Publication Date: Autumn 1998
CNYC thanks Marc J. Luxemburg,
Esq., for this column. A partner in the law firm of Snow Becker
Krauss, Mr. Luxemburg was a founder of CNYC and serves as
its president. His workshop discussing legal decisions of
the prior year is featured at each year's Cooperative Housing
SPONSOR TENANTS ENTITLED
TO RENEWAL LEASES
Paikoff v. Harris, NYLJ, 9/30/98, p.28, c.1(Civ.Ct. Kings
Co.) may affect the continuing battle between cooperatives
and sponsors to require sponsors to complete the conversion.
In this case, a Housing Court held: (i) that the tenant, who
rented an apartment from the sponsor five years after the
closing of the conversion, was a "non-purchasing tenant"
and thus was entitled to renewal leases, so long as the tenant
was not in default of the obligations under the lease; and
(ii) that the tenant could not be subjected to "unconscionable
rental increases." In other words, whenever a sponsor
rents an apartment, the tenant may not thereafter be evicted
unless the tenant violates the lease terms, and the tenant
must be offered a renewal lease with "not unconscionable"
increases. The result is the tenant is given non-eviction
status with limited rent-increase protection.
The facts of the case were simple. The sponsor leased the apartment to the tenant 5 years after the conversion. At the expiration of the second lease entered into between the parties, the sponsor offered a third lease, which was rejected. The sponsor thereupon moved to evict on the grounds that the tenant was a holdover. The court found that the tenants were "non-purchasing tenants" within the meaning of the Martin Act because the Act does not require that the tenant be in occupancy at the time of the offering plan. The action was dismissed, subject to a new action being brought to raise the issue of whether the rent increase offered by the sponsor was or was not "unconscionable", an issue which the court declined to rule on in the existing proceeding.
The long-term effects of this case are unclear. If the principle is upheld by higher courts, the case may deter sponsors with vacant apartments from further renting, on the theory that they will thereafter be unable to obtain possession of the apartment in order to sell it, and that this will induce sponsors to sell apartments rather than rent them. On the other hand, for those apartments that have already been rented at so-called free market prices, or where the sponsor is not concerned about the long term effects of the rental, the decision will inhibit the sponsor?s ability in the future to vacate and sell apartments and thereby complete the conversion. It remains to be `seen whether a higher court will agree with this interpretation of the law.
MUST BE DESIGNATED
In Thompson v. 490 West End Apts. Corp. , 676 NYS2d 73 (1st Dept. July
16, 1998), and in Merioz v Strang, Sup. Ct. NY Co., Index Nol. 600942/98,
decision of August 3, 1996 (NYLJ QDS 22206005), the court found that an
owner of multiple apartments who did not occupy one of the apartments
and who had leased it out, did not thereby become a "Holder of Unsold
Shares", entitled to the benefits given a "Holder" under
the proprietary lease. Each court held that the owner did not qualify
as a Holder of Unsold Shares for the reason that it was not designated
by the sponsor as a Holder, and supplied no documentary evidence in support
of its claim. The result of these decisions is that the burden is on the
person claiming the status of Holder of Unsold Shares to produce evidence
to support the claim, and in the absence of such evidence the benefits
under the proprietary lease will not avail them. The court in Strang also
held that the co-op board did not waive its rights because it had treated
other lessees as Holders of Unsold Shares.
CORPORATE OFFICERS MUST SIGN
In 684 East 189th Street HDFC v Catrone, Civ. Ct. Bx.Cty., Index No. 85841/97,
decision of 5/6/98 (NYLJ QDS 36700250) a three-day nonpayment demand required
by the RPAPL was sent by the attorney for the cooperative. The court dismissed
the action on the grounds that the three day demand did not comply with
the Federal Fair Debt Collection Practices Act and that a summary proceeding
cannot be maintained based upon a notice that violates the federal act.
The court held that the RPAPL?s three-day demand requirement conflicts
with the federal statute in any case in which the demand is sent by an
attorney rather than by the party.
The bottom line in this case is that all legal notices to shareholders regarding nonpayment of maintenance must be signed by an officer of the cooperative, and not by the attorney or the managing agent - unless the attorney or agent is an officer of the Corporation and is signing in such capacity.