Case Notes in

Commercial Unit

First published: Jul 2013
Thomas Campaniello v. Greene Street Holding Corp. and the Board of Directors of Greene Street Holding Corp.

In many co-ops, the commercial space is owned by the co-op and leased to a tenant, whether through a “sweetheart” lease to the sponsor or an arm’s length lease to a tenant. In those situations, the commercial occupant is only a tenant, and the lease forms the agreement between the parties. In arm’s length transactions, those leases are negotiated and the terms of any sublet would be contained in the commercial lease. In this situation, the commercial units were owned by shareholders of the co-op, so that the agreements between the parties were the same as the agreements between the co-op and its residential shareholders – the proprietary lease and bylaws. This case reminds us that it is important for the managing agent to maintain accurate and complete records of meetings and, in particular, votes by the board or shareholders. In order for a board to amend bylaws, the terms of the amendment should be set forth in the notice of meeting. Because the board (or agent) did not have a copy of the notice of meeting in this instance, the shareholder was able to argue that the meeting was not properly announced. Here, the board was able to locate persons who had served as board members more than 30 years ago, and those persons were able to recall the sum and substance of the notice of meeting on this issue. Without their affidavits, we do not know how the court would have resolved this issue – although there appeared to be evidence that the shareholders were advised of the bylaw amendment. Additionally, this case underscores the importance of uniformly implementing lease and bylaw provisions, as the court noted that the sublet fee had been charged to all shareholders – residential and commercial – for more than 30 years.

Read full article
First published: Jul 2005
Madison Medical Building v. Properties & Equities International Ltd.

It is obvious that the condominium board here did not want a Subway restaurant in the building. The board raised all types of objections to bar the restaurant's opening - none of which the court found to have merit. There was no danger to the building or its occupants. The ultimate remedy for the board would have been to exercise its right of first refusal to lease the premises intended for Subway. Of course, that would have required some risk and expenditure for the board that it was seeking to avoid. With the cost of litigation factored in, it might have been smarter for the board to have exercised the right of first refusal in the first place.

Read full article
First published: Jun 2004
Citipark II Associates, Ltd. and 44 West 62nd Garage LLC., v. Lincoln Plaza Tenants Corp.

The case resulted from the requirements of Section 216 of the Internal Revenue Code, which provides substantial tax benefits for co-op shareholders. In order to get these benefits, in each year the co-op must derive more than 80 percent of its gross income from shareholders, the so called 80/20 test. Here, the co-op assessed its shareholders in order to collect more rent from the garage tenant without jeopardizing its tax benefits. The garage tenant objected, arguing that the assessment was improper. The court disagreed and said that the co-op was not restricted from doing so, since the garage lease did not preclude this action.

Read full article
First published: Mar 2004
Peck v. Lily Lodge

The facts of this case led the court to conclude that the defendant was operating a bed-and-breakfast establishment in a co-op, which is inimical to the underlying purpose of a co-op enterprise. Transient occupancy involves a commercial enterprise, which has no place in a building designed to provide housing for its shareholders. The courts invariably frown upon such operations and not even the so-called roommate law could be invoked to help the tenant's position.

Read full article
First published: Aug 2003
Saxon Garage Corp. v. Regency East Apartment Corp.

What triggered this action for trespass after a long established practice is uncertain. It may have been that the garage was seeking to exact money from its co-op landlord. Perhaps business was in the doldrums and the garage was trying to persuade its landlord to reduce the rent. Certainly, the effort was unsuccessful.

Read full article