Published: Spring 2014

CNYC president Marc J. Luxemburg, Esq. is an attorney specializing in cooperative and condominium law. Each year at CNYC's annual Conference, he reviews recent court cases that have the potential to answer questions commonly faced by Boards of cooperatives and condominiums as part of their responsibilities. This article features cases highlighted at CNYC's 33rd annual Housing Conference. At CNYC's 34th Housing Conference on Sunday, November 16th, Mr. Luxemburg will again present this morning class, for which CNYC has made application for CLE credit.

RENOVATION ISSUES

CONSULT YOUR PROFESSIONALS
Boards must be careful before making a decision to stop work in a problem alteration; and should have the issues documented by a professional advisor before proceeding.

Wood v. 139 East 33rd Street Corp., 961 N.Y.S.2d 466 (1st Dept. 3/28/13) is an action by a shareholder for breach of an alteration agreement. The issue of whether defendant cooperative breached the proprietary lease and the alteration agreement by stopping work that was allegedly proceeding in accordance with plaintiff's approved renovation plans is correctly resolved without regard to the business judgment rule. Summary judgment for either side was denied because there was an issue of fact as to alleged drilling into the ceiling.

In Kleinerman v. 245 East 87 Tenants Corp., 936 N.Y.S.2d 187 (1st Dept. 4/11/13), shareholders seeking to renovate their unit allege that the cooperative and its board members condoned the superintendent's solicitation of kickbacks by improperly stopping certain renovations in the face of plaintiffs' accusations against him. Issues of fact exist, including whether the board members had knowledge of the superintendent's alleged conduct, whether the cooperative stopped plaintiffs' renovations in good faith based on the interests of the cooperative, and whether plaintiffs were accorded disparate treatment.

Musk v. 13-21 E. 22nd St. Residence Corp., 2012 N.Y. Misc. LEXIS 5775 (Sup. Ct NY Co. 12/3/12) raises two important issues:

A. WHO CAN ENFORCE AN ALTERATION AGREEMENT?

A Unit Owner injured by a renovation may have direct rights against the altering neighbor during the renovation, pursuant to the terms of the Alteration Agreement.

The plaintiff seeks a declaration that the defendants are responsible for remediation of a vibration and noise problem and for damages apparently caused by an alteration. The eleventh cause of action alleges that the altering shareholder breached the alteration agreement. Plaintiff is not an intended third-party beneficiary of the Alteration Agreement, but Section 7 of the Alteration Agreement provides: "you undertake to indemnify and hold harmless the Corporation, the Managing Agent and the Tenants and Occupants of the Building, against any claims for damages to persons or property suffered as a result of the Alteration." A shareholder is not precluded from enforcing the indemnification provision.

B. IS THE COOPERATIVE PARTY TO THE ALTERATION AGREEMENT?

The cooperative must be careful that documentation is properly and completely filled out.

Altering shareholder contends that the cooperative's cross claim for indemnification should be dismissed because the cooperative was not a party to the agreement. The Alteration Agreement states: "You have asked Wallack Management Co for its written consent for the making of certain alterations". The cooperative contends that it is undisputed that Wallack is the cooperative's management agent, and that the cooperative's account executive signed the agreement on behalf of the cooperative. The cooperative raises an issue of fact as to whether a scrivener's error resulted in Wallack, instead of the cooperative, being defined as "the Corporation" in the agreement. Altering shareholder is not entitled to dismissal of the cooperative's cross claim for indemnification on the basis of its contention that the cooperative is not referred to in the Alteration Agreement, or its indemnification provision.

This issue could have been avoided if the Alteration Agreement had been submitted to the cooperative's attorney for review.

ACCESS ISSUES

Access to apartments for the purpose of making repairs is frequently a problem. In York Towers v. Braha, 2013 WL 2474355 (Sup. Ct. NY Co. 6/6/13), cooperative sued to enjoin shareholders from denying the cooperative access to their apartment. Cooperative moved for partial summary judgment seeking a permanent injunction directing shareholders to grant the cooperative access to the apartment to perform complete mold abatement and such repairs as cooperative's professionals deem necessary. The court held that the decisions of cooperative boards are protected by the business judgment rule; and the Proprietary Lease empowers the cooperative to have access to apartments to make such repairs as it deems necessary. Shareholders failed to allow Plaintiff to make the necessary repairs, and presented no triable issues as to the cooperative's right to access the Apartment and make the repairs. The cooperative is entitled to an injunction barring the shareholders from denying access to the Apartment or otherwise interfering with the mold remediation and restoration work.

BUT

Board of Managers of the Britton Condominium v. C.H.P.Y. Realty Associates, 956 N.Y.S.2d 150 (2d Dept. 1219/12). Here the Board of managers brought action against owner of a commercial unit seeking judgment declaring COURT CASES SPRING 2014 CNYC HIGHLIGHTS 11 that board had the right to access water pipes for the purpose of altering and repairing them. Board moved for a preliminary injunction. The purpose of a preliminary injunction is to maintain the status quo pending determination of the action. Although the plaintiff may ultimately be successful, the order of the Supreme Court effectively altered the status quo and granted the plaintiff the exact relief which it sought in the complaint. Plaintiff failed to demonstrate that it would suffer irreparable harm in the absence of a preliminary injunction. Preliminary injunction denied.

