Unclear if Tenant Was Commercial or Residential

A tenant occupied the third floor of a building under an expired commercial lease. The zoning law permitted residential use of the space. The owner tried to evict the tenant. But the tenant argued that it was protected by residential rent-regulation laws and that the owner had violated the tenant's “warranty of habitability—that is, the space wasn't fit for human habitation. The owner claimed that the tenant was a commercial tenant and the lease's “counterclaim waiver” clause barred the tenant from making those arguments against the owner. The owner also noted that New York's top court had recently ruled in a similar case that a commercial tenancy couldn't be converted to a residential tenancy, so the commercial tenant couldn't take advantage of protections of the residential rent-regulation laws.

A New York court ordered a trial to decide whether the tenant was a commercial or residential tenant. The recent top court decision didn't apply because the tenant in that case occupied space that was zoned solely for commercial use. But here, the zoning laws permitted residential use of the space. If a trial showed that the tenant was a commercial tenant, the tenant's arguments against the owner would be barred by the lease's counterclaim waiver clause, the court said. If the trial showed that the tenant was a residential tenant, the tenant could seek residential rent-regulation law protection and sue the owner for violating the warranty of habitability [First Flatiron LLC v. Irizarry].