New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

ARCHIVE ARTICLE

Much Ado About a Cubbyhole

One of the difficulties in cooperatives is figuring out exactly which areas a shareholder is permitted to occupy. Yes, there is the apartment – that’s easy.  But almost all proprietary leases include language that says a shareholder leases the apartment “together with its appurtenances and fixtures and any closets, terraces, balconies, roof or portion thereof outside of said [apartment], which are allocated exclusively to the occupant of the apartment.” There has been much litigation over roof space and terraces. In Fellner v. 40 E. 88 Owners Inc., the question was whether a nine-square-foot closet was part of the shareholder’s leased property or a common area owned by the cooperative.
This nine-square-foot area is accessible by two doors: one from the apartment’s kitchen; the other from the public hallway. So one could enter the closet from the common hall, open the second door, and be in the apartment’s kitchen. Another door opens directly from the hallway into the apartment’s foyer.
The cooperative, after consulting with its engineer, decided to perform electrical upgrades that required the installation of vertical electrical conduits. In the C-line of apartments, one of which is owned by Donald Fellner, the cooperative determined that the conduits would be installed in these closets based on its engineer’s advice. The cooperative sent notices to the shareholders in the C-line, telling them about the work that would be performed in these “common areas.” Shareholders had to make the space available to the cooperative, including removing any items that they might have put in the closet.
Fellner sued, arguing that the closet was part of his leased property, and he asked the court to direct that the work be stopped. The court granted a stop-work order while the parties submitted affidavits and arguments. But after reviewing all of the arguments,  the court vacated its initial order and allowed the electrical upgrade to proceed. If Fellner is ultimately successful, he could be compensated by money damages.
Fellner’s complaint asserted multiple claims and causes of action, and the cooperative moved to dismiss them all. Since this was an early motion, before any discovery took place, the court was required to consider all facts in a light most favorable to Fellner. First, Fellner claimed that the co-op’s use of the closet interfered with his easement to use the closet. The court dismissed this claim. The best Fellner could argue is that the closet is part of his apartment; there is no basis for a claimed easement. Also dismissed was Fellner’s claim that he was wrongfully evicted – because the area did constitute a substantial portion of the apartment.
But many of Fellner’s other claims were not dismissed. The court appeared to be troubled by the proprietary lease language, specifically that the shareholder leases the apartment and its appurtenances and closets outside of the apartment “which are allocated exclusively to the occupant of the apartment.” The court concluded that the cooperative did not submit evidence to unequivocally demonstrate that the closet was not part of the apartment.
In fact, the court explained that there was nothing in the proprietary lease, bylaws, house rules, board minutes, floor plans or other governing documents that would define whether the closets were common areas or belonged to shareholders.  Common areas were not defined at all, and that ambiguity could not be resolved in connection with this motion.
Thus, Fellner’s claim for “breach of the covenant of quiet enjoyment” was permitted to go forward. Fellner’s claim for private nuisance – a substantial and intentional interference with a person’s right to use and enjoy land – was also permitted to stand.
Fellner’s claim for negligent misrepresentation – that the cooperative’s notices about the electrical upgrade did not adequately warn shareholders that the work would permanently block access to the kitchen from hall through the closet doors – was also allowed to proceed.
Lessons Learned
Most, if not all, proprietary leases have language similar to the language here, and they often fail to include floor plans or other documents to identify who owns specific areas. Here, it appears as if the cooperative made clear in its notices to shareholders its belief that the closets were part of the common areas of the building, and not part of the leased apartments. While one cannot be certain, it seems as if those notices were not enough for the court. Rather, it appears that the court was looking for some historic document or course of conduct that would address whether the closets belonged to the cooperative or the shareholders.
Boards may want to review their proprietary leases and physical space with their managing agents to determine if there are areas in the building that could be considered part of the leased premises or part of the common areas. If there are, the board may want to speak with counsel about whether and how best to address these areas in the hope of avoiding litigation in the future.
 As the court here pointedly stated: “Out of this ostensible cubbyhole, the parties have cultivated a litigation that is metaphorically far larger than the area in contest. To put the matter in perspective, the 80 pages of legal memoranda submitted . . . ,    if spread out contiguously, would create an area over five time[s] greater than the one in question.”

ATTORNEYS
For Fellner: Steven Landy & Associates
For the cooperative: Boyd Richards Parker & Colonnelli.

Dale J. Degenshein is a partner at the law firm Armstrong Teasdale. The statements and views in this article are her own and not necessarily those of the firm.

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