Is a co-op board responsible for repairs to a greenhouse installed by a previous tenant when, because of leaks, it becomes uninhabitable? No, according to Joan Messner v. 112 East 83rd Tenants Corp. in which the current tenant was held responsible for repairs not the co-op.
In this case, Joan Messner, the shareholder in the residential co-op at 112 East 83rd Tenants Corp., was the proprietary lessee of a penthouse apartment in the building. In 1983, the prior tenant, from whom Messner had purchased her shares, had received permission from the co-op’s board of directors to enclose the terrace with a glass roof and windows, creating a greenhouse-like structure. Since that time, the terrace had been used as a living space. Messner claimed that after taking possession of the apartment, she discovered extensive water leakage in the terrace area causing substantial damage to her personal property and rendering the apartment uninhabitable. She asserted that, despite numerous attempts to have the cooperative repair the leaks, it did not. She also said that, despite her requests, the co-op had failed to provide a certificate of occupancy for the enclosed terrace area.
Messner’s original complaint reported four causes of action against the co-op and the individual members of the board of directors. The first was for negligence, the second for breach of the proprietary lease, and the third for breach of the implied warranty of habitability. The fourth cause of action sought an order requiring the co-op to consent to Messner’s installation of a heating unit in the enclosed terrace area and to allow her to connect the heating unit to the building’s heating system.
With leave of the court, Messner amended her complaint to add two additional causes of action, one for an order directing the co-op to repair the leaks in the apartment and the other for an order directing the co-op to provide a certificate of occupancy for the terrace and awarding her monetary damages resulting from the co-op’s failure to obtain a certificate of occupancy for the enclosed terrace. In its amended answer, the co-op asserted four counterclaims seeking indemnification and damages that the building and its tenants had incurred by reason of the water leakage emanating from Messner’s apartment. It also sought reasonable attorney’s fees.
Messner then received a letter, dated October 7, 2003, in which the co-op stated that, at her expense, it intended to perform extensive repairs, including the possible removal of some or all of the glass structure on her terrace, to prevent further water leaks to other areas in the building. In response, Messner sought a court order enjoining the co-op from removing her greenhouse. She also sought leave to amend her complaint to add seventh and eighth causes of action for a declaratory judgment declaring her rights under the proprietary lease and an injunction preventing the cooperative from removing any of the terrace structure.
By decision and order dated October 25, 2004, the court denied Messner’s motion, holding that any decision of the co-op to remove Messner’s enclosure was protected under the Business Judgment Rule. The court also denied Messner’s request for leave to amend her complaint. The co-op moved for summary judgment dismissing the complaint in its entirety. It also sought an order awarding costs, disbursements, and attorney’s fees. Messner had cross-moved for leave to amend her complaint to include causes of action for fraud and breach of fiduciary duty.
In her first cause of action, Messner alleged that because of the negligence of the co-op and its board of directors in failing to repair her terrace, she had suffered damages that had made a portion of her apartment uninhabitable. However, as the board correctly pointed out, the co-op was under no duty to repair or maintain Messner’s terrace. As a condition to its approval of the sale of the apartment to Messner, the co-op had required her to execute an indemnification agreement, which contractually obligated her to pay for the removal and restoration of the terrace enclosure in the event of leakage.
Messner argued that the indemnification agreement was not enforceable because it was unreasonable. She also contended that, since she had been obligated to vacate her previous apartment, she had signed the agreement under duress. In its previous decision, the court found that the indemnification agreement was enforceable and was a reasonable condition for approval of the sale. This prior ruling foreclosed Messner from rearguing the enforceability of the agreement. Since the co-op was thus under no duty to repair her terrace, the court said that the first cause of action for negligence had to be dismissed.
Messner’s second cause of action alleged that 112 East 83rd had breached the provision of the proprietary lease, which required it to “provide proper services, including a sufficient supply of hot and cold water and heat to the apartment.” Messner claimed that, since the terrace space is part of her apartment, the co-op’s failure to provide the terrace with heating and water constituted a breach of the proprietary lease.
