For the board members of the co-op at 400 East 85th Street, the dog-loving shareholder had been something of an unknown quantity. When she first applied to buy into the co-op more than three years ago, she told the board she had one dog. Then she arrived with two. She soon began inviting friends to stay in the apartment, too. These days, the co-op’s problems with the shareholder have grown from four-legged to two-legged ones. The shareholder, who was married last year, has been splitting her time between New York and Texas, meanwhile allowing people to live in her apartment during her absences, sometimes for up to two months at a time.
One director says the board has received numerous complaints from the other shareholders about the steady stream of visitors. “We’ve asked her to stop, but so far she hasn’t. We don’t know what to do. She is a real pain in the neck.” Under the building’s proprietary lease, guests are permitted to stay for up to one month, longer with permission of the board.
So far, no such permission has been sought, adds the director, and, to date, the shareholder has not responded to a letter from the board, asking her to stop opening up her apartment to unauthorized guests when she is away from the building.
Short of eviction, is there anything else the board can do to make the shareholder comply? Definitely, say co-op attorneys. First, the board needs to establish what the relationship is between the shareholder and the guests coming to visit, and to remind the shareholder of the language in the proprietary lease controlling guests.
“The first question is, are these people really social guests or is this a bed-and-breakfast?” says Marc Luxemburg, a partner with Snow Becker Krauss and the president of the Council of New York Cooperatives & Condominiums, who says it seems like the East 85th Street shareholder may be illegally operating a business. “When you have a revolving series of people who roll in and roll out you have to strongly suspect it is being used as a bed-and-breakfast. If it’s a financial arrangement, then that’s illegal.”
One way to tackle the problem, suggests Luxemburg, would be for the board to pass a rule that says that no guests can come and visit an absent shareholder’s apartment unless there is a written explanation from the shareholder about what it’s all about. “Pass the policy and tell the doorman no one gets in there. No one gets in the apartment when the shareholder is not there, key or no key.”
When a board is dealing with a difficult shareholder, a doorman or superintendent can be the first line of defense in protecting the building. When one Manhattan co-op board started wondering whether a shareholder was operating an illegal business, it had the doorman keep a log of all the comings and goings of the guests. After that, it hired a detective, says Arthur Weinstein, a co-op attorney who represented the board. Eventually, the cooperative gathered enough information to know the shareholder was running an accounting business.
Figuring out just what exactly is the relationship between a shareholder and a houseguest can be tricky, even with the help of an observant super or doorman. Under the New York State Real Property Law, a co-op corporation cannot restrict a shareholder from taking a roommate, either a family member or an unrelated person. But restrictions can apply on the number of people in any apartment – and the primary tenant has to reside concurrently in the residence with the roommate.
Remember, even though the board is within its rights to know what the status is of guests occupying an apartment – so long as that right is codified in a house guest rule in the proprietary lease – determining the exact status of a house guest can make the shareholder angry. Mary Hack, a managing agent with Blue Woods Management, recalls one board trying to find out who was living with a shareholder. “We got a very nasty letter saying that the man was her husband and that we had no business interfering in her business.”
In the case of the co-op on East 85th Street, however, the answer may be right in front of the board. “They have to read their proprietary lease,” says Mitchell Kossoff, a partner with Kossoff Apler & Unger, a law firm specializing in landlord-tenant relations. If the lease controls the length and frequency of guest stays, the shareholder could be in breach, and the board can send a notice to cure the breach or face eviction. If the shareholder argues that the guests are roommates, “she can’t use the roommate law in this residence and live in another apartment she owns somewhere else.”
David Berkey, a partner with Gallet Dreyer & Berkey, recommends that boards start with a phone call to the offending shareholder, reminding him or her of the month-long guest rule in the proprietary lease. If there is no movement, a letter should then go out, from the board or managing agent, again reminding the shareholder that the guest is “not an authorized occupant of the apartment.” If that fails, the final step is to send a default notice to the shareholder and to the shareholder’s mortgage holder, if there is one. If the default is not cured, then the board should send a termination notice and proceed to legal eviction of the shareholder “for breaching the lease.”
While it may seem intrusive to be asking shareholders who they are letting stay in their apartment, the security of the other residents in the building is the primary reason for a board to seek to stay on top of the situation.