Cooperatives & Condominiums

Foreclosure Sale Purchaser

Federal National Mortgage Association v. Simmons

NYLJ 5/1/15, p. 22, col. 1

AppTerm, First Dept.

(memorandum opinion)

In a holdover proceeding brought by purchaser at a non-judicial foreclosure sale, purchaser appealed from the trial court's dismissal of the petition. The Appellate Term affirmed, holding that neither RPAPL 713(1) nor 713(7) authorized a foreclosure sale purchaser to bring a summary proceeding against prior owner of shares associated with a co-op apartment.

Owner of shares associated with a co-op apartment defaulted on a mortgage loan secured by the shares and proprietary lease. Mortgagee then sold the shares at a UCC article 9 non-judicial sale. Assignee acquired the rights of the successful bidder, and then brought this holdover proceeding pursuant to RPAPL 713, seeking to remove former owner from possession. After trial, the trial court dismissed the proceeding.

In affirming, the Appellate Term held that RPAPL 713(7) does not authorize a licensee holdover proceeding when the occupant entered into possession as a tenant pursuant to a proprietary lease agreement. The court observed that the co-op corporation had not terminated previous occupant's lease nor issued a new lease to assignee. The court also held that RPAPL 713(1), which authorizes a summary proceeding to remove an occupant after an execution sale when “title under the sale has been perfected,” does not apply when the property sold is personal property rather than real property. Because the court characterized the co-op shares and proprietary lease as personal property, RPAPL 713(1) did not authorize a summary proceeding.

COMMENT

In light of the Simmons decision, the purchaser of a cooperative apartment at a non-judicial foreclosure sale faces an uphill battle to regain possession of the property from an unwilling prior owner. The purchaser's first obstacle is to obtain the proprietary lease and stock certificate from the cooperative. The purchaser may start by simply requesting that the shares be transferred. But even if the cooperative consented, someone still needs to have the prior owner removed from the premises. The problem is that the purchaser at a non-judicial foreclosure sale is not a landlord and is therefore unable to bring suit under RPAPL ' 711. Because the prior owner held a proprietary lease from the co-op corporation, the co-op is in a better position to bring a summary proceeding. Cooperatives have been treated as landlords under ' 711 in other contexts. For instance, in 40 W. 67th St. Corp. v. Pullman, 100 N.Y.2d 147 (2003) the cooperative, as landlord, was able to recover possession of an apartment under RPAPL ' 711 because of a shareholders “objectionable conduct.” Nonetheless, there is no case law indicating whether the purchaser would be able to obtain an assignment of the coop's right to bring a summary proceeding under ' 711.

If the cooperative were not willing to bring suit on its own and the purchaser were unable to obtain an assignment of the cooperative's rights under ' 711, then the purchaser would be forced to look to ' 713, as this is the statute that governs summary proceedings where no landlord-tenant relationship exists. However, for the reasons outlined in Simmons, recovering possession of the property under ' 713 is problematic. Consequently, it appears that the purchaser's only option might be to bring an ejectment action under RPAPL Article 6. In Alleyne v. Townsley, 110 A.D.2d 674, 675, the court awarded possession to a landlord who had brought an ejectment action, noting that “although resort to a summary proceeding to regain possession of real property has become the rule rather than the exception ' the common-law action for ejectment still survives” and its principles remain unchanged unless explicitly modified by statute. Id. While there is little case law regarding ejectment in the non-judicial foreclosure sale context, the principles of ejectment would seem to apply. So long as the purchaser could establish that she was the rightful owner of the property and that the prior owner was wrongfully holding over, the purchaser would likely be able to have the prior owner removed from the property in an ejectment action. This of course could take far longer than a summary proceeding.

Condominium purchasers are in a different position. Under RPAPL ' 713(5), all that is required in order to bring a summary proceeding is that the “property has been sold in foreclosure” and that the purchaser has had a deed exhibited to him. Because condominium purchasers receive a deed, and not a proprietary lease, the purchaser of a condominium at a non-judicial foreclosure sale would be able to recover possession in a summary proceeding under RPAPL ' 713(5).

Trespass Claim Fails

Schwartz v. Hotel Carlyle Owners Corp.

NYLJ 5/21/15, p. 21, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by co-op unit owner against the co-op for trespass, conversion, and breach of the covenant of quiet enjoyment, the co-op corporation appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division reversed and granted the motion, holding that the unit owner did not raise any issue of fact about an action of the co-op corporation that prolonged his ability to resume residence after a period of rent abatement.

After a water leak caused damage to unit owner's apartment, agents of the co-op corporation entered the apartment to assess damage and make repairs. Unit owner was credited with a rent abatement for the period between August 2011 and April 2012, but never resumed making monthly maintenance payments. Unit owner collected compensation from his insurer for items that were missing from the apartment, but nevertheless brought this action against the co-op corporation for trespass, conversion, and breach of the covenant of quiet enjoyment.

In reversing Supreme Court's denial of the co-op corporation's summary judgment motion, the Appellate Division first held that the trespass claim should have been dismissed because the terms of the proprietary lease authorized the co-op corporation to enter to assess and repair leak damage, and because the co-op's agents left when unit owner objected to their presence. The court dismissed the conversion claim for absence of proof of any losses not covered by insurance. In holding that the quiet enjoyment claim should have been dismissed, the court noted the absence of any issues of fact about whether delays in completing repairs after April 2012 were due to wrongful actions of the co-op corporation. The court then held that unit owner's failure to pay rent constituted an election of remedies that precluded a damage claim against the co-op corporation.

