Page 5 - NY Cooperator June 2019

QUESTIONS & ANSWERS Legal Q A& Problem Neighbor Q I have written several complaint letters to the board and the man- aging agent regarding a noisy neighbor. Th ey did send a letter to the share- holders about a year ago, but the problem persists. Although I continue to write letters, nothing is being done. What is my recourse? Do I fi le against the board for not acting on my behalf? It really aff ects quality of life. —Shareholder on the Edge A “Living in a cooperative apart- ment means living in close quarters with fellow residents, and one of the most common complaints is excessive noise from one’s neighbors,” says Cathleen Hung, an attorney at the New York City-based fi rm of Anderson Kill. “Turning to litigation to resolve a noisy neighbor issue should be a last resort. Not only is litigation the most expensive option, it is also diffi cult to prove in court because excessive noise is a subjective matter, with diff erent people hav- ing diff erent sensitivity to noise. “So before taking the case to court, try exhausting the following options: Th e fi rst option is going directly to the source and knocking on your neighbor’s door to explain that the noise is really aff ecting your quality of life. Your neighbor may be unaware that the letter sent out to all shareholders was spe- cifi cally directed at the noise coming from his or her apartment. “If your neighbor is not receptive, the sec- ond option is to get the board and managing agent involved. You have already sent out complaint letters – but try supporting your grievances with both documentation and references to the house rules. Most coopera- tives have a house rule prohibiting disturbing noises during nighttime hours, so document the times and duration of the disturbances. Some cooperatives also have a house rule that requires 80 percent of an apartment’s fl oors to be covered by carpeting, so have the manag- ing agent inspect your neighbor’s apartment to make sure he or she is in compliance. “Give your managing agent enough evi- dence so the board can cite your noisy neigh- bor for violation of the house rules, rather than just a general letter to all shareholders about keeping the noise level down. Make sure to also keep copies of all your correspon- dence with the board and managing agent, as those records will be essential should you decide to pursue litigation later on. “If none of those options have yielded a resolution to your noisy neighbor problem, then it might be time to consider an action against your board of directors. A claim that the board has breached its fi duciary duty will be problematic, as the board’s actions are generally protected by the Business Judgment Rule. Whether the board decides to act or not to act, the courts defer to the board’s deci- sion as long as it was within the scope of their authority, made in good faith, and arguably advanced a legitimate corporate purpose. Th e board would not be protected by the Business Judgment Rule if the board did not consider or deliberate a shareholder’s complaint at all – but here it looks like the board made a con- scious decision to issue a general letter to all shareholders and deemed it suffi cient. “You can make a little more headway with a claim that the board breached the war- ranty of habitability, and also petition for an abatement of maintenance charges. Because you occupy the apartment pursuant to a pro- prietary lease, the board has a landlord-like duty to remedy certain apartment conditions. However, to prove a breach of the warranty of habitability you must show the court that the noise level was so excessive it rendered your apartment uninhabitable, which is a challenging standard to meet. In the end, you may come out of litigation with an unsatis- factory result and a heft y legal fee. Th e more prudent remedy may be to simply elect a more responsive board.” Proving Non-Resident Status Q We have a problem with a share- holder circumventing sublet rules by claiming that the occupant of their unit is a ‘roommate.’ Th e actual share- holder does not live here, but she shows up occasionally and sits on the stoop to make her presence known as if she is living here. Every- one accepts the ruse. How do we prove non- residency? Others have claimed that an illegal occupant is a sibling. Again, how to disprove? Th e board is less concerned with illegal sub- lets than it is with spending money for legal solutions. — Fed-Up With the Shenanigans A “Th e answer to this question is known in the landlord-tenant courts as a non-primary resi- dence case,” says attorney Martin Kera of the fi rm Kera & Graubard, which has offi ces in Manhattan and Hastings-on-Hudson. “Th e last sentence of the question seems to imply that the board does not want to spend money on legal fees. Most co-op proprietary leases provide for the collection of legal fees from a shareholder. Th e resolution of this situa- tion will require the expenditure of money. Th ere are companies that specialize in doing non-primary residence searches. Th e cost is $1,000 to $1,500. Th ey search all public re- cords to see where the shareholder actually resides. Th e residence used for the fi ling of New York City income tax returns and voter registration are key. “Assuming the search shows that the shareholder has a diff erent primary resi- dence, the next step would be to hire an at- torney to commence a holdover proceeding. Proprietary leases usually require service of a notice to cure before commencement of the holdover proceeding. “An important adjunct, and also an ele- ment of proof, is to install security cameras that show who is going in and out of the building – particularly in and out of the sub- ject apartment. Th e cameras look like smoke detectors, and the taping system must store the video for a period of time. It cannot be one of those systems that records over the tape every 48 hours. “I have assumed that this is a no-doorman building. If you have doormen or perhaps a live in super, you have a witness who can tes- tify about whether the shareholder resides in the building.” How Should Boards Operate? Q I live in a New York City co-op and would like to understand exactly what the legal responsi- bilities of board members are. Our board has not posted board meeting minutes for a few years (although annual meeting minutes are distributed with the annual meeting notice). Th ere are no notices posted about when and where board meetings occur. One sharehold- er who asked to sit in on a meeting was told the board conducts business via email. —Shareholder Seeking Knowledge A According to Jeff rey Reich, an attorney for the New York City fi rm Schwartz Sladkus Reich Greenberg Atlas, LLP: “A New York co- operative apartment corporation is a business corporation that has been formed under the New York State Business Corporation Law (the ‘BCL,’ or in some rare instances under the New York Not-For-Profi t Corporation Law, the ‘NFPCL’), and as such is governed both by the cooperative’s bylaws and the BCL (or the NFPCL). BCL corporations are led by their boards of directors, and members of the board have an obligation to make decisions in good faith on behalf of their corporations. “Additionally, due to the position of trust that board members occupy, they are subject to fi duciary obligations requiring that they consider the best interest of the corporation in their decision making and the actions they take – even where those decisions may be contrary to their individual interests. Th us, a member of a cooperative board has a duty to operate the cooperative in good faith and in a manner that refl ects the best interest of the cooperative shareholders. “In order to determine how a board members should respond to a particular gov- ernance issue, the board member can look to the BCL and to their co-op’s bylaws. While the BCL provides general instructions re- garding the governance of a cooperative cor- poration, the co-op’s bylaws usually provide more detailed guidance. Bylaws may address the process for board elections, the conduct of board meetings, and the publication board meeting minutes. Th e writer should review their co-op’s bylaws to determine if there are any qualifi cations or term limits imposed on an individual’s right to serve on the board, the process for electing board offi cers, whether board meetings are to be open to the share- holders, and the requirements for sharing the board meeting minutes. In the event that the bylaws are silent on any of these topics, the bylaws may be amended (in some cases by the board’s own action) to adopt appropriate policies. Th ere is no requirement that bylaws provide for specifi c qualifi cations for board offi cers, term limits, to compel boards to hold board meetings open to the shareholders, or to distribute the minutes of the board meet- ings (although recent court decisions indicate that shareholders have the right to review board meeting minutes on request) – but a board may decide to establish such policies. “Since the board controls the operations of the cooperative, bylaws and proprietary leases usually grant the board the authority to amend, modify, impose and delete rules for the use and operation of the cooperative property (oft en referred to as house rules or rules and regulations). Th ese rules are adopt- ed based on a vote of the board members, and as such, a board president does not have the authority to unilaterally amend, alter, impose or delete cooperative rules on his or her own accord. If a president has attempted to do so, it is a matter that should be taken up by the board and addressed. “Th e best board members are those who understand their roles and who are actively engaged in the operation of the cooperative.” n Disclaimer: Th e answers provided in this Q&A column are of a general nature and cannot substitute for professional advice regarding your specifi c circumstances. Always seek the advice of competent legal counsel or other qualifi ed profes- sionals with any questions you may have regard- ing technical or legal issues. COOPERATOR.COM THE COOPERATOR —JUNE 2019 5