Case Notes in

Alterations

First published: Dec 2012
Cogut v. 1220 Park Avenue Corporation and Brown Harris Stevens, LLC

This case reminds us that agreements entered into between shareholders and their co-op boards are contracts and the courts will treat them as legally binding. It has long been the law that one is presumed to have read what one signs. Plaintiffs’ argument that they had not read the final version of the alteration agreement before signing it was of no moment. Nor could they successfully argue that they reasonably relied on the managing agent’s alleged representations that the agreement was substantially the same as the prior version the plaintiffs had signed. As to electricity, boards do have the discretion to take the needs of all shareholders into consideration when deciding how to allocate services such as electricity. Plaintiffs’ claim that increased amperage had been approved in their alteration application was belied by documentary evidence. Importantly, boards also have the right – found in statute and case law – to rely on the advice of their experts. Finally, although we have seen other decisions where the court did not permit liquidated damages, the court here upheld the liquidated damages provisions of the alteration agreement, rejecting arguments that they should be invalidated as an impermissible penalty. The court specifically noted that the amounts charged – $250/day for the first five days; $500/day for the next five days; and $1,000/day thereafter – were not unconscionable or in violation of public policy, particularly given the scope of the project.

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First published: Sep 2009
Batsidis v. Wallack Management Co. Inc., et al.

The shareholder and co-op entered into an alteration agreement that required the shareholder to pay all of the corporation’s costs associated with the shareholder’s proposed alteration. The appellate court recognized that the provision was intended to insure that other shareholders of the co-op were not required to pay charges directly attributable to a single shareholder’s renovations. Importantly, the court drew a distinction between the provisions of the alteration agreement and proprietary lease where the lease typically requires a shareholder to pay the co-op’s legal fees in the event of litigation between the co-op and a shareholder. In the case of the lease, the court explained, public policy considerations must be taken into account so that people are not dissuaded from seeking “judicial redress of wrongs.” This is not a concern when a shareholder and a co-op contract through an alteration agreement to require a shareholder to pay costs associated with issues directly related to a particular apartment. Query whether a proprietary lease should be amended to specifically permit a co-op to charge back shareholders for professional fees incurred in connection with a specific apartment in the absence of litigation.

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First published: Apr 2009
Mark Hotel LLC v. Madison 77th LLC.

Once again, the court reviewed and upheld the clear terms of the contract between the parties. Of particular interest was the landlord’s attempt to declare the lease provision invalid by asking the court to apply the provisions of the Condominium Act to a request to convert premises to cooperative ownership. As the appellate court properly noted, the two are distinct and separate forms of ownership. While the Condominium Act applies to condominiums (which requires residential real property to be owned in fee simple), the court correctly explained that it does not apply to cooperatives, in which shareholders own stock in a corporation owning real estate, which permits them to live in a specific apartment pursuant to a proprietary lease. Moreover, the court made it clear that the landlord’s attempt to delay a review of the tenant’s alteration plans until the tenant agreed that it would not seek to convert the building to luxury hotel cooperative units would not be permitted. The lease gave the landlord a final five-day opportunity to submit its objections to the renovations and specifically provided that, absent such objections, approval is deemed given. Thus, the court found that when the landlord failed to object, it could not preserve a right to object at a later date, i.e., when the tenant agreed that it would not convert the building to cooperative units. Finally, the term “owner” as used by the Department of Buildings, must be reviewed by all cooperatives and condominiums. Although this case relied on an interpretation of the administrative code, we note that new DOB rules, in effect as of August 4, 2008, may require buildings to change their practices concerning who may sign certain permit applications as “owner.”

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First published: May 2005
Arnold v. No 24 Gramercy Park Inc.

The co-op had granted Arnold permission to alter his apartment and install a central air conditioning system. When the co-op board members had second thoughts about this installation, they acted as if the permission was conditional and revocable despite any evidence that this was the case. Levandusky was no defense for the board’s breach of contract liability. This was not a case where the business judgment rule could protect the board’s efforts to alter the consent. Perhaps most significantly, the decision here holds that the shareholder may recover his legal fees from the co-op because of a statutory provision in the Real Property Law for the benefit of tenants. This should give other co-op boards pause before trying to alter binding contracts with shareholders.

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First published: Apr 2004
Babeli v. East 13th Street Tenant Corp.

Once a shareholder in a co-op embarks upon an apartment alteration with co-op approval, it is very difficult to stop such alteration without a clear and compelling reason as long as the work is proceeding as authorized. In other words, once an apartment alteration is approved, a co-op does not have the option of changing its mind and stopping the work.

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First published: Apr 2002
Farnsworth v. Wells

The result here was predictable. There was no proof that the wall had been moved. Also, the plaintiff waited a long time to pursue this claim. As a result, the sympathy of the court was not invoked. Indeed, other defenses such as laches, waiver, and estoppel probably could have been raised by the defendant to support dismissal of the claim.

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