prior to the MDL Amendments, they have pre-existing vested rights to operate their SROs on a transient basis, as a matter of law.”
Tuesday’s lengthy oral arguments regarding the City’s request for a preliminary injunction, however, appeared to demonstrate that the law in this area seems far from settled. Should WSR readers wish to review the jousting memoranda of law documents and dozens of exhibits in this case, please do. [You will reach the filings after entering the code information on the right side of the linked web page.]
Essentially, the City’s argument relies on MDL § 4(16) “When a class A multiple dwelling is used wholly or in part for single room occupancy, it remains a class A multiple dwelling.” MDL § 248 “A dwelling occupied pursuant to this [SRO] section shall be deemed a class A dwelling and… shall be occupied for permanent residence purposes.” MDL § 4(8) “A class A multiple dwelling shall only be used for permanent residence purposes,” meaning, for periods of 30 days or longer.
Further, the City cited a January 31, 2017, Appellate Court decision regarding Freid’s Royal Park Hotel that found that “none of the units” there may be used for transient purposes, adding that the most recent Certificate of Occupancy [CO] was the binding, deciding document. As WSR reported, a similar finding was made last year against the Imperial Court on West 79th Street.
Freid’s defense team – three firms and at least nine lawyers strong – pointed to decision by the City’s Environmental Control Board [ECB] on February 2, 2017, regarding Freid’s Broadway Hotel finding that its CO “legally permits transient use,” and that other documentation beyond a CO may be considered when determining a property’s lawful use.
Defense attorneys suggested that a “hybrid” designation of Class A (permanent use) and Class B (transient use) exists, is recognized by the Department of Buildings and applies here.
Justice d’Auguste said he was leaning toward ruling against the City in as far as an preliminary injunction forcing the hotels to cease operations while the case in chief moves toward trial. He expressed skepticism when City attorneys pressed the need to restore the 300 units to affordable housing. “I accept that this hotel use results in less available housing, but I don’t accept that ending hotel use now will return affordable housing to New York City,” he said. The more likely result? The owners would, “convert them to luxury apartments or homeless shelters, “ he said. “The owners would lose money on rent-stabilized apartments.”
The fact that other authorities had decided Royal Park Hotel could not be used for transient purposes, but Broadway Hotel could be [Marrakech Hotel was not discussed in detail] seemed to inspire the judge to offer an unexpected suggestion to both parties. “Is there a way to bring some finality to this suit, a potential win-win? Perhaps modify the CO in some buildings to keep hotel use, and others become housing?” he asked. “You folks chat, and in three weeks, tell me.”
Compromise didn’t seem a promising bet, according to conversations with attorneys immediately following the hearing.
“We felt very good about the hearing,” said defense attorney Ronald J. Rosenberg of Rosenberg, Calica & Birney. “We maintain that these buildings have been used legally and will continue to be used legally.”
“The parties at this point are pretty far apart,” said Catherine Wan, Deputy Director of the Mayor’s Office of Special Enforcement. “The City’s position is clear. Clear on the law with MDL, clear on the Certificate of Occupancy and clear on the [Appellate Court] decisions regarding [Royal Park and Imperial Court]. The City wants this to be permanent housing.”