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Objection, Your Honor

It is not a place for the timid. Stephen Lasser ought to know. A partner at the law firm Stark & Stark, he shepherds co-op board cases through the labyrinth that is housing court – familiarly called landlord-tenant court, or just “LT” to those in the know. Most board members don’t realize it, but because co-ops operate under a proprietary lease, cases get adjudicated in the same court that handles rent-stabilization issues and complaints of building owners who don’t give heat or hot water. There is a special section devoted to co-ops (and to condo apartments used as rental units) but it’s still all so complicated that poor volunteer board members can feel like sheep in wolf country.

 

How Do I Trick Thee?

“Fake documents, fake witnesses…” Lasser counts off. “In some cases, you’ll have a co-op where the records aren’t good – say, a transfer occurred years and years ago – and someone will actually take a stock certificate, white out a name, and add a new name to give someone ownership interest they don’t have.”

Is that true? “Let’s say someone’s brother owns an apartment,” Lasser answers without missing a beat, “and the sibling lives with them and the brother moves out. Ten years later, the sibling’s still living there. He takes the old document – using a scanner and Photoshop – and makes a copy with a new first name.”’

Then there’s the old shareholders-as-guests-who-become-tenants-after-30-days scam. If the board lets shareholders keep a guest for 30 days, then the shareholder is technically the guest’s landlord, whether the guest has paid rent or not, and the shareholder would have to go through an eviction proceeding if the guest decided to stay.

Confusing? You bet. Welcome to LT. But these are not the most unusual things attorneys and board members have seen. Lasser currently represents a Manhattan board “suing a shareholder with an illegal subtenant situation. Someone,” he says, marveling, “appeared in court claiming to be the shareholder’s wife. Then at a subsequent court appearance, the shareholder showed up and testified he had never been married! [Court officials] are, like, ‘Your wife was here a couple of months ago.’ The guy says, ‘I was never married.’ Who was here? I don’t know. It’s still dragging on.”

As Captain Braddock used to say on TV’s Racket Squad, “It could happen to you.”

 

The Delay Game

Delay is the point of such tactics, which can be employed by either party in hopes the other side will run out of money, time, or simply the stomach to continue the fight.

“The thing you need to realize,” warns Dov Treiman, a managing partner at Adam Leitman Bailey, and the publisher-editor of The Housing Court Journal “is that unlike a commercial landlord, a cooperative board has as its resources typically only the pockets of the residents. On the other hand, any one of those residents could have significant assets that have nothing whatsoever to do with the co-op. So if the co-op gets into a major battle with one of its residents, it could find its resources are outmatched.”

Nowhere was this more apparent than in the widely publicized case of 1050 Tenants Corp. v. Lapidus. In 1992, the board of the luxurious, 1923 apartment house at Park Avenue and East 87th Street, designed by the famed architect J.E.R. Carpenter and converted to co-op in 1959, began the first of multiple lawsuits against Steven R. Lapidus. Disagreeing on how the board chose to finance a relatively small, $1 million exterior-repair project, he refused to pay his share of the assessment for it – and also held back maintenance, claiming the building was in poor condition.

After four years of litigation in which Lapidus, according to Judge Martin Shulman’s opinion, used ‘’every conceivable motion …to delay or derail the underlying proceeding” (as well as “aggressive defense tactics [that] were implicitly designed to economically force the co-op to its knees”), Lapidus was ordered to pay more than $450,000 in back maintenance and assessments, plus the co-op board’s legal fees and interest.

But it wasn’t over yet by a long shot. Lapidus – himself a leading LT attorney, whose firm represented him at little or no expense – appealed. And the case dragged on for another 11 years before the co-op eventually won a final victory. It took another two years before the board, with 98 percent of the shareholders approving, terminated the Lapiduses’ lease for objectionable conduct. Proceeds from the $4 million sale of the apartment’s shares went mostly to pay back mountains of back maintenance and also the co-op’s $1.4 million in legal expenses and interest. The original amount of the assessment Lapidus had to pay? A little over $13,000. Clearly, logic doesn’t always enter into it when a shareholder insists on going all the way.

 

The Hows of Housing

The co-op in the Lapidus case had deep enough pockets and a united enough front so it could successfully spend 14 years fighting. Your co-op may not be so fortunate. But knowing a little about how housing court works – and how, sometimes, it doesn’t – can help protect you by offering a realistic picture of what to do and what to expect.

