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Can co-ops evict shareholders who are using their apartments for criminal activities even if they are not hurting the other residents? And does a board have any responsibility to try to do something about the activity?

 

For an unconventional starting point to our answer, we must look to New York’s landlord-tenant laws (statutes and case law), which have evolved over substantial time, and continue to evolve. Because they are landlords, co-ops more commonly are on the receiving end of these laws (for instance, a shareholder defending the withholding of maintenance based on a co-op’s alleged violation of the warranty of habitability).

But in the case of criminal activities, co-ops can take advantage of laws intended to provide weapons for landlords against tenants in far more dangerous buildings. In New York, the so-called “bawdy-house” laws are at the core of a landlord’s arsenal against tenants conducting or allowing criminal activities at or from their apartments. The first, originally enacted in 1868, allowed a landlord to evict tenants using a premise “as a bawdy house or house of assignation for lewd purposes.” In 1880, the law was expanded to allow landlords to evict tenants “for any illegal trade or manufacture, or other illegal business.”

Over the years, the legislature allowed others besides landlords to sue to evict for prostitution-related offenses. Those able to sue included neighbors (1880); those residing within 200 feet of the premises, another tenant in the same apartment or tenement house, or a domestic corporation holding a certificate from the board of charities (1913); and agencies licensed by the state board of social welfare (1939). Then in 1947, while expanding those allowed to sue to also include “any duly authorized law enforcement agency of the state...under a duty to enforce the provisions of the Penal Law,” the legislature provided that all of the parties permitted to sue could do so based on any “illegal trade.” The parties were expanded one last time in 1976 to include “any enforcement agency under a duty to enforce...any local law, ordinance, code, rule or regulation relating to buildings.”

In 1962, the bawdy-house laws were moved to their current designations as New York Real Property Actions and Proceedings Law (RPAPL) Sections 711(5) and 715. The former section allows a landlord to sue to evict if the “premises, or any part thereof, are used or occupied as a bawdy-house, or house or place of assignation for lewd persons, or for the purposes or prostitution, or for any illegal trade or manufacture, or other illegal business.” Among other things, the latter section allows the other designated parties to demand that a landlord sue to evict, or do it themselves if the landlord fails to comply within five days.

As New York RPAPL Sections 711(5) and 715 evolved, so did their companion, currently Real Property Law (RPL) Section 231, which provides the additional punch of declaring void any lease that a tenant or occupant is using for “illegal trade, manufacture or other business”; and establishes two or more convictions within one year for certain crimes to be “presumptive evidence of unlawful use of such premises and of the owners [sic] knowledge of same”; and allows for the landlord and some others to sue for injunctive relief from such activity.

This law also has more bite against landlords, however, which is relevant to the question about whether a co-op has a responsibility to act to curtail criminal activity. A landlord that allows such unlawful activity to begin or continue is “liable severally, and also jointly with one or more of the tenants or occupants thereof, for any damage resulting from such unlawful use, occupancy, trade, manufacture or business.”

Over the years, the bawdy-house laws have evoked over many combative court battles over what is permitted and necessary to secure an eviction for criminal activity by a tenant. Unfortunately, little of this has led to published appellate decisions, leaving as guidance numerous lower court decisions with limited precedential authority; although some have fine reasoning that could have great relevance to a co-op considering action based on illegal activity.

One issue critical to most drug-related cases is whether the tenant or occupant in question is engaged in drug trade or simply is a user. The lower courts have not hesitated to dismiss bawdy-house eviction proceedings when evidence of dealing is deemed insufficient or non-existent. Thus, a court dismissed one recent proceeding in part because a policeman testified that, in arresting the occupant for gun possession, he observed “no scales, prerecorded money, no packaging, no substances used to cut drugs, no customer lists, or [drug-related] paraphernalia,” and “no witnesses were asked by petitioners to testify as to customer traffic in and out of the premises, or other indicators of a commercial business.”

By contrast, another court refused such a dismissal, and ordered a trial, because the tenant’s “participation or acquiescence in the use of the apartment for illegal drug sales may be inferred from the indicia of drug measurement, packaging and sales recovered in the search of the premises.”

Such cases tell us that a co-op pursuing a drug-related eviction would have an easier time if the proceeding followed an arrest, search, and seizure, and a guilty plea or conviction. That could provide the evidence critical to establishing the commercial aspect of the activity. The co-op’s dilemma is that the district attorney may not be so eager or able to provide assistance until after the disposition of the criminal proceedings, if ever, especially if the offending shareholder is not deemed a significant risk to other residents.

So, co-ops must be more disciplined than ever for these cases to carefully gather evidence of the drug trafficking, by way of carefully logging who enters and exits the apartment, the activities in the common and outside adjacent areas, and any other conceivable evidence. One positive is that landlords do not have the burden, as do prosecutors in criminal proceedings, of proving the criminal conduct beyond a reasonable doubt. A landlord’s burden is to prove its case by a “preponderance of the evidence,” which means simply evidence of such weight as to produce a reasonable belief in the truth of the facts asserted.

Landlords also face a significant hurdle if the principal offender is a roommate or subtenant. The courts have held that the landlord must establish that the “tenant-respondent ‘knew or should have known’ and turned a ‘blind eye’ to the illegal business,” or put another way, that the tenant “had knowledge of and acquiesced in the use of the demised premises for such illegal activity.” And where “the named tenant is not personally involved in the illegal activity, a ‘nexus’ between the activity and the subject premises must be demonstrated.”

The courts are reluctant to allow innocent tenants to lose their homes based on the conduct of their wayward boyfriends, children, and the like, especially if the tenant has limited resources or options to live elsewhere. For co-ops, courts comparably might be reluctant to allow surrender of ownership of valuable apartments based on the conduct of residents other than shareholders.

An interesting wrinkle, which might be particularly relevant to some co-ops, is that some courts have extended the scope of the 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.” The court held the proceeding in abeyance pending a disposition of the criminal charges against the employee. Unfortunately for landlords, an appellate court reversed the lower court 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.

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.

In this last area, co-ops received a huge boost from the New York high court decision in 40 West 67th Street v. Pullman in 2003. Whether a co-op must act depends on where the activity in question falls on the annoyance-versus-danger spectrum, with the decisions (good or bad) ultimately reflecting the experiences, expectations, and desires of the co-ops making them.

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 notice of termination before eviction proceedings in the ordinary landlord-tenant context.

On the other hand, a co-op can presumably use Pullman-type procedures to secure termination of a proprietary lease based on criminal activity repeated after notice. And for that, so long as proper procedures are sufficiently followed 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 evidentiary standards.

If it does not respond to criminal activity, a co-op must consider the 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.” Presumably, “damages” 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 the possible dangers to its tenants, staff, and visitors from criminal activities and failed to act.

In reinforcing that principle, RPL Section 231 arguably expands it by assessing liability on a landlord’s “knowingly permitting” criminal activity to occur, which almost surely would include a landlord who knows, or should have known, of the criminal activity (whether through a prior incident or otherwise) and does not take advantage of what the bawdy-house laws have to offer.

Be warned: co-ops are at significant risk if they do not act to curtail criminal activity from their premises. They can benefit from the bawdy-house laws to supplement standard default and objectionable conduct procedures but must be careful to squeeze the benefits from these twin barrels without falling prey to their traps.

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