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2017 Jack Newton Lerner Landlord Tenant Practice Institute Presentation

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Cooperative & Condominium Hot Topics
By Adam Leitman Bailey

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2017 Jack Newton Lerner Landlord Tenant Practice Institute Presentation

  1. 1. Adam Leitman Bailey, P.C. New York Real Estate Attorneys COOPERATIVE & CONDOMINIUM HOT TOPICS By Adam Leitman Bailey Jack Newton Lerner Institute CLE September 15, 2017
  2. 2. Adam Leitman Bailey, P.C. New York Real Estate Attorneys When a Board Can Fine Its Residents 1
  3. 3. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Board’s Authority to Impose Fines 2 • For condominiums, this requires a determination that residents are in violation of a provision of a governing document. If they are in violation, then the board has statutory authority to impose a fine on them. • For cooperatives, the court must determine that the residents are in violation of authority in the governing documents to fine their residents. • Lastly, even if the board of the condominium or cooperative is properly authorized by the governing documents, courts will look to whether the severity of the fine is unconscionable. Courts will not uphold fines that are found to be too heavy, even if the board acted within the discretion of its authority.
  4. 4. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Condominiums • Failure to comply with any of the [governing documents] shall be ground for an action to recover sums due, for damages or injunctive relief or both maintainable by the board of managers on behalf of the unit owners or, in a proper case, by an aggrieved unit owner. N.Y. Real Prop. Law §339-j. 3
  5. 5. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Minkin v. Board of Cortlandt Ridge Homeowners Ass’n, Inc. 4
  6. 6. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Gabriel v. Board of Managers of Gallery House Condominium 5
  7. 7. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Cooperatives • There is no statute that authorizes cooperative board of directors to assess monetary fines. Instead, a cooperative board seeking to assess monetary fines against tenant-shareholders for violating house rules must do so pursuant to explicit authorization from within the governing documents. • Where cooperative boards have authority provided in the by-laws to implement additional rules and regulations, boards are also given the implicit authority to impose fines. 6
  8. 8. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Cohan v. Board of Directors of 700 Shore Road Waters Edge, Inc. 7
  9. 9. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Olszewski v. Cannon Point Ass’n, Inc. 8
  10. 10. Adam Leitman Bailey, P.C. New York Real Estate Attorneys The Departmental Divide on Shareholder Family Occupancy 1
  11. 11. Adam Leitman Bailey, P.C. New York Real Estate Attorneys The Clause • A representative example of the kind of clause the Departments are disagreeing over reads as follows: The Lessee shall not, without the written consent of the Lessor on such conditions as Lessor may prescribe, occupy or use the apartment or permit the same or any part hereof to be occupied or used for any purpose other than as a private dwelling for the Lessee and Lessee’s spouse, their children, grandchildren, parents, grandparents, brother and sisters and domestic employees… 2
  12. 12. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Georgetown Leasing LLC v Oakley • Real Property Law §235-f(3) provides that: ▫ Any lease or rental agreement for residential premises entered into by one tenant shall be construed to permit occupancy by the tenant, immediate family of the tenant, one additional occupant, and dependent children of the occupant provided that the tenant or the tenant’s spouse occupies the premises as his primary residence. ▫ The statute does not define the term immediate family. The term immediate family has been defined by the Rent Stabilization Code to include a husband, wife, son, daughter, stepson, stepdaughter, father, mother, stepfather, stepmother, brother, sister, grandfather, grandmother, grandson, granddaughter, father-in-law, mother-in-law, son-in-law or daughter-in-law. See, e.g., 9 NYCRR 2104.5[a]. ▫ Even assuming arguendo the term immediate family did not include the Undertenant, as the mother of Respondent’s Daughter, certainly Respondent’s minor child would be considered to be his immediate family. Undertenant is the legal guardian of Respondent’s daughter, and thus could derive rights to occupancy in her capacity as guardian. • Generally, courts have held that where the allegation of subletting is predicated upon a transfer of interest to an immediate family member, a cause of action for subletting does not lie, and the landlord must bring a nonprimary residence proceeding to obtain possession, if the essential allegation is based on the fact that the tenant of record does not maintain his primary residence at the subject premises. This body of case law is primarily from the First Department. (See, e.g., MF Holding, LLC v. Apostolopoulos, 30 HCR 222A, NYLJ April 26, 2002, p. 21, col. 1 (App. Term 1st Dept.) (dismissal of subletting proceeding was warranted where alleged subtenant’s were the tenant’s own children) 3
  13. 13. Adam Leitman Bailey, P.C. New York Real Estate Attorneys First Department, 2016 230-79 Equity, Inc. v Frank • Appellate Term, First Department “The undisputed record evidence establishes that respondent Beatrice Frank, the proprietary lessee, breached Paragraph 14 of the governing proprietary lease agreement by permitting her daughter to reside in the subject cooperative apartment, while the respondent live elsewhere. Paragraph 14 provides that the apartment may not be used for any purpose “other than as a private dwelling for the Lessee and Lessee’s spouse, their children, grandchildren, parents, grandparents, brothers and sisters and domestic employees.” This language is “correctly construed…as permitting occupancy by the listed persons other than the lessee only if the lessee maintains a concurrent occupancy” (445/86 Owners Corp. v Haydon, 300A.D.2d 87 [2002]; but see Wilson v Valley Park Estates Owners Corp., 301 A.D.2d 589 [2003].) 4