'

Foreclosure Sale Purchaser

Federal National Mortgage Association v. Simmons

NYLJ 5/1/15, p. 22, col. 1

AppTerm, First Dept.

(memorandum opinion)

In a holdover proceeding brought by purchaser at a non-judicial foreclosure sale, purchaser appealed from the trial court's dismissal of the petition. The Appellate Term affirmed, holding that neither RPAPL 713(1) nor 713(7) authorized a foreclosure sale purchaser to bring a summary proceeding against prior owner of shares associated with a co-op apartment.

Owner of shares associated with a co-op apartment defaulted on a mortgage loan secured by the shares and proprietary lease. Mortgagee then sold the shares at a UCC article 9 non-judicial sale. Assignee acquired the rights of the successful bidder, and then brought this holdover proceeding pursuant to RPAPL 713, seeking to remove former owner from possession. After trial, the trial court dismissed the proceeding.

In affirming, the Appellate Term held that RPAPL 713(7) does not authorize a licensee holdover proceeding when the occupant entered into possession as a tenant pursuant to a proprietary lease agreement. The court observed that the co-op corporation had not terminated previous occupant's lease nor issued a new lease to assignee. The court also held that RPAPL 713(1), which authorizes a summary proceeding to remove an occupant after an execution sale when “title under the sale has been perfected,” does not apply when the property sold is personal property rather than real property. Because the court characterized the co-op shares and proprietary lease as personal property, RPAPL 713(1) did not authorize a summary proceeding.

COMMENT

In light of the Simmons decision, the purchaser of a cooperative apartment at a non-judicial foreclosure sale faces an uphill battle to regain possession of the property from an unwilling prior owner. The purchaser's first obstacle is to obtain the proprietary lease and stock certificate from the cooperative. The purchaser may start by simply requesting that the shares be transferred. But even if the cooperative consented, someone still needs to have the prior owner removed from the premises. The problem is that the purchaser at a non-judicial foreclosure sale is not a landlord and is therefore unable to bring suit under RPAPL ' 711. Because the prior owner held a proprietary lease from the co-op corporation, the co-op is in a better position to bring a summary proceeding. Cooperatives have been treated as landlords under ' 711 in other contexts. For instance, in 40 W. 67th St. Corp. v. Pullman, 100 N.Y.2d 147 (2003) the cooperative, as landlord, was able to recover possession of an apartment under RPAPL ' 711 because of a shareholders “objectionable conduct.” Nonetheless, there is no case law indicating whether the purchaser would be able to obtain an assignment of the coop's right to bring a summary proceeding under ' 711.

If the cooperative were not willing to bring suit on its own and the purchaser were unable to obtain an assignment of the cooperative's rights under ' 711, then the purchaser would be forced to look to ' 713, as this is the statute that governs summary proceedings where no landlord-tenant relationship exists. However, for the reasons outlined in Simmons, recovering possession of the property under ' 713 is problematic. Consequently, it appears that the purchaser's only option might be to bring an ejectment action under RPAPL Article 6. In Alleyne v. Townsley, 110 A.D.2d 674, 675, the court awarded possession to a landlord who had brought an ejectment action, noting that “although resort to a summary proceeding to regain possession of real property has become the rule rather than the exception ' the common-law action for ejectment still survives” and its principles remain unchanged unless explicitly modified by statute. Id. While there is little case law regarding ejectment in the non-judicial foreclosure sale context, the principles of ejectment would seem to apply. So long as the purchaser could establish that she was the rightful owner of the property and that the prior owner was wrongfully holding over, the purchaser would likely be able to have the prior owner removed from the property in an ejectment action. This of course could take far longer than a summary proceeding.

Condominium purchasers are in a different position. Under RPAPL ' 713(5), all that is required in order to bring a summary proceeding is that the “property has been sold in foreclosure” and that the purchaser has had a deed exhibited to him. Because condominium purchasers receive a deed, and not a proprietary lease, the purchaser of a condominium at a non-judicial foreclosure sale would be able to recover possession in a summary proceeding under RPAPL ' 713(5).

Trespass Claim Fails

Schwartz v. Hotel Carlyle Owners Corp.

NYLJ 5/21/15, p. 21, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by co-op unit owner against the co-op for trespass, conversion, and breach of the covenant of quiet enjoyment, the co-op corporation appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division reversed and granted the motion, holding that the unit owner did not raise any issue of fact about an action of the co-op corporation that prolonged his ability to resume residence after a period of rent abatement.

After a water leak caused damage to unit owner's apartment, agents of the co-op corporation entered the apartment to assess damage and make repairs. Unit owner was credited with a rent abatement for the period between August 2011 and April 2012, but never resumed making monthly maintenance payments. Unit owner collected compensation from his insurer for items that were missing from the apartment, but nevertheless brought this action against the co-op corporation for trespass, conversion, and breach of the covenant of quiet enjoyment.

In reversing Supreme Court's denial of the co-op corporation's summary judgment motion, the Appellate Division first held that the trespass claim should have been dismissed because the terms of the proprietary lease authorized the co-op corporation to enter to assess and repair leak damage, and because the co-op's agents left when unit owner objected to their presence. The court dismissed the conversion claim for absence of proof of any losses not covered by insurance. In holding that the quiet enjoyment claim should have been dismissed, the court noted the absence of any issues of fact about whether delays in completing repairs after April 2012 were due to wrongful actions of the co-op corporation. The court then held that unit owner's failure to pay rent constituted an election of remedies that precluded a damage claim against the co-op corporation.

'