The court disagreed. It said that the provision on which Messner relied did not obligate 112 East 83rd to provide heating and water for an outdoor terrace that was adjacent to Messner’s apartment – for which there was no certificate of occupancy, for which the co-op had never assigned any shares, and for which Messner had never paid maintenance. Indeed, in its previous decision, the court specifically found that the greenhouse enclosure was never intended to be a separate living space and that Messner was on notice of this fact when she purchased. The fact that she wished to use the space as additional living quarters did not obligate the board to provide additional services not otherwise specified in the proprietary lease. The court said that the second cause of action must therefore also be dismissed.
The third cause alleged a breach of the implied warranty of habitability. According to Messner, the water leaks in the greenhouse enclosure had made the terrace uninhabitable. However, since the greenhouse had never been considered or represented by the co-op to be habitable space, in the court’s view, there could be no claim for breach of the implied warranty of habitability, and the third cause was dismissed.
The fourth cause sought an order directing the co-op to allow Messner to heat her terrace by tapping into the building’s heating system. Since it appeared from the record that Messner had already unilaterally tapped into the building’s heating system, the court said that this claim should be interpreted as requesting that the co-op officially retroactively authorize Messner to utilize the building’s heating system to heat her enclosed terrace. Since, as already discussed, the greenhouse had never been considered or represented by the co-op to be habitable space, the co-op was under no contractual obligation to permit Messner to utilize building heating services for this area.
In any event, the proprietary lease specifically required that a shareholder obtain written consent from the co-op before making any alterations to the plumbing or heating systems in her apartment. Messner conceded that she had never received written permission, but argued that she was entitled to rely on the oral representations, of two employees of the managing agent who allegedly had told her, immediately after the closing, that she could utilize the building’s main heating system to heat her greenhouse. Messner, however, could not rely on any such alleged oral representations, the court concluded, since the lease specifically required that permission be obtained in writing and that any modifications to the lease also be in writing. Messner claimed that the co-op had waived the requirement that permission be in writing by allowing her workers to enter the apartment and make changes to the heating system. In the court’s view, this contention was without merit, since a doorman or building staff member, on his or her own, allowed workers into her apartment to perform the work at issue hardly constituted a waiver.
In additional support of her argument that the co-op waived its right to require prior approval for any alterations to the apartment’s heating system, Messner also relied on the written solicitation, known as a “show sheet,” which she was given by the real estate broker, Bellmarc East, prior to her agreement to purchase the apartment. The show sheet advertised the apartment as featuring a 48-foot by 14-foot glass-enclosed terrace with quarry-tiled floor that, heated and air-conditioned for year-round enjoyment, would make a huge living room or an additional bedroom. Relying on the fact that the co-op’s managing agent, Bellmarc Property Management Services, is related to the real estate broker, Messner argued that the managing agent should be bound by these representations.
The problem with this argument, the court held, was that Messner had not provided any evidence that suggested that the managing agent had approved of or even knew about the contents of the show sheet. On the contrary, Marilyn Fleming, the Bellmarc East employee who prepared the sheet, had submitted an affidavit in which she stated that the information contained in it was based on representations made to her by the apartment’s previous owner and that Bellmarc neither saw nor approved the language therein.
In addition, John Janangelo, the president of Bellmarc, submitted an affidavit stating that Bellmarc Management and Bellmarc East are two separately run and distinct companies that do not share information with each other and were unaware of the details of each other’s business conduct. Finally, Jay Lisnow, the co-op’s president, had submitted an affidavit stating that the co-op had no knowledge of the contents of the “show sheet.” Notably, Messner had not offered any evidence that contradicted these affidavits. Without any proof, Messner’s assertion that the co-op must have known about the representations in the show sheet, given the corporate relationship between Bellmarc Property Management and Bellmarc East, was nothing more than mere speculation and, as such, was insufficient to oppose a motion for summary judgment.
Since Messner had not pointed to any determination or conduct by the co-op itself that would have constituted a waiver of its right to require prior approval in writing for any alterations to the apartment’s heating system, the terms of the proprietary lease remained applicable and, under those terms, Messner had been obligated to obtain written permission from the co-op prior to tapping into the building’s heating system to heat her greenhouse. In the absence of any such permission, the fourth cause of action was dismissed.
