We want to remove an objectionable shareholder from our co-op. How do we successfully use the Pullman proceeding?
“A tenant shareholder who harasses their neighbors or is constantly breaking the rules can be highly disruptive to a community—going against the foundational spirit of a co-op,” says New York City real estate attorney Steven Wagner, a partner at Adam Leitman Bailey, P.C. who represents co-op and condo boards and owners.
In some cases, it’s possible to prepare a Pullman proceeding, which refers to a court case in which a co-op board successfully evicted a disruptive tenant shareholder by the name of David Pullman. The case set a precedent for co-ops that want the right to evict abusive neighbors. "Not all cases are successful, but it has become one of the go-to cases for boards to cite, and its authority is very strong," Wagner says.
While there’s very little that can be done to remove an abusive neighbor in a condo, the proprietary lease of a co-op includes a provision to evict a tenant shareholder either by a vote of the board or co-op owners for objectionable conduct.
“This is obviously a broad term but has included a case where the tenant filed repeated lawsuits against the board or other shareholders based on false allegations—along with sending dozens of letters containing defamatory material,” Wagner says.
Other situations have included hoarding, threats, assaults, or the refusal to pay maintenance followed by threats to sue anyone voting in favor to remove the objectionable tenant.
A word of warning: A Pullman procedure is time consuming for a board and you must carefully follow the procedural requirements for terminating a lease and give the shareholder facing eviction plenty of opportunities to be heard.
“Many cases have been dismissed on a technicality—for example, the tenant wasn’t given the opportunity to speak or the alleged conduct occurred years before and there was no communication between the parties,” Wagner says. Hiring an attorney with experience in this area will put you in the best position to be successful.
Below, an overview of the steps involved in evicting a tenant shareholder.
1. Make sure your proprietary lease has the relevant clause
Most proprietary leases include a clause permitting a board to seek eviction but before you start any proceedings you will want to double check. In the standard-form proprietary lease used widely in the city, you’ll find the Pullman clause in paragraph 31(f).
“It states that if the tenant shareholder or their visitors repeatedly continue with objectionable conduct in spite of receiving written notice to stop, a meeting can be called and a two-thirds vote of the board of directors can determine whether the tenancy can be terminated,” Wagner says.
2. Check whether all shareholders need to vote
The specific language of the Pullman clause can vary. Some require a vote of the shareholders, others a vote of the board and some even require the vote of both. You need to confirm what the lease requires, as well as the percentage of the board or shareholders who must vote to terminate the tenancy of the resident.
“The most common clause only requires the vote of the board but it is still very important to check,” Wagner says.
3. Give your neighbor a chance to make amends
In most cases, you can only evict a shareholder if they continue their misconduct after you’ve given them written notice. Again, check the wording in the lease. So your next step is to inform the shareholder in writing that they’re breaking the rules and ask them to correct their behavior.
These are civil cases, not criminal ones so you do not have to inform the shareholder of their rights, just be specific about the objectionable behavior and seek resolution.
“When a shareholder in one case complained about not being notified of their right to counsel, the courts rejected that argument and have made it clear that the board is only obligated to notify the shareholder of the problem, not tell them their rights,” Wagner says.
Nevertheless recent cases have referred to the notices given to the shareholder. So even though you are not required by law to advise the shareholder of their rights, it is good practice to do so. “You should also be very specific about the objectionable conduct that’s been observed and suggest they get legal representation,” Wagner says.
4. Review the evidence and organize your facts
You need a written timeline of the various infractions, the notices sent to the shareholder and details from the witnesses of this behavior. “If you have police reports, photographs, arrest records, videos or other solid proof of their misdeeds, putting it together in advance will make everyone's job easier,” Wagner says.
In the original Pullman case, the court noted that Pullman's nastiness was well documented and referenced in the notices to terminate his proprietary lease. This helped the court decide that the board wasn’t motivated by any vendetta but instead had the best interests of the building at heart.