Housing court – the shorthand name for the Housing Part of the Civil Court of the City of New York – is itself relatively new. It didn’t exist until 1973. That’s when the state legislature created it to address cases involving federal, state, and local housing standards. The housing part’s primary mission is to deal with housing code violations, in what are called HP proceedings, a.k.a. HP actions, but most of its calendar today is made up of two other kinds of proceedings: nonpayment of rent, and “holdovers,” which is a legal term for attempting to evict a tenant, or a person in the apartment who is not a tenant, for reasons other than simple nonpayment.

After lobbying by the Council of New York Cooperatives & Condominiums and others, Judith Kaye, then chief judge of the state of New York, expanded housing court under a program that went into effect January 5, 1998. This expansion created, among other provisions, a dedicated co-op/condo part in every borough except Staten Island, which hears all housing court cases in one all-purpose part. Called Part C, this co-op/condo section hears all cases involving a cooperative apartment building or the owner of a condo apartment as plaintiff. The “condo” part “is kind of a misnomer,” says LT specialist Adam Pollack, a partner at Manhattan’s Pollack & Sharan. “It’s not where [a condo board brings] a proceeding against the owner of a condo unit in order to get common charges collected. Condo units are involved in housing court if you’re the unit-owner and subletting it and the tenant isn’t paying rent, you can bring a summary proceeding.” (While Pollack, like most people, refers to condo-owners who rent their units as “subletting,” there is no building-wide proprietary lease, and so condo-owners are actually renting, not subletting, to their tenants.)

Condo boards have their cases heard in regular Civil Court or, if the amount at issue is over $25,000, Supreme Court. They can also start foreclosure proceedings on unit owners.

In the co-op/condo part, the petitioner – the person who initiates a case – may be the co-op board or a shareholder. The respondent may be a shareholder, a rent-stabilized tenant, a rent-controlled tenant or another, similar entity.

Judges in Part C “are presumed to have some familiarity with co-op issues and to be more sensitive to the needs of co-ops, which are almost always non-profit entities,” says Richard T. Walsh, a senior associate at the Long Island firm Horing Welikson & Rosen. “Issues that a standard landlord-tenant court might gloss over – things like quality-of-life issues, maintenance fees – are given greater recognition in the co-op/condo part because they affect more than a single apartment.”

“This [part of housing] court is meant to be sensitive to particular issues and to the fact it’s not a commercial landlord running a rental building,” concurs Pollack. “You can’t go months without rent,” which is what monthly maintenance charges technically are.

New York City has six housing courts and the aforementioned Richmond County (Staten Island) general civil court that hears housing cases. Aside from the Bronx County, Kings County (Brooklyn), New York County (Manhattan), and Queens County housing courts, there is the Harlem Community Justice Center, on East 121st Street, and the Red Hook Community Justice Center, at 88 Visitation Place in Brooklyn. Additionally, cases sometimes get heard in spillover facilities, like 71 Thomas Street in Manhattan, not far from the borough’s main housing part, at 111 Centre Street.

 

Welcome to the Club

Not unexpectedly, given that landlord-tenant law is a specialty for both judges and attorneys, “It’s a whole other world down in housing court,” says Lasser. “It’s a whole little society down there,” where many of the players all know each other. The dangers of clubbiness aside, their familiarity can often benefit co-op boards by keeping the co-op out of court.

For example, says Treiman, “Let’s say the opposing party is being represented by Stuart Saft,” a leading real estate attorney and partner at Dewey LeBoeuf. “I’ve known Stuart a long time. I’ll call him and say, ‘Hey, Stuart, what’s it going to take for both parties to settle?’ And we’ll reach some compromise that hopefully will keep our clients out of court.” Not that clients always listen. “As an attorney who makes a pile [of money] out of people not settling,” says Treiman. “I can tell you one is always better off settling. Frequently in the discharge of my responsibility to give my clients good advice, I have to tell them, ‘Don’t let your pride overcome your wisdom.’”

Marc A. Landis, a partner at Phillips Nizer and chair of the firm’s real estate department, concurs. “I tend to go to housing court only as a last resort,” he says. “It’s a painfully slow and thankless process. Nobody’s happy to be there. If you end up there it means you weren’t able to end the problem some other way first – you weren’t able [as a board] to correct the shareholder’s behavior by sending notices or anything else.” (The courts try to help with a section called the “resolution part,” a courtroom where the parties in a housing case can discuss their differences before a judge or a court attorney to see if a settlement can be reached.)

One reason justice grinds so slowly there is that 50 housing judges must adjudicate over 300,000 cases a year. In order to keep things moving, the housing stages “summary proceedings,” which are designed to deal with typically minor civil claims or criminal offenses – quickly and expeditiously. “There’s limited discovery,” says Lasser, referring to the pre-trial process of each party requesting information and documents from the other side.

