1.When owners say they cannot obtain financing for legalization,
we see a lack of substantiation for these claims.

According to the recently released Loft Board code compliance statistics, less than 25% of the 827 buildings within the Loft Law universe lack a building permit. It is important to note that a contractor, who is required to submit proof of Workers Compensation and Liability insurance, typically pulls a permit.

Therefore, an owner would have to hire a contractor and make a significant down payment prior to the obtaining of a permit. It is reasonable to assume that these owners have confidence in their ability to pay for the contract into which they have entered. So, when we discuss financing as an issue, over three quarters of owners have already found ways to deal with it successfully. In a meeting with former Loft Board Executive Director, Jeanette Koster, (hardly one who could be called pro-tenant) the Executive Committee of LMLT was informed that in her view financing is simply not a legitimate excuse for non-compliance by owners.

Indeed, the Loft Board regulations treat the inability to obtain financing as grounds for an extension to the code compliance timetable. To date, we are unaware of a single complete application for such an extension. The value of these IMD's has risen astronomically since 1982. With loan rates at historic lows, and lenders aggressively courting customers, it is clear that financing is available. It is our belief that this is an excuse made by owners who do not believe it is in their interest to legalize, and are stretching for justification for their refusal to follow the law. We consider this to be an enforcement issue. A statutory increase to the fines the Board could levy would compel the owners in question to proceed with legalization. The new Board figures show over 100 buildings completing the process in the last year alone. The process is working.

It is also worth noting that many of these buildings have changed hands since the Loft Law was passed. In these instances, the new owner's due diligence would reveal coverage under the Loft Law, the existence of IMD units, and the owner's responsibility to legalize. The prudent individual would not enter into an investment of this type if basic analysis did not show that it was a good investment.

2.LMLT disputes the owners' claim that
pass along allowances are too low.

Our contacts in architectural offices inform us that pass along costs under the Loft Board's Code Compliance Schedule appear in many cases, to be close to, if not equal to, 100% of the owner's cost. While the Loft Law says that " the tenant shall assist" in the cost of legalization, it does not mandate that loft tenants pay 100% of the cost to the owner to legalize his building.

It should be pointed out that the schedule of costs that can be passed along under the Loft Board's rule is revised every year to reflect costs changes based on a national index. Since the Board's rule permits the owner to pass along either actual cost or the schedule cost, in many instances we are seeing pass alongs based on the actual cost of many of the items on the schedule, which is lower than the maximum pass along permitted by the schedule.

3.The owners' claim that they have only received
one rent increase since 1982 is ludicrous.

This is simply not true. In fact, to address this complaint, additional rent increases, which were geared to code compliance progress, were added to the law in 1992. These have been in effect ever since. The concept was, and remains, to reward the owners who fulfilled their statutory obligation to legalize their buildings.

4.The proposal to place all loft tenants immediately
into rent stabilization prior to code compliance,
as proposed in last years' Mayor's Program Bill language,
would hinder, not help legalization.

Under the Loft Law, owners receive rent increases pegged to code compliance progress. There is an increase for registering the building and entering the program, another for filing an alteration application, and so on. To allow non-compliant owners to collect regular rent stabilization increases before completing legalization would undercut this scheme. Rent stabilization hikes, along with code compliance pass alongs, should remain a benefit that goes only to owners when they complete the program.

5.The Loft Board's legalization review process
is beneficial to code compliance.

The Narrative Statement procedures developed by the Board over the last twenty years are critical to the process. The bringing together of the parties to discuss legalization issues and resolve differences before the work begins is a proven success. This facilitates movement through the Department of Buildings, and reduces the strain on the courts. Some owners may consider it an inconvenience, but the effort is clearly worthwhile.

6.With respect to "market rent," it is our position that, just as
the original loft tenants were paying it (according to the
accepted willing lessor/willing lessee definition) when they
leased their lofts, so are the uncovered loft tenants of today.

Over time, the ability to be locked into RGB increases (along with paying code compliance pass alongs) would prove just as advantageous to the Live/Work membership as it has to LMLT's members.

7.Vacancy Decontrol already exists for 7-C tenants.

Owners presently have the right to buy out a tenant who elects to depart under MDL 286.12. Without exception, they exercise that right because it deregulates the unit. This provision is likely to apply to new units as well.

8.Under the hardship provisions of 7-C, owners were given the
opportunity to argue that certain units could not be legalized,
or that compliance was an "economic infeasibility."

This provision is similarly likely to apply to the new units. It provides added protection to owners faced with extremely high legalization costs or loft units that simply cannot be legalized under DOB rules.

9.We strongly dispute the fairness of treating
legalization costs as MCIs.

As noted earlier, the Loft Law states that tenants "shall assist" in the cost of legalization. It does not say tenants should pay all of it, or that pass along costs should be permanent. Major Capital Improvements are designed to benefit owners who rented legal housing in conformance with state law. In the loft legalization scheme, fairness dictates that the reimbursement paid to the owner by the tenants should end after the owner's cost of legalization (which under the Loft Law can include financing costs) has been reimbursed.

10.A very high percentage of loft tenants are artist
and work in arts-related industries.

Whether long-time covered 7-C loft tenants, or currently unprotected tenants who did not qualify under the original window period of the Loft Law, it is clear that most loft tenants are artist or work in arts-related fields. It was the need for sizable open spaces with high ceilings and good light that attracted artist to lofts in industrial and manufacturing areas in the first place. When artist first move into loft neighborhoods, there are no amenities or services to support them. They move into lofts because they need to. Among LMLT members, almost all are artist. Many of these tenants are art professors in schools and colleges in the New York City region. Over the years, the city has come to recognize the contribution of the arts sector to the City's economy. Loft housing for artist is part of what makes this possible.

In summation, the Loft law works.

It is not surprising that owners criticize the Loft Law. It does require that they convert formally manufacturing and commercial buildings (or portions of buildings) into code-compliant residential housing. It is also true that sometimes significant work is involved since these buildings were not constructed with residential use in mind. However, faced with overwhelming vacancy rates of manufacturing and industrial tenants, owners over the past thirty-plus years have opted to accept residential tenants. They sought them out and welcomed them. In fact, in many buildings these residential tenants moved into raw, or near raw space and had to invest their money to make the necessary improvements for residential use. In other buildings, while there may have been some basic systems, tenants were encouraged to install other residential amenities.

Code compliance work has been done in these buildings, pursuant to the Loft Board's rules, with the tenant in place. Considering the task at hand, the completion rate is very good. Thousands of code compliant units have been created. the latest Loft Board statistics indicate a recent significant increase in the number of buildings completing the legalization process.

Thank you for taking the time to review our comments and observations.

LMLT Executive Committee