Disputing Space When It's Not Inside Your Apartment

Green came to believe, however, that those representations were false at or about the time Schneider was selling his apartment to Mitterhoff. Green demanded that the board provide documentation as evidence of the transfer. The board could not produce any amendments or assignments, but there was a reallocation of shares so that 17E's shares were decreased while 17F's shares were increased. Further, Schneider made representations to Mitterhoff that those rooms were to be used by the owner of 17F.

The Lawsuit

Green sued for an order declaring that he was entitled to use those rooms. The board responded that, at some point after 1947, a portion of 17E's living room had transferred to 17F, the two disputed rooms were transferred from 17E to 17F, and 49 shares of stock were transferred from E to F. The documentation, however, was (as is unfortunately often the case) far from precise.

The court reviewed the claims of the parties and determined that, even though the co-op and Mitterhoff did not have documents showing the transfer of the two rooms, they were able to establish that Mitterhoff had acquired the space through adverse possession and that, in any event, the statute of limitations had expired.

Adverse Possession

The court examined adverse possession and prior cases that held that, even though it is a "real property" concept, adverse possession is applicable to co-ops. The elements necessary to establish adverse possession are that possession must be (i) hostile and under a claim of right; (ii) actual; (iii) open and notorious; (iv) exclusive; and (v) continuous. In discussing the element of "hostile" possession, the court explained that hostile does not necessarily mean that the party has to show enmity or a specific act of hostility; courts have decided that there is a rebuttable presumption of hostility when there is possession accompanied by the usual acts of ownership.

Green admitted that he knew he was not going to own the two rooms when he purchased his apartment. He was basing his claim on his review of the 1947 plan, 11 years after he had purchased. The court found that the plan no longer reflected the space configuration or the share allocation, as it had been revised. There was no question that the 17F occupants had used the space for at least 44 years.

The Takeaway

This is a situation that managers and practitioners see every day. A "transfer" or some formal or informal agreement was reached years earlier and the paperwork, if it ever existed, is nowhere to be found. What can a board (and an affected shareholder) do?

If a shareholder has the right to use space that is not within the four walls of that shareholder's apartment, the shareholder may want to confirm with the managing agent what paperwork is on file with the building. Better yet, the shareholder may want to give to the managing agent a copy of any documentation regarding the space so that it can be retained in two places.

Richard Siegler is a partner in the New York City law firm of Stroock & Stroock & Lavan.  Dale J. Degenshein is a special counsel for that firm.

Illustration by Liza Donnelly. Click to enlarge

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