Some courts have extended the scope of bawdy-house laws beyond the traditional drug-dealing and prostitution. One court held that a commercial landlord could use the laws to evict tenants who had been convicted of using the leased premises for "illegal manufacture and sale of counterfeit trademark apparel and sportswear." In doing so, the court held that the bawdy-house laws "were intended to address any illegal business, trade or manufacture and should not be interpreted to arbitrarily exclude those illegal businesses which fail to directly impact on the health, morals, welfare or safety of the public."

Another court refused to dismiss a commercial landlord's case seeking to evict a tenant because one of its employees was under indictment for "after hours mutual funds trades." An appellate court reversed the lower court, however, and dismissed the landlord's eviction petition, but only because the criminal activity was "largely carried out" by only one of many employees, who also was the only one indicted. The appellate court concluded that this fell short of meeting the bawdy-house laws standard of showing that the illegal use of the premises to be "customary and habitual."

Nonetheless, these cases open the door for a co-op to act against a shareholder using an apartment for criminal activity that might not have a direct or obvious impact on the health, welfare and safety of the other shareholders and residents.

Proprietary and the Proprietary Lease

Before acting under the bawdy-house laws, a co-op must consider its proprietary lease, which could hinder or help a co-op considering action against a shareholder conducting or allowing criminal activities. Co-ops can enforce rights to terminate their tenant-shareholders' proprietary leases on contractual grounds that are unique to the co-op, thanks largely to the 2003 court decision in 40 West 67th Street Corp. v. Pullman. Whether a co-op must act depends on where the activity in question falls on the annoyance-versus-danger spectrum.

Some proprietary lease requirements exceed those of the bawdy-house laws. For example, a co-op must usually give proper notices of default and/or objectionable conduct even though the RPL Section 231 voiding of the lease does not require such notice.

On the other hand, you can presumably use Pullman-type procedures to secure termination of a proprietary lease based on criminal activity repeated after you give notice. As long as you follow procedures sufficient to survive the "heightened scrutiny" that the courts will apply, the co-op's judgment might just preclude any court review of whether the criminal conduct meets the bawdy-house standard of evidence.

Note that if your co-op does not respond to criminal activity, there are consequences. The Real Property Law Section 231 provides for a landlord's liability for "any damage resulting from such unlawful use, occupancy, trade, manufacture or business."

"Damages" presumably include personal injury or death, as well as property damage. Consider a co-op that knows or should have known that a shareholder is conducting or condoning drug trade from an apartment, but also concludes that this activity is not disruptive and seems almost "victimless." One day, however, the drug trade turns violent and residents, staff or visitors are injured or worse as a result.

Under longstanding common-law principles, a landlord, including a co-op, can be liable if he knows or should have known (usually from a prior incident affecting third parties) of such possible dangers and failed to act.

In sum, co-ops are at significant risk if they do not act to curtail criminal activity from their premises. But you can benefit from the bawdy-house laws to supplement standard default and objectionable-conduct procedures.

Robert Tierman, a longtime co-op and condo attorney, is a partner at Litwin & Tierman.

Adapted from Habitat July/August 2009. For the complete article and more, join our Archive >>