  14. 14. Adam Leitman Bailey, P.C. New York Real Estate Attorneys First Department, 2002 5 445/86 Owners Corp v. Haydon • The Court opined that the: “meaning is manifested by a grammatical structure that does not differentiate between the lessee’s family and domestic employees i.e., to hold that paragraph 14 permits defendant’s mother-in-law to live in the apartment without defendant also living there at the same time would permit defendant’s domestic employee to live in the apartment without defendant also living there at the same time.” The court added “this is a patently unintended and absurd result.”
  15. 15. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Wilson v. Valley Park Estates Owners Corp • The Second Department held that the lease clause was ambiguous and does not expressly require that Board approval be obtained for a tenant-shareholder’s family member to reside in an apartment while the tenant- shareholder is not in residence. • The Court reasoned that the lease term did not expressly require that consent be obtained for the type of arrangement at issue in the case and thus, triable issues of fact were raised as to whether the cooperative apartment owner was in breach of the proprietary lease when his daughter and her fiancé resided in the apartment while he resided elsewhere. 6
  16. 16. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Conclusion • Neither Department considered the doctrine that a lease is normally construed against its landlord- drafter in the event of ambiguity. • Neither Department answers whether in such cases an unauthorized occupancy can be prosecuted as an illegal sublet, particularly where there is clear proof that the child is not paying the parent. • The split decisions between the First and Second Departments in interpreting the above-mentioned proprietary lease provision ripens this issue for review by the Court of Appeals. 7
  17. 17. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Updated: Advising Board and Landowners on Handling Secondhand Smoke Issues 1
  18. 18. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Supreme Court, Appellate Division, First Department 2
  19. 19. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Milena Jovic v. Lynn Blue, et al. • In this holdover proceeding to recover possession of a rent- controlled apartment on the ground that the tenant created a nuisance, the tenant denied the allegations, asserting that certain of the complained-of conduct cannot constitute a nuisance and that other vague and conclusory allegations were insufficient to satisfy the elements of a nuisance claim. • After trial, the jury returned a verdict in the landlord’s favor. • The New York City Rent and Eviction Regulations state that a tenant commits or permits a nuisance when “his conduct is such as to interfere substantially with the comfort and safety of the landlord or of other tenants or occupants of the same … building” (N.Y. City Rent and Evictions Regulations [9 NYCRR] § 2204.2[a][2]) 3
  20. 20. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Milena Jovic v. Lynn Blue, et al. 1. There was no house rule or provision in the lease which prohibited such conduct. There was also no evidence establishing that the tenant smoked in the common areas. 2. Under the circumstances presented, as a matter of law, the tenant’s smoking did not constitute a nuisance. 4
  21. 21. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Susan Reinhard v. Connaught Tower Corporation, Arthur S. Olick, Real Estate Board of New York • After a nonjury trial, the court found the defendant Connaught Tower Corporation liable and awarded the plaintiff certain maintenance payments, interest, and reasonable attorneys’ fees, unanimously reversed, on the law and the facts, without costs, the finding of liability and award vacated, the complaint dismissed, and the matter remanded for a hearing and determination as to Connaught’s attorneys’ fees. 5
  22. 22. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Susan Reinhard v. Connaught Tower Corporation, Arthur S. Olick, Real Estate Board of New York • The finding of liability against Connaught, the owner of a cooperative building in which the plaintiff purchased shares, was not based on a fair interpretation of the evidence. • The evidence failed to show that the odor of cigarettes rendered the plaintiff’s apartment uninhabitable, breached the proprietary lease, or caused the plaintiff to be constructively evicted. In particular, the plaintiff’s evidence failed to show that the odor was present on a consistent basis and that it was sufficiently pervasive as to affect the health and safety of occupants. • The plaintiff’s witnesses testified that they smelled smoke in the apartment on a handful of occasions over the years, and the source of smoke was never identified. • Correctly conceded at oral argument that her claim of constructive eviction is time-barred. 6
  23. 23. Adam Leitman Bailey, P.C. New York Real Estate Attorneys 7
  24. 24. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Supreme Court, Appellate Division, Second Department 8
  25. 25. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Michael Feinstein, et al. v. Randi Rickman, et al. • Condominium residents brought action against neighbors, real estate agent and her employer, condominium management company, and condominium board of managers, seeking to recover damages for negligence, fraudulent misrepresentation, private nuisance, trespass, and intentional infliction of emotional distress. • Plaintiffs are the owners and residents of a condominium unit located in Oceanside. Alleging that the secondhand smoke from their adjacent neighbor’s unit was entering their unit and causing them injury, they commenced this action, inter alia, to recover damages for private nuisance, trespass, and intentional infliction of emotional distress. 9
  26. 26. Adam Leitman Bailey, P.C. New York Real Estate Attorneys Michael Feinstein, et al. v. Randi Rickman, et al. • The Supreme Court properly granted the Rickmans’ motion to dismiss the complaint insofar as asserted against them. • The Rickmans succeeded in establishing that the complaint failed to state a viable cause of action against them, since their “conduct in smoking in the privacy of their own apartment was not so unreasonable in the circumstances presented as to justify the imposition of tort liability against them” (Ewen v. Maccherone, 32 Misc.3d 12, 14-15, 927 N.Y.S.2d 274 [App.Term, 1st Dept.]) 10
  27. 27. Adam Leitman Bailey, P.C. New York Real Estate Attorneys 27 THE END ONE BATTERY PARK PLAZA 18TH FLOOR NEW YORK, NEW YORK 10004 (212) 825-0365 WWW.ALBLAWFIRM.COM

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