Ira Brad Matetsky in Legal/Financial on September 9, 2021
Most proprietary leases in housing cooperatives state that a tenant-shareholder’s lease can be terminated for “objectionable conduct.” Some proprietary leases bestow this authority to terminate the lease on the board of directors, while others give it to the shareholders. “Objectionable conduct” can typically include persistently making excessive noise, creating unsanitary conditions inside an apartment, or acting in an abusive or threatening manner toward residents and staff. Less common, but equally troubling, is a pattern of unreasonable and vexatious litigation brought by a tenant-shareholder.
In one prominent case decided in 2007, the Appellate Division for the First Department (which includes Manhattan and the Bronx) held that “evicting tenants who consciously and unabashedly…inflict thousands of dollars in unnecessary legal fees is in furtherance of the cooperative’s legitimate interests.”
This precedent was followed in a recent court decision, 800 Grand Concourse Owners v. Thompson, in which the board of directors voted to terminate a tenancy on grounds of objectionable conduct. The board acted after the shareholder’s husband, who resided in the unit with the shareholder, filed at least 15 lawsuits against the cooperative. The board described these lawsuits as frivolous and noted that in two of the cases, the court had categorized the plaintiff as a “vexatious litigant” and prohibited him from filing further court papers without obtaining special permission from the judge. In addition to costing the cooperative substantial legal fees, the board asserted that the frequent litigation caused the cooperative to lose its insurance coverage.
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The board tried to work with the shareholder to resolve the problem, but it only intensified. Ultimately, the board voted unanimously to terminate the shareholder’s proprietary lease. When the shareholder failed to vacate the premises, the co-op brought what’s known as a holdover proceeding in Housing Court.
In reviewing the co-op board’s action, the court observed that the board’s decision to terminate a proprietary lease is reviewed deferentially under the Business Judgment Rule, which states that courts will not second-guess board decisions provided they’re not discriminatory and are made in good faith and for legitimate purposes of the cooperative. The court held that the shareholder’s conduct as described was a proper basis for terminating a proprietary lease. The court further observed that, before voting to terminate the proprietary lease, the board had sent numerous communications and made several attempts to meet with the shareholder and try to work out the issues over a period of months. In light of this, the court upheld the co-op board’s decision. The shareholder appealed, but the Appellate Term of New York State Supreme Court upheld the board’s decision as well.
The “objectionable conduct” provision in a proprietary lease is not a panacea. It certainly cannot be invoked every time a tenant-shareholder sues a cooperative or its board members, even if the board disagrees with the lawsuits. However, when a shareholder (or someone living in the unit with the shareholder’s permission) wastes the co-op’s resources through a consistent pattern of meritless litigation, this case suggests that such a barrage of litigation qualifies as “objectionable conduct” – and thus could be grounds for terminating the shareholder’s proprietary lease.
Ira Brad Matetsky is a partner at the law firm Ganfer Shore Leeds & Zauderer.
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