Court rules state law does not protect Manhattan House tenants from eviction

By David Jones | September 15, 2010 03:30PM

Jeremiah O’Connor and the Manhattan House

The New York state Appeals Court unanimously ruled late yesterday that market-rate tenants at the Upper East Side’s Manhattan House condominium were not protected from eviction by the Martin Act when their leases expired in 2007.

The five-judge panel agreed with a 2008 appellate court ruling that the law, which regulates condominium and co-op conversions, did not protect 29 holdover tenants, whose leases expired prior to the conversion of the building into condos.

“Although the Martin Act reflects a public interest in protecting tenants properly in possession who do not desire or who are unable to purchase the units in which they reside, and therefore should be construed liberally, the statute does not bestow, by mere implication, tenancy rights on individuals whose rights have expired with the term of their leases,” Justice David Saxe wrote on behalf of the panel.

Saxe noted, however, that the case should be remanded back to the lower court for additional consideration because a number of other legal arguments were never ruled on in connection with the eviction case.

The case was one of the most closely watched landlord-tenant disputes in New York in recent years, as it concerned whether landlords had the right to evict market-rate tenants during a condo conversion, which would allow the units to be sold to incoming buyers. The building, at 200 East 66th Street, was acquired for a record $625 million by Jeremiah O’Connor and Richard Kalikow, and planned as a $1 billion conversion, before falling into serious financial problems.

Tenants argued that the sponsor, Jeremiah O’Connor, acted in bad faith by offering tenants lease renewals for terms as short as three months and attempted to double rents in some cases. They argued that the rent increases were part of an overall effort to harass tenants into leaving the building so that units could be sold at higher prices during the boom.
Adam Leitman Bailey, who represents the market-rate tenants at the property, conceded that losing the Martin Act argument was a blow, but added that the court will allow him to re-argue that the evictions were allegedly done in retaliation for tenant complaints about construction and other issues.

“We did lose the issue of the Martin Act,” Bailey told The Real Deal. “But fortunately the court reversed the Appellate Term and allowed us to argue the rest of our claim, which was previously and incorrectly dismissed.”

Market-rate tenants at the Sheffield, a condo conversion previously led by developer Kent Swig, won what was widely considered a landmark victory housing court Judge David Cohen ruled that the Martin Act protected them from eviction from that property, at 322 West 57th Street, near Columbus Circle.

Sheffield tenants reached an agreement with the state attorney general who granted them protection from eviction by Swig, and were later offered “use and occupancy agreements” by the owners. Fortress Investment Group later foreclosed on that property and took over ownership.

Sam Himmelstein, who represented the Manhattan House tenants in the original case, was not immediately available for comment, and nor were Manhattan House officials.