First published: Feb 2026
The Consequences of Rolling Back Rights
TAKEAWAY This case demonstrates that once a board conveys important amenities to a tenant that are maintained for years, an attempt to later claw them back through a change to the house rules risks a lawsuit. The appellate court’s decision shows that if there is evidence that the rule change may have targeted and discriminated against a particular tenant or group of tenants, a court may hold that the business judgement rule does not apply to allow for a quick summary dismissal, leaving the board to face the bad publicity, acrimony, time demands, and costs of ongoing litigation. Still, the appellate court’s decision to let stand the trial court dismissals of counts relating to the freight elevator rule changes, notwithstanding their sweeping nature and seemingly adverse business implications for commercial tenants in a heavily commercial building, demonstrate that the business judgment rule’s protections are still quite substantial. It is also helpful, as occurred here, for a board to pass a more general rule that clarifies and provides notice regarding its powers prior to taking action on particular amenities through a house rule.
ATTA V. 450 WEST 31ST OWNERS CORP.
WHAT HAPPENED For more than 25 years, Karen Atta, a shareholder-tenant at the 12-story cooperative at 450 W. 31st Street in Manhattan, operated a commercial sculpture business from a rear, ground-level unit. An amendment to the offering plan permitted her to use and maintain effective control over a portion of the building’s parking lot, the only direct access point into the building. The cooperative recognized and did not oppose her use of the space for parking during that time. Atta and other tenants also had unrestricted access to a freight elevator.
In March 2023, a newly elected board adopted house rules that dramatically altered these long-standing arrangements. House Rule 21 prohibited all parking or standing in the lot, allowing only loading and unloading, and effectively removed Atta’s control over the space. The board also imposed new limitations on the freight elevator, restricting use to once per day unless prior approval was obtained and fees were paid, with substantial fines for violations.
Atta and fellow shareholder Jeffrey Greene, whose unit housed a photography sub-tenant, filed suit, arguing that the new rules ignored Atta’s established access rights, reduced the value of their units, and impaired their ability to operate art businesses. Atta alleged that building staff blocked her access to the parking lot and installed a new lock. The plaintiffs further claimed the rule changes were made in bad faith and as part of an effort to force art business owners out of the building so that board members could buy the units, citing alleged statements by the board president and a board member’s subsequent attempt to persuade Greene to sell his unit. They also asserted the changes were retaliatory, following their criticism of a board decision involving a financial transaction with the new board president.
The plaintiffs sought elimination of the new house rules and an easement guaranteeing Atta access to the parking lot. The trial court dismissed the case, finding Atta had no parking property rights and that the board’s actions were protected under the business judgment rule. Atta and Greene appealed.
IN COURT While rejecting most of the counts in the appeals, the appellate division court overturned the dismissal of two of the parking lot-related counts and remanded those matters to the trial court for its further consideration. The appellate court noted that the offering plan amendment clearly assigned a portion of the parking lot to Atta as part of her unit and stated that she might have had an entitlement to use it. The court found Atta had sufficiently alleged bad faith in House Rule 21 to overcome the business judgment rule, noting the fact that her unit is the only one that includes a parking area suggested that the rules may have impermissibly targeted and discriminated against her. It also found she could further argue her entitlement to an easement by necessity to the parking lot, finding that when the new house rules removed her access to the parking lot an easement over property became absolutely necessary to her. However, the appellate court dismissed the counts challenging the new freight elevator rules. It deemed these rule changes to be protected by the business judgment rule, because such changes were authorized by 2011 amendments to the proprietary lease, regulate all shareholder-tenants’ use of the freight elevator, did not expressly require additional freight elevator trips to occur outside of regular business hours so long as there is availability, and provided generally applicable fines for violations of the house rules and the proprietary lease.
COUNSEL for Karen Atta and Atta Inc. PETER ZLOTNICK, Saul Ewing; for AAC Realty LLC and Jeffrey Greene DAVID E. ROSS, Morrison Cohen; for 450 West 31st Owners Corp. and its Board of Directors JEFFREY R. METZ, Adam Leitman Bailey; Justice Robert R. Reed
