Cooperatives & Condominiums

Co-Op Board May Refuse to Execute Recognition Agreement for Home Equity Line of Credit

Kikis v. 1045 Owners Corp.

NYLJ 4/27/11

Supreme Ct., N.Y. Cty.

(Goodman, J.)

In an action by co-op shareholder to compel the board to execute a recognition agreement permitting him to use his shares as collateral for a home equity line of credit, both parties sought summary judgment. The court granted summary judgment to the co-op board and dismissed the complaint, holding that the business judgment rule insulated the board's refusal from legal challenge.

Shareholder owns shares associated with several apartments in a Fifth Avenue building, one of which was appraised at $7 million. Shareholder wanted to use the apartments for a home equity line of credit in the amount of $3 million. The co-op board denied the application, and shareholder brought this action, contending that the board's decision constituted a denial of due process because neither the bylaws nor the proprietary lease prohibit home equity lines of credit.

In granting summary judgment to the co-op board, the court noted that shareholder could submit no evidence to establish that the board's action was discriminatory, and no evidence to establish that the board had granted permission to others in the building. On these facts, the court concluded that the business judgment rule was applicable, and that the board's decision subjects neither the board nor individual members to liability.

Co-Op Not Liable for Failure to Abate Alleged Nuisance in Individual Apartment

Sherlock v. 20 East 9th Street Owners Corp.

NYLJ 4/12/11, p. 25, col. 2

Supreme Ct., N.Y. Cty.

(Rakower, J.)

In an action by co-op shareholder against another shareholder and against the co-op itself (and its managing agent) alleging that excessive noise constituted a nuisance, the co-op and the managing agent moved to dismiss the complaint. The court granted the motion, holding that the co-op could not be held liable for the alleged nuisance.

Shareholder, who lives in apartment 8-E, contends that the shareholder in apartment 9-E causes excessive noise at all hours of the day and night, and that the upstairs shareholder has not complied with the provisions of the house rules and proprietary lease requiring 80% of the floor space to be carpeted and padded. The co-op corporation and the managing agent moved to dismiss the complaint against them.

In granting the motion, the court first noted that the managing agent was a disclosed agent of its principal, and therefore was not free to take actions independently from the co-op corporation. As a result, the managing agent was entitled to dismissal. Turning to the co-op board, the court started by citing the business judgment rule as a basis for deferring to the board's decision not to take action against the upstairs shareholder. The court then noted that a co-operative cannot be held liable for a nuisance if it did not itself create the nuisance or retain control of the apartment from which the nuisance emanated. Here, there was no allegation that the co-op created the nuisance or retained control. The court did hold, however, that the downstairs unit owner had set forth the elements of common law nuisance against the upstairs neighbor, and continued the action against that defendant.

Co-Op Board May Refuse to Execute Recognition Agreement for Home Equity Line of Credit

Kikis v. 1045 Owners Corp.

NYLJ 4/27/11

Supreme Ct., N.Y. Cty.

(Goodman, J.)

In an action by co-op shareholder to compel the board to execute a recognition agreement permitting him to use his shares as collateral for a home equity line of credit, both parties sought summary judgment. The court granted summary judgment to the co-op board and dismissed the complaint, holding that the business judgment rule insulated the board's refusal from legal challenge.

Shareholder owns shares associated with several apartments in a Fifth Avenue building, one of which was appraised at $7 million. Shareholder wanted to use the apartments for a home equity line of credit in the amount of $3 million. The co-op board denied the application, and shareholder brought this action, contending that the board's decision constituted a denial of due process because neither the bylaws nor the proprietary lease prohibit home equity lines of credit.

In granting summary judgment to the co-op board, the court noted that shareholder could submit no evidence to establish that the board's action was discriminatory, and no evidence to establish that the board had granted permission to others in the building. On these facts, the court concluded that the business judgment rule was applicable, and that the board's decision subjects neither the board nor individual members to liability.

Co-Op Not Liable for Failure to Abate Alleged Nuisance in Individual Apartment

Sherlock v. 20 East 9th Street Owners Corp.

NYLJ 4/12/11, p. 25, col. 2

Supreme Ct., N.Y. Cty.

(Rakower, J.)

In an action by co-op shareholder against another shareholder and against the co-op itself (and its managing agent) alleging that excessive noise constituted a nuisance, the co-op and the managing agent moved to dismiss the complaint. The court granted the motion, holding that the co-op could not be held liable for the alleged nuisance.

Shareholder, who lives in apartment 8-E, contends that the shareholder in apartment 9-E causes excessive noise at all hours of the day and night, and that the upstairs shareholder has not complied with the provisions of the house rules and proprietary lease requiring 80% of the floor space to be carpeted and padded. The co-op corporation and the managing agent moved to dismiss the complaint against them.

In granting the motion, the court first noted that the managing agent was a disclosed agent of its principal, and therefore was not free to take actions independently from the co-op corporation. As a result, the managing agent was entitled to dismissal. Turning to the co-op board, the court started by citing the business judgment rule as a basis for deferring to the board's decision not to take action against the upstairs shareholder. The court then noted that a co-operative cannot be held liable for a nuisance if it did not itself create the nuisance or retain control of the apartment from which the nuisance emanated. Here, there was no allegation that the co-op created the nuisance or retained control. The court did hold, however, that the downstairs unit owner had set forth the elements of common law nuisance against the upstairs neighbor, and continued the action against that defendant.