Artist in Residence Loft Law for Soho and Noho NYC

[Benny]

There are thousands of artist in residence buildings in NYC, most of which are in Soho and Noho. I know for a fact that the vast majority of these artist in residence apartments are sold to non artist buyers (i.e. wealthy bankers who don't stand a chance at becoming a certified artist).

I've also read that after the Financial Crisis of 2007 to 2008 banks have become more wary of lending to non artist buyers of artist in residence buildings, probably because they fear being stuck with an illiquid asset if the city cracks down harder. Also, I've heard that the city has become more strict after the Financial Crisis as well in terms of actually inspecting to see if buildings have certified artists actually living there.

Does anyone have any color on the risks today of buying in an artist in residence building in Soho or Noho? Has it become safer in 2018 to buy as a non artist in a Soho or Noho artist in residence building in NYC?

[aslan]

I recently attended a lecture by one of the most experienced real estate lawyers in the artist in residence building space. His opinion was that everyone, including the city, knows that the vast majority of buyers and probably owners these days in Soho and Noho are non certified artists. So yes, at some point the city will have to man up and legalize it. You can't have people living there in perpetuity in fear of illegally occupying their apartment.

He did say that if the artist in residence building has a permanent Certificate of Occupancy (C of O) then he's okay with his clients buying in it even if they're not a certified artist. However, he cautioned that there is some risk of the Department of Buildings not renewing a temporary C of O if an artist in residence building doesn't comply with the loft law. He said that 60% to 65% of the time, the Department of Buildings will ask to see artist certificates before renewing a building's temporary C of O. Therefore, there definitely is a risk of living in a "zombie" building if it's renewing a temporary Certificate of Occupancy every 90 days.

There are many problems with living in a building without a Certificate of Occupancy. First, having a Certificate of Occupancy means the building is habitable and safe. If you don't have one, you're technically occupying it illegally. Secondly and perhaps more importantly for many residents, you can't get a permit if the building doesn't have a C of O. That means you can't do renovations!

Lastly, I'm not sure if these buildings can just get rid of their artist in residence status or not. I know there are tax breaks associated with being classified as an artist in residence building, and that many buildings that have converted from coops to condos have been reluctant to get rid of this status because of the tax breaks. Perhaps that is a last resort if possible.