Selecting the Right Methods for Dealing with Objectionable Conduct by Apartment Owners09/07/2014 | Fall 2014 Newsletter
Two recent cases highlight the difference between serving defaulting tenant/shareholders with a notice to cure, and serving shareholders with a notice to terminate a proprietary lease based on objectionable conduct.
In Gold Street Properties L.P. v. Freeman, decided on July 2, 2014 in the Civil Court, New York County, the tenant had subleased the subject apartment numerous times on a short term basis. It appeared that the tenant had advertised the apartment on AirBnB, and had collected money from a series of travelers to New York. The landlord served the tenant with a notice to cure, and advised the tenant she must immediately cease all conduct in violation of the lease.
The testimony at trial was that after the notice to cure, the tenant had ceased to rent out the apartment, removed the listing from AirBnB, and was in compliance with the notice. The Court held the fact that the tenant had been allegedly profiteering and that her conduct was in violation of various statutes designed to prevent apartments being used for hotel purposes did not preclude the tenant from curing the default, and accordingly the action was dismissed.
In contrast, in the case of Gordon v. 476 Broadway Realty Corp., decided on May 21, 2014 in the Supreme Court, New York County, the shareholders refused the Cooperative access to the apartment for the purpose of performing testing in order to determine the source of a leak, and also refused to pay maintenance and assessments relating to waterproofing. The shareholders insisted on attaching conditions to providing access; for example, providing alternative housing for the shareholders and the moving and storage of plaintiffs’ personal property. They also demanded that the work be videotaped. The Cooperative served the shareholders with a notice of objectionable conduct, and called a special meeting of the shareholders to terminate the proprietary lease of the shareholders. The meeting resulted in an overwhelming vote for terminating the proprietary lease. The shareholders then brought this action to enjoin the termination of the proprietary lease and the Cooperative counterclaimed for a judgment of possession. The Court granted summary judgment to the Cooperative, and held that even though the shareholders were subsequently willing to provide access, there was no basis for allowing a cure either pursuant to the terms of the lease, or pursuant to the Real Property Actions and Proceedings Law. The objectionable conduct provision of the proprietary lease does not require that the Cooperative give the plaintiffs a notice to cure, and the Court has no discretion to allow a cure or to stay the eviction in order to allow a cure. There was no dispute that the shareholders did not provide access by the date specified in the notice of objectionable conduct and continued to refuse access until after the shareholders meeting. The Court held that the Cooperative had no obligation to provide alternative housing or any of the other measures requested by plaintiffs as a condition for acquiring access.
The conclusion is that whenever possible the cooperative should consider use of the objectionable conduct provision of the proprietary lease in order to remove inappropriate shareholders from the building.
About the author: Marc J. Luxemburg is a partner at Gallet Dreyer & Berkey LLP. His practice focuses on real estate transactions, cooperative and condominium law, and real estate litigation. Mr. Luxemburg represents numerous buildings and sponsors in the New York City area. He is the President of the Council of New York Cooperatives and Condominiums, a nonprofit membership organization with more than 2300 cooperative and condominium members, which provides educational activities and monitors legislation which affect its members. He has taught numerous seminars on the legal aspects of operating cooperatives and on the role of the Board of Directors. Mr. Luxemburg can be reached at email@example.com.