The narrow focus, ironically, can make cases take longer. “The legal documents, called pleadings, are very technical, and procedurally you can make a technical defect.” Lasser says. “Whereas other courts afford you an opportunity to amend your pleadings, you can’t do that in housing court. If your attorney doesn’t do the papers perfectly from the inception, a savvy tenant lawyer will make a motion to dismiss and have your case bounced on a technicality,” leaving you to start from scratch.

 

Small Co-ops Vulnerable

The cost of starting over, and of affording a savvy LT specialist in the first place, becomes particularly acute for boards of “very small co-ops, the ones with fewer than a dozen units, of which there are many,” says Treiman. “Their resources are extremely limited, their ability to fund anything is extremely circumscribed, and,” he adds, “their likelihood to become oppressive of one particular cooperator is magnified, because they’re all living in each other’s hip pockets. A small co-op typically will not have an elevator, so [shareholders are] meeting and conversing in staircases all the time” – a recipe for both neighborliness and “I’ll see you in court!”

Treiman recounts a case in which a small co-op’s board president owned the majority of shares, so that “it became extremely difficult to outvote her on anything.” This led to litigiousness when one shareholder accidentally started two fires in the same apartment. With those unfortunate but ultimately small accidents as leverage, “The president was looking to cancel that shareholder’s share of stock” and “buy [the apartment] at fire sale,” Treiman says. The board president, by dint of her voting majority, could veto any other buyer, and the case had gone all the way from housing court to state supreme court by the time Treiman got involved.

In this case, fairness prevailed – “We settled the case by a highly structured, highly supervised sale of the apartment. The president did not buy it because we structured the deal in a way that she couldn’t” – but sometimes fairness and the law don’t necessarily coincide.

Take the quirk involving 30-day guests – a loophole in a law meant to protect legitimate tenants from bad landlords who don’t want to go through proper eviction channels. Richard Vaun, who lives in East New York, Brooklyn, related on the Brownstoner.com forum that, “My friend and her family (three kids and husband) were living in a homeless shelter when she reached out to me … I had them come stay with me in September.” By December, “things were getting out of hand” with arguments, “lack of respect, etc. and I told them … that they should find another place and leave. I was told by them and confirmed by the police (they called them) that they had a right to be there. That, since they lived there for over 30 days and could prove it, that I was now their landlord!”

Some of the Brownstoner.com forum participants’ advice – changing the locks, hiring goons to intimidate the guests into leaving, lying to police by saying the guests never lived there – is extraordinarily bad and falls under the umbrella of what’s called “self-help” evictions, i.e., illegal evictions not done through the formal court process. Yet as astonishing as it may seem, the “guest who wouldn’t leave” scenario “is,” says Treiman, “substantially true. If somebody has resided in the same premises for 30 days, then one can be held criminally liable for using self-help to remove them.” Even if no rent has been paid? “That’s right. Generally speaking, courts consider payment or non-payment of rent as amazingly irrelevant.”

This could happen in a co-op, if a shareholder’s guest decides to become a squatter. Since the shareholder and not the board is stuck with going through eviction to remove him, and since a board shouldn’t victimize the shareholder a second time by taking action against the shareholder, it might be prudent for boards to limit guests to fewer than 30 days.

Indeed, says Treiman, when it comes to protecting yourself and avoiding housing court, “My one message for co-op boards is, ‘Look at your bylaws.’ If they haven’t been updated in 10 years, they are out of date. The overwhelming majority of co-op bylaws are 40 years old, 60 years old, more.” By way of illustration, he says more than one that he’s seen “prohibits the occupants from ‘carrying one’s velocipede through a lobby.’ Do you know what a velocipede is? It’s that old-fashioned bicycle with the big front wheel and the little back wheel. If your bylaws mention velocipedes, run to your lawyer to get your bylaws updated.”

Finally, except in the most egregious circumstances, try and stay out of court. “Courts tend to be pro-tenant,” Lasser says, echoing a refrain that registers across the spectrum, from tenant-advocacy groups to landlords. “So just because, factually, a board may think it has a strong case, the reality is that some things are more difficult to prove than you might initially believe; if a tenant requests an adjournment it’s typically granted,” thus delaying things another month or two at a time, “and since the courts are backlogged, judges strongly encourage parties to mediate their disputes.

The courts don’t move as quickly as boards anticipate,” he says. “It may be a considerable amount of time before a trial, and you’ll be encouraged to settle. Sometimes that’s the best option. Otherwise, you’re spending a lot of money – and time.”

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