Co-ops and Condominiums

The court first held that the single sale to a tenant in occupancy at the outsider price — after expiration of the exclusive period — did not alter the "total price" on which the reserve fund was to be based. The court noted that if a single sale after expiration of the exclusive period would alter the sponsor's reserve fund obligation, the sponsor could arrange a low-priced sale after the period expires in order to reduce its reserve fund obligation — a result the governing statute did not contemplate. Turning to the credit for elevator improvements, the court concluded that sponsor was entitled to the $224,762 credit for the elevator upgrade, reduced by the $15,000 cost for correcting the code violations. Finally, the court concluded that the board had not met its burden of proof on its claim for contract damages.

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Shareholder Did Not Breach Survival of Closing Affidavit

Sutton Apartments Corp. v. Zanani NYLJ 5/7/20, p. 17, col. 1 AppTerm, First Dept. (per curiam opinion)

In the co-op corporation's holdover proceeding, shareholder appealed from Supreme Court's award of possession to the co-op corporation. The Appellate Term reversed and dismissed the petition, holding that shareholder did not breach his survival of closing affidavit or his proprietary lease.

Upon the closing of his purchase of an apartment in the co-op, shareholder was required to tender a bank check in the amount of $122,606.03 to the city's Housing Development Corporation. Shareholder tendered the check, and the co-op forwarded it to HDC by messenger, but HDC never received the check. One year later, the co-op informed shareholder that HDC was requesting a replacement. His ban would not stop payment on the original check unless he executed an affidavit indicating that the check was lost stolen or destroyed. Because shareholder, a lawyer, did not have personal knowledge about the facts regarding loss of the check, he requested that HDC execute a lost check affidavit, but HDC refused. As a result, shareholder did not tender a replacement check. The co-op corporation then brought this holdover proceeding, alleging that shareholder's failure to tender a replacement check constituted a breach of a "survival of closing" affidavit, which constituted a default under the proprietary lease. Civil Court awarded a summary judgment of possession to the co-op corporation, holding that shareholder had breached the survival of closing affidavit when he stopped payment on the original check without tendering a replacement check.

In reversing, the Appellate Term noted that the survival of closing affidavit focused on failure to replace checks that failed in collection. In this case, the shareholder's check did not fail in collection, but was never presented for collection because it was lost after the closing through no fault of the shareholder. The court also held that neither stopping payment of the check nor declining to tender a replacement until HDC submitted a lost check affidavit constituted a failure of collection.