Boards must be careful to preserve evidence in any situation that is or may become litigated, and should consult with counsel before moving or disposing of potential evidence.

In Kosovsky v. Park South Tenants Corp., 2013 N.Y. Misc. LEXIS 3572 (Sup. Ct. NY Co. 8/7/13), a shareholder brought action arising out of damage to his apartment as a result of repairs made to an adjacent balcony. The cooperative counterclaimed and cross claimed against its architect. The cooperative decided to make repairs to a window and the exterior wall. The Court ordered that all parties be present during the repair work so all parties could observe the condition of the wall. Shareholder also requested that his counsel and his engineer be able to discuss the scope of the work with the Board. Instead, the cooperative obtained access to plaintiff's apartment by procuring a locksmith to drill through the locks and, the repair work commenced without the shareholders or the architects being present. The court granted the motion of the architect and the cross-motion by plaintiff to strike the Board's answer and cross-claims based on the Board's spoliation of evidence.

The Board should document the need to access an apartment as part of an investigation, and should consult with counsel before taking unilateral action.

York Towers, Inc. v. Kotick, 2013 N.Y. Misc. LEXIS 3953 (Sup. Ct. NY CO. 9/3/13) - At a board meeting the board discussed the noise problem complained of by the shareholders, and then directed the superintendent to check if the shareholders were in the apartment. Once the superintendent determined that the shareholders were not home, the board members directed him to get the pass key for the apartment so that they could hear the noise for themselves. The shareholders claim that the superintendent and board members' entry into the apartment, without prior permission and/or notice, constitutes trespass. The cooperative argues that pursuant to the 'right of entry' clause in the proprietary lease it was entitled to enter the shareholders' apartment without their prior consent or notice, and therefore, the trespass claim must be dismissed. The clause provides that the lessor "shall be permitted to visit and examine the apartment to make or facilitate repairs in any part of the building." The cooperative presented no evidence that the superintendent and board members entered the shareholders' apartment to 'make or facilitate repairs'. The trespass counterclaim was allowed to proceed against the cooperative.

SHORT TERM RENTALS

In Board of Managers of South Star v. Grishanova [80 John Street], 2013 WL 869953 (Sup. Ct. NY Co. 3/8/13) the Board of Managers moved to preliminarily enjoin a unit owner from subletting, or renting out the unit for less than 30 days. The unit owner had asked the condominium staff to provide access and keys to 48 different visitors (an average of four per month), some with international and out-of-state driver's licenses provided upon their visits, who stayed in her unit for several days at a time. The manager accessed 'craigslist.org' and saw defendant's unit advertised as a short term rental, along with photographs of her 'living room, bedroom, and distinctive red kitchen'. In support of preliminary injunctive relief, the Board argued that it is likely to succeed on the merits of their claims. Even if defendant's visitors were not paying customers, their occupancy would violate the By-laws and Multiple Dwelling Law because defendant has not been residing in her unit, and the unit owners are gravely concerned about the risk to their safety and security posed by large numbers of strangers in the building. The legislature considers the practice of furnishing hotel room rentals in a residential building 'fundamentally unsafe' and 'dangerous' because of the increased risk of fire caused by the presence of transients in such buildings. The ongoing nuisance and interference with the unit owners' use and enjoyment of their property caused by defendant's illegal rooming house business is sufficient to establish irreparable harm. The apparent granting of the 'ultimate relief' is not an obstacle to granting a preliminary injunction. Otherwise, preliminary injunctions could never issue in cases in which the sole relief sought is to enjoin a continuing violation of the law or a continuing harm.

WHEN SHAREHOLDERS AREN'T CO OPERATIVE

In Lebovits v. 104 Division Avenue HDFC, 966 N.Y.S.2d 347 (Sup. Ct. K Co. 12/28/12), a resolution adopted at a shareholders' meeting cancelled all existing proprietary leases and gave each shareholder a uniform, substitute proprietary lease that conforms with the corporation's bylaws. Two shareholders failed to execute the new proprietary lease. The cooperative then initiated a holdover proceeding. This case ensued to stay the holdover proceedings. The cooperative counterclaimed for an order directing each shareholder to sign the proprietary lease. The cooperative's summary judgment motion seeking dismissal of the complaint was granted. The court transferred the cooperative's motion seeking summary judgment on its counterclaim to Kings County Civil Court. Consequently, the shareholders will face eviction unless they sign the amended proprietary leases.

In Ortiz v. Garcia, 959 N.Y.S.2d 223 (2d Dept. 1/30/13), an ousted board president brought petition challenging the election of officers to the board of directors. The president was more than two months behind in his maintenance payments, and the bylaws disqualified a shareholder from being a voting member of the cooperative or from being elected to the Board. A majority of the Board were entitled to call a special meeting to elect directors. The election of officers which took place at that meeting was proper.