Ask Sam: I'm a co-op shareholder and I've been accused of 'objectionable conduct.' How do I respond?
I am a shareholder in a co-op and received a notice from the board that I have been accused of “objectionable conduct.” I’ve been given an opportunity to appear at a special meeting of the board to answer these accusations. What can I expect, and what can they do to me?
“Normally, if you’re claiming a tenant is engaging in objectionable conduct, you have to bring them into housing court and convince an impartial judge with a preponderance of evidence that this person has engaged in that conduct and it justifies eviction,” says Sam Himmelstein, a lawyer who represents residential and commercial tenants and tenant associations, and co-op shareholders. “But in these cases, there is no impartial arbiter. The same people accusing the tenant are the ones passing judgment.”
This arrangement stems from the fact that most proprietary leases for co-ops include provisions stating that a shareholder’s lease can be terminated if that shareholder engages in objectionable conduct. What that phrase means, though, can be unclear.
“Vandalizing the building, attacking people, dealing drugs out of an apartment, or possibly, Airbnb’ing the apartment, could be considered objectionable,” Himmelstein says. “The fuzzy area is, what if it’s a tenant who is just complaining about building conditions, and the board thinks they are too aggressive?”
Co-op boards are granted an unusual amount of discretion in these situations, and once you’ve been accused of objectionable conduct, the board or shareholders will vote on how to proceed.
“First, the tenant has to be given notice, and given a chance to cure,” explains Kevin McConnell, a partner with HMGDJ Law. “If they don’t cure, the next provision is that either the board of directors or shareholders must vote.”
Some leases state that the co-op corporation can terminate a lease based on a two-thirds vote from the board of directors, he adds, while others state that the co-op can terminate based on a shareholder vote.
If the board or shareholders vote to terminate your lease, unfortunately, you may have very little recourse. The case of 40 West 67th Street vs. Pullman, in which a court upheld the decision of co-op shareholders to terminate a resident’s lease, set a legal precedent that makes it very difficult for people in this position to fight a co-op eviction.
“The Court of Appeals ruled that the shareholders had made a determination under the business judgment rule, which the court cannot review unless there was some kind of impropriety,” McConnell says.
In cases of shareholder eviction, an impropriety could be discrimination on the basis of protected classes under New York City human rights law, or some form of self-dealing—for instance, a board member trying to claim an apartment for themselves.
If this doesn’t apply to you, your best bet is to appear before the board and ask them for leniency, as well as attempt to address whatever issues are the source of the objectionable conduct accusation. Otherwise, you have a lot to lose: When a board evicts a shareholder, they will generally then put the apartment up for auction and use the proceeds to pay off outstanding maintenance fees, the shareholder’s bank, and then finally, the shareholder.
“This is something we advise clients about when they’re planning to buy,” Himmelstein says. “Co-ops can be wonderful places, but if you get a difficult board and end up at odds with them, they can have a tremendous amount of power.”
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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam or call (212) 349-3000.