First published: Jan 2025
Battling Goliath
TAKEAWAY The government is different from you and me. So it is not always easy to hold the government to legal standards that apply to individuals and corporations—but it can happen. Here, the appellate court found that the City’s efforts to move the Brooklyn property from one program to another could not stand. The tenants had participated for years in the TIL program, and presumably were working towards creating an HDFC cooperative for themselves. The City’s unilateral efforts to pull the property from that pathway were, for the time being, stopped. It remains to be seen if discovery or other evidence comes to light that renders the City’s actions warranted by law.
374-76 PROSPECT PLACE TENANTS ASS’N INC V CITY OF NEW YORK
WHAT HAPPENED Back in the 1980s, the City foreclosed on many tax-delinquent residential properties. To promote home ownership, the City created the “Tenant Interim Lease” program, known as TIL. Resident tenants of certain City-owned buildings could form an association, apply to the TIL program, and work toward having the building sold to the tenants as an HDFC, a type of cooperative for low- to moderate-income residents. Tenants in a Brooklyn building in Prospect Heights engaged in this process and were accepted into the TIL program in 2001.
Eight years later, the City tried to shift the building into a different program, the Affordable Neighborhood Cooperative Program (ANC). The City notified the tenants association that rents would be increased to fund renovation work; that tenants would be relocated for two years while renovations occurred; and that tenants would have no rights under the TIL program.
The tenants association objected to being moved from the TIL to the ANC program, and sued the City, asserting, among other claims, breach of contract, promissory estoppel, and breach of fiduciary duty. The City filed a motion to dismiss the claims, but the trial court denied the motion. The City appealed.
IN COURT The appeals court affirmed the trial court in full, denying the City’s appeal. The tenants association and the City entered into a contract once the City accepted the association into the TIL program. The tenants association stated a claim for breach of contract based on the City’s efforts to remove the building from the TIL program and transfer the building to the ANC program, over the plaintiffs’ objection.
As for the claim for promissory estoppel, when there is a clear and unambiguous promise, and an injury sustained in reliance upon that promise, a claim has been stated. Here, the tenants association relied upon the City’s promises in the TIL program, and the tenants association faced injury when the City failed to live up to those promises.
Finally, the complaint stated a claim for breach of fiduciary duty against the City, which had undertaken a fiduciary obligation to the tenants association, under both the TIL contract and otherwise. That fiduciary obligation was breached when the City sought to subject the property to a different program.
COUNSEL for the Tenant’s Association MATTHEW BERMAN Valli Kane & Vagnini; for New York City DIANA LAWLESS NYC Law Department, Office of Corp. Counsel; Justice Rosemarie Montalbano
