Ask Habitat: Can Our Board Evict Without Going to Court?

HABITAT ANSWERS: In 2003, New York's highest court upheld a co-op board's decision to terminate a shareholder's proprietary lease and cancel his stock in the co-op in 40 West 67th Street vs. Pullman.

In making its decision, the court held that the co-op's actions should be judged by the Business Judgment Rule, which provides that co-op decision-making will be upheld unless it can be shown that a board has acted outside of its authority, in a way that does not legitimately further the corporation's purposes, or in bad faith.

However, co-ops cannot avoid court all together; it still must sue in court to evict or eject a problem shareholder — except in the highly unlikely event that the shareholder voluntarily surrenders the apartment.

Furthermore, in the Pullman case, the co-op's proprietary lease had an uncommon twist to a standard provision. Determining that a shareholder's lease should be terminated because of objectionable conduct required the approval of not only the board but also at least two-thirds of shareholders. Therefore, in this case, the board was able to show that it was not acting vindictively or in a shortsighted manner.

If your board is contemplating a Pullman-type termination it must:

• Document all the facts. How long has the shareholder been playing music loudly? What time does he do it? How many times have you asked him to turn it down? Has the board asked him?
• Thoroughly vet its own actions to wring out any conceivable bad faith.
• Check the proprietary lease; if it permits a board to terminate the problem shareholder's lease for objectionable conduct, the courts will uphold proper board action.
• Follow the required procedures to the letter to ensure due process to the shareholder whose lease is being terminated, because of the drastic nature of such action. Failure to do so will invalidate the board's action and invite a judicial hearing on the merits of the objectionable conduct.
• Consult the building's attorney before proceeding.

Once the board has gotten legal advice and determined that eviction is the only resolution to this problem, it can move forward and you can eventually enjoy some peace and quiet. 

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