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A co-op attempts to restrict access to the roof to shareholders who are entitled to its use.
AUTHORRichard Siegler and Dale J. Degenshein
May shareholders whose proprietary lease entitles them to use a portion of the roof require the co-op to repair the roof so that it can be used as contemplated by the lease?
Read this article in the digital edition.
May shareholders whose proprietary lease entitles them to use a portion of the roof require the co-op to repair the roof so that it can be used as contemplated by the lease? The answer was sought in Shapiro v. 350 E. 78th Street Tenants Corp.
Florence and Adam Shapiro were shareholders in 350 East 78th Street Tenants Corp., which owned the property located at 350 East 78th Street in Manhattan. Their proprietary lease and the co-op’s offering plan allowed them to have exclusive use of a portion of the roof. In 1993, a clogged drain pipe outside the Shapiros’ apartment caused a leak to an adjacent apartment. As a result, the roof was replaced. In 2004, after major leaks, it was determined that the Shapiros had installed wooden decking on a portion of the roof on which they placed large and heavy planters and furniture, including those made of iron, as well as heavy shrubbery.
In the summer of 2005, the co-op sent a notice demanding that the Shapiros remove the deck, furniture, and planters from their terrace so that it could be inspected. The items were removed and the co-op had its expert inspect the roof in the summer of 2005. The expert would not endorse wooden roof decks because on roofs of this type they were subject to punctures and made it difficult to access leak-prone areas as well as active leaks. The expert also questioned whether the deck was permitted by the New York City Fire Code.
By a notice dated October 24, 2005, the co-op forbade the Shapiros from even walking on the roof, and made the restriction permanent in a notice dated May 26, 2006. The Shapiros sued, claiming that the co-op had the obligation to – but had not – maintained the roof in a condition that permitted the Shapiros to walk on it. The Shapiros sought, among other things, an order requiring the co-op to restore the roof to a condition that would have allowed them to use it, which also meant making it weight-bearing.
The co-op asserted that the roof, in its condition at the time, was not structurally sound enough to withstand the weight of the Shapiros’ chairs or any other item of furniture. The court noted that as recently as April 29, 2009, the co-op contended “that the roof is in a condition of disrepair such that three persons cannot safely sit on chairs placed on it.”
The motion court directed the co-op to make repairs as necessary to restore to the Shapiros “use of the roof space.” It noted that it had been four years since the Shapiros were directed to, and did, remove the items from the roof.
The court discussed that the offering plan provided that the owner of the Shapiros’ apartment would have exclusive use of the roof area, subject to the co-op’s right to access “whenever necessary for the maintenance and operation of the building.” The proprietary lease was similar: “[i]f the apartment includes a ... roof, and/or a portion of the roof adjoining a penthouse, the Lessee shall have and enjoy the exclusive use of the ... roof and/or that portion of the roof appurtenant to the penthouse, subject to the applicable provisions of this lease and to the use of the ... roof by the Lessor to the extent herein permitted.” Further, the lease provided that the co-op would, at its sole cost and expense, manage the building as a first-class apartment building.
The co-op did not dispute that the Shapiros were entitled to use the roof, nor did it dispute that the roof’s condition was such that it could not be used. The co-op argued that the question was whether the Shapiros had the right to install whatever decking and furniture they wanted on the roof. In response, the motion court stated this was not the issue and that the Shapiros did not have the right to place whatever they wanted on the roof.
The court framed the issue as whether “for the last four years, the [co-op] has violated the offering plan and the lease by depriving [the Shapiros] of any residential use of a major part of what [they] paid for when [they] purchased the shares appurtenant to [their] apartment, and what [they continue] to pay for on a monthly basis.”
The court determined that the co-op’s failure to maintain the roof deprived the Shapiros of its use, which violated the proprietary lease and offering plan. The court explained that while the Business Judgment Rule protects co-ops from decisions made in certain contexts, it does not protect the board from a breach of contract (here, the proprietary lease). The court found that the Shapiros were entitled to an order directing the co-op to make repairs to the roof so that it would be usable in accordance with the Shapiros’ rights under the lease and offering plan, but that it would be “subject to reasonable regulation by” the co-op. The court denied the Shapiros’ demand that they were entitled to install planters, decking, and other similar items, and whether such installations violated applicable city codes or caused damage to the roof structure were issues left for a trial. Comment: In this situation, the co-op apparently attempted to solve its problem of a leaking and deteriorating roof by prohibiting the shareholder from using the area. The court stated that such a position violated the proprietary lease, which clearly gave the shareholder exclusive use of the area. In sum, the court found that – where a shareholder has use of an area of the building that the co-op has an obligation to maintain – the co-op must take steps to make sure that the area is available for its intended use. As the court noted, the plaintiffs paid for the right to use the area when they purchased, and paid for that right in their monthly maintenance charges. The question of what can be placed on the terrace was subject to the co-op’s standard alteration procedures, and the shareholders could not simply install what they wanted on the roof. As is typical, the co-op had the right to have its board and professional advisers review and approve any proposed plan to make sure, among other things, that the building envelope would not be damaged by any installation. We found the motion court’s reliance on the offering plan interesting. An offering plan is typically a “contract” between a sponsor/developer who converts the building to cooperative ownership and the shareholder who purchases from the sponsor. The plan may, in certain circumstances, be used for the purpose of clarifying an issue if it is ambiguous in the proprietary lease. We do not know why details of the offering plan were reviewed by the court in this case, although we suspect it was raised by one of the parties.
For the Shapiros:
Toback, Bernstein & Reiss
For the co-op:
Ahmuty, Demers & McManus