The fifth cause sought an order directing the co-op to repair the leaks in the greenhouse. However, there could be no doubt in the court’s thinking that these leaks were attributable not to the building but, rather, to the defective existing conditions of Messner’s premises. Indeed, this was the conclusion found in an engineering report prepared by a neutral and independent expert retained by all of the parties. Thus, this cause of action was clearly without merit since the co-op could hardly be responsible for repairing leaks in the greenhouse that emanated from the Messner premises. Thus, the fifth cause of action had to be dismissed.
The sixth cause sought an order directing the co-op to obtain a certificate of occupancy for the enclosed terrace. The co-op argued that its decision not to seek a certificate of occupancy for Messner’s terrace was protected from judicial review pursuant to the Business Judgment Rule. The court agreed. It noted that it was well settled that under the rule, the decisions of a co-op board are immune from judicial review if the board acted for the purposes of the cooperative within the scope of its authority and in good faith.
Here, the board asserted that it had reasonably determined that it should not seek a certificate of occupancy for Messner’s terrace because doing so would double the habitable space and square footage of her apartment without providing any additional shares or maintenance, and because the building would then be potentially responsible for the terrace area. This decision clearly fell within the business judgment rule and was therefore not subject to judicial review.
Messner, however, alleged that the board should be precluded from invoking the business judgment rule on the ground that, prior to the time she purchased the apartment from its previous owner, the board had been aware of the fact that the terrace lacked a certificate of occupancy but nevertheless, attempted to conceal this from Messner in order to induce her to complete the purchase. She claimed that the co-op was aware that she would not have purchased the apartment if the terrace could not be legally used as habitable space. She alleged that the co-op covered up the lack of a certificate of occupancy in order to aid the sale of the apartment by the previous owner, who was a former board member and long-time resident. In the court’s view, not only was this allegation purely speculative, it was, in fact, contradicted by documentary evidence, including two engineering reports that Messner reviewed prior to purchasing the apartment. These reports, one of which was prepared by the cooperative’s engineer, adequately advised Messner that the legality of the greenhouse was subject to question. The sixth cause of action was therefore dismissed by the court.
Messner had cross-moved to amend her complaint so as to add causes of action for fraud and breach of fiduciary duty. Although leave to amend should be freely granted, the court said that it must pass upon the validity of the proposed cause of action and deny amendment if the proposed causes of action are found to be without merit. Here, the court held that Messner’s proposed amendments were without merit and her motion should therefore be denied.
Messner’s proposed cause of action for fraud was based on her allegation that the co-op had improperly failed to inform her before she had purchased that the apartment lacked a certificate of occupancy for the terrace. In order to make out a prima facie case of fraud, the court said that Messner must show that there has been misrepresentation of material facts, falsity, justifiable reliance on the misrepresentation, and resulting injury. A fraud cause of action may be predicated on acts of concealment only where 112 East 83rd had a duty to disclose material information.
Here, the co-op was under no duty to disclose the lack of a certificate of occupancy for the terrace since it was not the seller of the apartment and did not then have a fiduciary relationship with her. Moreover, there was no evidence that Messner was in any way prevented by the coop from ascertaining both the condition and the legal status of the enclosed terrace. On the contrary, Messner received multiple engineering reports, one of which was from co-op’s engineer, which alerted her to the possibility that the terrace was not legally habitable.
Similarly without merit was Messner’s claim of breach of fiduciary duty. In the court’s view, the evidence showed that the co-op dealt with her strictly at arms’ length and never entered into a fiduciary or confidential relationship with her prior to the sale of the apartment. Messner’s cross-motion for leave to amend the complaint was thus denied.
Accordingly, 112 East 83rds’ motion for summary judgment was granted and the complaint was dismissed in its entirety. Their request for attorney’s fees and other costs was denied as premature since their counterclaims remained before the court for adjudication.
Comment: This situation happens fairly frequently in Manhattan. An apartment is purchased with an existing greenhouse, which was not part of the original building construction. Somehow the purchaser fails to learn for some time, at least until there are leaks, that this structure is one for which the co-op has no responsibility to repair. Then, a dispute with the co-op ensues over the repair responsibility. In most cases, as here, the co-op will prevail, but there are extenuating circumstances in some cases. The best solution would be for the co-op to explain the repair responsibility to the purchaser at closing, making sure to obtain an acknowledgement at that time from the purchaser that the co-op has no such repair responsibility.