Cooperatives & Condominiums

Business Judgment Rule Does Not Permit Co-Op to Block Bulk Sale

R&L Realty Associates v. 205 West 103 Owners Corp.

NYLJ 8/10/12, p. 23, col. 5

AppDiv, First Dept.

(memorandum opinion)

In an article 78 proceeding by owner of 25 co-op apartments to compel a co-op corporation to prepare documents for a closing for the bulk sale of the apartments, the co-op appealed from Supreme Court's grant of the petition. The Appellate Division affirmed, holding that the co-op board's actions were not protected by the business judgment rule.

Owner of the apartments had previously been ordered by a court to sell them in a bulk sale. Nevertheless, the co-op corporation refused to prepare new stock certificates and proprietary leases for the apartments and other documents necessary to facilitate closing. The apartment owner then brought this proceeding, and Supreme Court granted the petition, ordering the co-op corporation to prepare the documents and adjudging that the owner of the apartments was entitled to inspect the co-op corporation's books. The co-op appealed.

In affirming, the Appellate Division held that in light of the owner's legal right to sell the apartments, Supreme Court properly directed the co-op corporation to engage in the ministerial acts necessary to remove obstacles to the sale. The court emphasized that the proprietary lease does not give the co-op the right to object to the owner's sale of unsold shares or any other shares. As a result, the co-op's refusal to co-operate was an action outside the scope of its authority. When a co-op acts outside the scope of its authority, it is not entitled to the protection of the business judgment rule.

Business Judgment Rule Does Not Permit Co-Op to Block Bulk Sale

R&L Realty Associates v. 205 West 103 Owners Corp.

NYLJ 8/10/12, p. 23, col. 5

AppDiv, First Dept.

(memorandum opinion)

In an article 78 proceeding by owner of 25 co-op apartments to compel a co-op corporation to prepare documents for a closing for the bulk sale of the apartments, the co-op appealed from Supreme Court's grant of the petition. The Appellate Division affirmed, holding that the co-op board's actions were not protected by the business judgment rule.

Owner of the apartments had previously been ordered by a court to sell them in a bulk sale. Nevertheless, the co-op corporation refused to prepare new stock certificates and proprietary leases for the apartments and other documents necessary to facilitate closing. The apartment owner then brought this proceeding, and Supreme Court granted the petition, ordering the co-op corporation to prepare the documents and adjudging that the owner of the apartments was entitled to inspect the co-op corporation's books. The co-op appealed.

In affirming, the Appellate Division held that in light of the owner's legal right to sell the apartments, Supreme Court properly directed the co-op corporation to engage in the ministerial acts necessary to remove obstacles to the sale. The court emphasized that the proprietary lease does not give the co-op the right to object to the owner's sale of unsold shares or any other shares. As a result, the co-op's refusal to co-operate was an action outside the scope of its authority. When a co-op acts outside the scope of its authority, it is not entitled to the protection of the business judgment rule.