5. Call a meeting the right way
It’s very important to follow the exact procedures for calling a meeting on this issue. Cases have been thrown out of court because boards have ignored these technicalities.
Meetings of the board and of the shareholders are governed by the co-op's by-laws so the board must first give enough notice of the meeting. This will be outlined in the bylaws.
“Shareholder meetings usually can’t be held unless the notice is sent at least 10 and no more than 40 days before the meeting,” Wagner says. Board meetings can usually be called in a shorter period of time. “Regardless, make sure that the notice is mailed or delivered in the manner required by the by-laws,” Wagner says.
Make sure you call the correct type of meeting: There are two types of meetings—regular and special. “If the Pullman clause in the proprietary lease says a vote to terminate must be held at a meeting called for that purpose, then you must do just that—make sure the meeting notice says it is a special meeting,” Wagner says.
The notice should spell out the reason for the meeting—so clearly state it is being called to consider and vote on a resolution to terminate the proprietary lease of the tenant-shareholder, authorize actions to recover the apartment, and to cancel the share certificate.
“It is good practice to list each of the infractions forming the basis of the objectionable conduct claim,” Wagner says.
6. Make sure the tenant shareholder is heard
The tenant shareholder accused of objectionable behavior must have the opportunity to be heard. You need to document these opportunities either by recording the meetings or employing someone who can take shorthand notes and independently transcribe what is said.
“The specific charges in the notice should be reviewed and discussed and the tenant shareholder and their attorney should be given a complete opportunity to speak, and comment on or rebut the charges,” Wagner says. You will also want your co-op’s attorney present at the meeting.
It’s also helpful to have any witnesses of the objectionable behavior present so that the charges may be substantiated, if necessary. “After the tenant-shareholder has had an opportunity to speak, they and their attorney don’t have the right to stick around during the board’s deliberations,” Wagner says.
The decision of the board should be detailed in a resolution and clearly state the grounds that were sustained from the testimony and other evidence.
7. Serve a termination notice
The notice sent to the tenant to terminate the lease, the termination notice, must follow the rules in the proprietary lease for giving notice.
“The notice should state that the board or the shareholders voted to terminate in accordance with the lease and it should be specific as to the dates, times, location and nature of the infractions constituting the objectionable conduct,” Wagner says. You can include a copy of the resolution adopted by the board or the shareholders with the notice.
Wagner points out the notice must be delivered in the exact manner called for in your building’s proprietary lease and should give no less than the minimum number of days stated on the proprietary lease before the termination is effective.
8. Go to court if necessary
A board's efforts to remove an objectionable resident from the building can often result in a negotiated settlement and it’s in the board’s interests to avoid lengthy court proceedings. “Even if a settlement is not reached, if you do have to go to court and you’ve followed all the procedural steps accurately, the court should defer to the vote of the board,” Wagner says.
If you do proceed to a trial, the co-op can bring two types of lawsuits, depending on the facts of the case. Your co-op attorney can guide you on this.
One option is a holdover proceeding. This is brought in the New York City Housing Court and would not include the declaratory judgment canceling the stock and lease. However, most co-op bylaws allow the board to cancel the shares following a holdover proceeding.
The other option would be to take the case to the New York State Supreme Court, seeking possession and ejectment, and a declaratory judgment canceling the shareholder’s stock and lease, and a money judgment for the tenant's use of the apartment after the proprietary lease is terminated. “In either case you could seek attorneys' fees and costs,” Wagner says.
Many of these cases are decided by the courts on motions for summary judgment, meaning you can win the case without a trial. However, the court may refuse to grant summary judgment if the shareholder is able to show the board did not follow its own rules or behaved in an underhand way.
New York City real estate attorney Steven Wagner, a partner at Adam Leitman Bailey P.C., has more than 30 years of experience representing co-ops, and condos, as well as individual owners and shareholders. You can submit a question for this column via email or if you’d like to arrange a free 15-minute telephone consultation with Steve send an email or call (212) 584-1973.
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