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HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

When Neighbors Tangle, Co-op Boards Can't Look Away

Andrew P. Brucker in Legal/Financial on December 8, 2020

New York City

Shareholder v. shareholder disputes, co-op board response, Fair Housing Act, discrimination.
Dec. 8, 2020

A recent court case serves as a warning that co-op boards cannot sit back when there's a dispute between shareholders. In the case Donahue Francis v. Kings Park Manor Inc., Corrine Downing and Raymond Endres, the facts are disturbing yet hardly rare. Kings Park Manor is a rental apartment complex on Long Island where Donahue Francis moved after signing a rental lease. Corinne Downing managed the complex, and Raymond Endres lived next door to Francis.

Court testimony showed that after a few months, Endres began to act in a hostile manner toward Francis. Specifically, Enders began to make anti-Semitic comments (Francis is Black and not Jewish) and engaged in numerous diatribes, using racial expletives and anti-Black stereotypes. This went on repeatedly from February to September 2012. At one point, Endres stood at Francis’s open front door and photographed the interior of his apartment.

Fearing for his safety, Francis contacted the apartment management and the police. The police department investigated and warned Endres to stop threatening Francis. Kings Park’s management did nothing. Two months later, Francis filed another complaint with the police. Once again, management did nothing. After Endres’s conduct persisted, including a death threat, the police arrested him and charged him with aggravated harassment. Francis informed management that Endres continued his racial and anti-Semitic slurs after his arrest.

After yet another episode, Francis sent a third letter to Kings Park, which then advised the manager “not to get involved,” and the company did not respond to the letter, even though it was shown in court that it had intervened against other tenants at the complex when there were violations of their leases (or the law).

Three years after Francis moved into the complex, Endres’s lease expired, and he moved out. A few months later, Endres pleaded guilty to harassment, and an order of protection was issued, prohibiting Endres from contacting Francis.

The next year, Francis sued Kings Park, its manager and Endres in federal court, claiming that they had violated several laws, including the Fair Housing Act, a federal law that prohibits discrimination. The District Court of the Eastern District of New York that first heard the case dismissed the action brought against Kings Park and the manager, reasoning that a landlord has no duty under federal law to respond to one tenant’s discriminatory harassment of another. (A judgment was entered against Endres.)

On appeal in December 2019, a panel of the Court of Appeals reversed this decision, ruling that the Fair Housing Act requires a landlord to take racial harassment as seriously as it takes other tenant misconduct, and that it constitutes intentional discrimination for a landlord to selectively ignore misconduct. The court held that the act covers discrimination not only when renting an apartment to a tenant but also extends to the relationship after the tenant moves in. Thus, a landlord – and, by extension, a co-op board – is not allowed to harass or otherwise discriminate against a tenant because of race by failing to address complaints. The court reasoned that the landlord had remedies, such as terminating the lease, and it should have taken action rather than ignoring the problem.

What’s the significance of all this to a co-op’s board of directors? Everything! The relationship of the co-op corporation to the tenant-shareholder has been held to be equivalent to the landlord-tenant relationship found in a rental building. In addition, the recent Tenant Protection Act applies to rental tenants as well as co-op tenant-shareholders.

The Kings Park decision is a warning to all co-op boards that no complaint between neighbors should be ignored. In the past, many boards took the position that these were personal disputes and that the neighbors should work out a solution between themselves. While this might be the ultimate solution, the board (and management) should not take this stance immediately. The board should take every complaint seriously, and some investigation should take place.

Most co-op proprietary leases have provisions that require tenants to act in a cooperative manner and not do anything to disturb or interfere with other tenants’ enjoyment of their homes. Some leases even provide for fines in the event of certain violations of the lease. And, importantly, most leases have a provision (sometimes referred to as the Pullman clause) that states that the board may terminate the lease if it deems actions of the tenant to be objectionable.

Finally, directors are fiduciaries who should be acting in good faith for the good of the co-op and its tenant-shareholders. To fully ignore any complaint is not acceptable. While it may not be necessary to act every time a complaint is received, the best practice is for a board to consider the complaint and to do some investigating in an effort to understand the validity of the complaint, the degree of the problem and possible solutions.

Andrew P. Brucker is a partner at the law firm Armstrong Teasdale. The statements and views in this article are his own and not necessarily those of the firm.

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