Lawyer for the pair, Margaret Sandercock, told the New York Post that the building "did not comply with the Loft Law".
"The owner is not entitled to collect rent and my clients are not required to pay rent," Sandercock said.
Loft Law applies to buildings with at least three residential tenants, but the pair are the only residents, Harry Shapiro, the landlord's lawyer told the New York Post.
"They can stay if they pay," Shapiro said. "The unit is legal . . . We really don't want to evict them. We just want them to pay the rent. They're getting all the services but the landlord got zippo."
Sandercock disagrees. She said at the time when the Loft Law was changed, there were other residential tenants in the building.
"For the building to be safe and legal for them to live in, the law requires the landlord to have a residential certificate of occupancy," she said.
Sandercock said the building was unsafe, but defended her client' choice to stay rent-free, the New York Post reported.
"They're entitled to be there," she said.