New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

The Case of the Contentious Cooperator

There was no flash of realization. No “shazam!” moment. It dawned on Gerald Tanenbaum gradually, but relentlessly, that his co-op was headed for a bare-knuckle legal brawl with one spectacularly nettlesome shareholder.

One day in 1992, Tanenbaum, a corporate lawyer who was then president of the elegant 61-unit co-op at 1050 Park Avenue, decided to see if a little sensible talk couldn’t stave off the inevitable. Tanenbaum and a fellow board member paid a call on Steven Lapidus, a real estate lawyer who lived in the building and was refusing to pay his maintenance or a special assessment for Local Law 11 repairs.

After a few fruitless exchanges, Tanenbaum’s companion turned to him and said, “We’re wasting our time.” A decade and a half after that fateful meeting, Tanenbaum, now 63 with his hair going to silver, says, “It was apparent to us he just wanted to fight.”

And Lapidus got himself a fight. A big one. The board soon sued him for failure to pay his maintenance and the special assessment. It was the opening salvo in a bruising, costly legal battle that raged for 15 years, a war of attrition that forced the co-op to develop a siege mentality and hunker down for the long haul.

“It wasn’t a lot of fun,” notes Tanenbaum ruefully. “You certainly don’t want to engage in a war for a decade and a half, but the board felt it couldn’t cave in.”

 

The Way It Began

The source of the conflict was, technically, $1 million worth of mandatory Local Law 11 repairs. When the board announced a plan to finance the repairs from a mix of sources – an assessment, a maintenance increase, a loan and some cash from the reserve fund – Lapidus objected, urging the board to borrow the entire $1 million. When the board declined, Lapidus refused to pay the assessment or the maintenance increase.

“We had no choice but to sue,” says Tanenbaum, who is still on the board but no longer as president. “We tried to avoid litigation, but there comes a time when you’ve got to put your foot down.”

Lapidus, described as “aggressive” and “savvy” by one trial judge, promptly fired back. He sued the co-op, claiming he should not have to pay maintenance or the assessment because his apartment was plagued with roaches, rodents, asbestos, soot, excessive heat, noise, and odors, among other unpleasantries.

“He made it sound like Dresden right after the bombing,” Tanenbaum says wryly, noting that the solid brick fortress at the corner of Park Avenue and 87th Street is not exactly known as a slum. It is, in fact, among the most succulent real estate in the city.

The situation almost got laughable. One of Lapidus’s many claims that his “warrant of habitability” was breached was the absence of guards on his windows. When a judge asked him why he didn’t install his own, Lapidus replied he was afraid he would get evicted for modifying his apartment without board approval. “Ludicrous!” cries Tanenbaum. “And the judge didn’t buy it.”

But no one was laughing when the legal wrangling spread. Lapidus’s downstairs neighbor, an attorney named Arthur Handler, filed a suit of his own, claiming that Lapidus’s air conditioner was leaking water into his apartment. Every time Lapidus suffered a setback in court, he appealed. It began to seem that the war of attrition might drag on forever.

“He made the litigation torture,” says the co-op’s current lawyer, David Berkey, a partner at Gallet Dreyer & Berkey. “He used his legal talent to try to drive the co-op to its knees.”

It didn’t work. Part of the reason, according to several board members and shareholders, was that the co-op remained united against what was widely seen as a very determined, very resourceful, but very isolated enemy. As a result of this unity, the war of attrition never turned into an internecine struggle.

“It’s difficult when you have a relatively small building that’s a nice community – and then you get someone who’s a total pariah,” says Tanenbaum. “But we just stuck with it. Otherwise, you get intimidated and you’re out of a lot of money. We legitimately felt he had no complaints.”

Richard Herrmann, a lawyer who has lived in the building since 1979 and has served as board president for the past six years, adds: “You want a united building, and we were united all along. It was us against a very, very difficult tenant who was able to mobilize his own [law] office to support his case.”

 

Lawyer vs. Lawyer

That aspect of the battle – having a legal expert as your foe – is not at all uncommon. Back in 1996, after one of many legal rulings in the co-op’s favor, Stuart Saft, a lawyer who is also chairman of the Council of New York Cooperatives & Condominiums, said: “This happens a lot. Probably the most contentious cases are with attorneys who live in co-ops, because they know how the system works and they can use their own in-house legal services so it doesn’t cost them anything, and they can enter into endless litigation to wear the co-op boards down.”

Sound strategy, perhaps, but in this case it didn’t work. It turned out that the board and shareholders at 1050 Park Avenue were at least as determined as their adversary. “The shareholders and directors pursued it to the end because we weren’t going to accept his refusal to pay [the maintenance and the assessment],” says Herrmann, the current board president. “You just stay at it. This didn’t have a downside for the co-op.”

If anything, the conflict brought the shareholders even closer together. This came home in the spring of 2005, when the board voted unanimously to terminate the Lapiduses’ lease and a special meeting was called to determine if the shareholders backed the board’s decision. Shareholders squeezed into a rented hall around the corner from the co-op on the appointed day. The air was crackling with pent-up anger. Lapidus did not attend, but he sent his lawyer.

“It was more crowded than usual,” Tanenbaum recalls. “I think people had been upset with him for a long time. The shareholders were angry with the Lapiduses for what they had put the building through.”

When the votes were tallied, Lapidus and one other shareholder had voted not to terminate his lease, while the rest of the building – 98 percent – voted to evict. After an appellate court upheld the eviction, Lapidus and his wife, Iris, finally left the building in early 2008. In April of that year, just before the real estate market started to cool, the co-op sold the shares to Lapidus’s three-bedroom apartment for the handsome sum of $4 million. Under provisions in the proprietary lease and bylaws, proceeds from the sale covered Lapidus’s unpaid maintenance and the co-op’s $1.4 million in legal expenses and interest; under a separate judgment, the money was also used to reimburse Arthur Handler for the $144,000 in legal fees he had incurred during the fight over Lapidus’s air-conditioner. The remaining money went to Lapidus. (Reached at a telephone listing in the eastern Long Island town of Wainscott, Lapidus declined to comment.)

War may indeed be hell, but in this case peace has proven immensely sweet for the victors.

“It created some tensions and some added costs, which we had to finance through maintenance increases,” says Tanenbaum. “But at the end of the day we wound up with a nice reserve fund because of the sale. The wheels of justice may turn slowly, but they turn in the right direction.”

 

 

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