When Conduct Becomes Objectionable

There is probably no more difficult task for a board than having to deal with the bad behavior of a shareholder or condo owner. Discomfort, embarrassment, chagrin, and dismay don't even begin to describe the feelings of board members who have to confront such a problem. After all, board service is voluntary, and people undertake it to ensure that they can live in a safe environment and to look out for their own financial interests and those of the their neighbors. No board member is volunteering to be a cop or a social worker.

Yet problems among neighbors are a fact of life and dealing with them is not easy. It is time-consuming and, in some instances, can result in protracted legal battles. If you have no behavior problems in your building, consider yourself lucky. But if you or any of your colleagues on the board has ever received a late night phone call from a neighbor - who up until that point had seemed to be a rational, well-balanced person - screaming into the phone that his "upstairs neighbor was a lying low life who was making a concerted effort to ruin my life and something has to be done immediately, immediately, DO YOU HEAR ME? IMMEDIATELY!" then listen up. There are steps you can take.

WHAT'S LEGAL

A pending lawsuit, 40 West 67th Street Corp. v. Pullman ("Hotline: Voting Out Your Neighbor," Habitat, July/August 2002), is an example of a situation that has gone all the way to the highest court in the state. The case has raised extremely important legal issues regarding how a board can run its affairs. A positive outcome in this case may, in fact, make it much easier for boards to deal with shareholders whose conduct is egregious.

Briefly, Pullman involves a shareholder in an Upper West Side co-op who made numerous complaints about other shareholders, brought lawsuits against them and the board, made unauthorized renovations to his apartment, and so alienated himself from the other tenants by his conduct toward them that they voted unanimously to kick him out.

The vote to evict was done under the provisions in the co-op's bylaws. The board subsequently voted to evict him as well. When Pullman refused to leave, the co-op began an action in the Supreme Court of New York County. The judge refused to allow an eviction without a court proceeding to determine whether his conduct was objectionable. On appeal to the appellate division, three of five judges sided with the co-op, citing the business judgment rule, which prohibits judges from interfering with legitimate, lawful actions taken in good faith by corporate directors.

The two dissenting judges found that the corporation's rights conflicted with those of a tenant in danger of losing a home. They expressed the notion that the business judgment rule should "yield" to a statute that protects tenants.

Pullman is now being considered by the New York State Court of Appeals, the highest court in the state. A decision from that body is due in early to mid-spring. If the court rules in favor of the co-op, it will be the first time that the business judgment rule will have been used for an eviction and will give a tremendous amount of power to boards. If the court rules in favor of Pullman, then boards will have to be aware that even though they have a procedure to evict shareholders, they will still have to convince a court that the person's conduct was objectionable and warranted eviction.

"This is a very important case for co-ops," says attorney Ed Fajardo of the Manhattan firm of Delitto & Fajardo. "Tenants rights are taken very seriously and that's why the original judge ruled in favor of the shareholder. The surprise was the willingness of the three judges in the appellate division who said, in effect, that if the co-op has a procedure in place whereby a super- majority of the shareholders vote a person out, then the business judgment rule should apply. There may be a majority on the court of appeals who agree with that also."

The business judgment rule has been used to support rulings favorable to co-ops in other instances. Extending it to eviction would give boards a lot of power to deal with objectionable conduct.

WAITING FOR THE COURT

Most instances of objectionable conduct don't go as far as Pullman and board members will continue to find themselves trying to resolve what are often ugly confrontations involving shareholders and other members of the building community. Before getting into how to deal with such situations, the question of what is objectionable conduct must be asked.

The answer is not easy. In New York, the definition is based on common law and it is up to a court to decide based on facts and testimony if a person's conduct goes to the level at which an eviction is warranted. There are three behaviors that if proven are clear-cut grounds for eviction: (1) selling drugs, (2) prostitution, and (3) chronic incidents of noisemaking and disturbance of neighbors.

"There are two things to remember: one is that objectionable behavior evolves on a case-by-case basis; two is that you are making a case in a court of law," says Fajardo. "Therefore, you need to have a fully documented case with police reports and the testimony of the other shareholders and the staff, and you need logs of incidents to support their testimony. I can't stress it enough, what you need is documentation, documentation, documentation."

Even with documentation you are still trying to convince a court that what someone has done merits eviction. There is no guarantee that a co-op or condo can prevail in situations where the conduct is other than the three behaviors mentioned above.

DEALING WITH IT

But what about lesser situations, ones that come up often and need to be dealt with by the board? In one Manhattan co-op, a shareholder insisted on locking his bicycle near the fire stairs. It was a fire code violation. Even though the board repeatedly directed the shareholder to put the bike in the bike room, as all shareholders were required to do, he refused, subjecting the co-op to possible fines and other enforcement from the fire department.

"This is not objectionable conduct," says Fajardo. "If, in fact, he was breaking the law then he should be dealt with under the lease provision that states that tenants will not knowingly break laws."

Compounding this situation was another shareholder in the building who criticized the board frequently for every one of its actions and inactions. This second shareholder decided that the bike situation needed to be handled so he called the fire department and told them to send an inspector to the building. Observes Fajardo: "This is not objectionable conduct either. There was a law being broken and the second shareholder was reporting it."

The point is that objectionable conduct should not be considered a catchall for everything a shareholder can do to make the other shareholders' and the board's lives more difficult. Objectionable conduct should be clearly defined in the lease and the bylaws.

One other characteristic of objectionable conduct is that it can't be cured. Someone who is playing his stereo loudly every night and disturbing the neighbors can cure it by simply turning down the volume. In the case of Pullman, the other shareholders are, in effect, saying that his prior actions damaged them beyond the point of mere annoyance and that cannot be cured by a change in his behavior.

HAVE A STRATEGY

Are there strategies and management styles to deal with the less-than-stellar behavior of your neighbors? Some people favor the direct approach. "We run into it every day and we just deal with it," says the president of a 250-unit Upper West Side co-op where the sponsor still owns about a third of the units.

First is the woman who insists on bringing stray dogs into her apartment. It was too much when she brought in a stray pit bull she had found on the street. "One of the other shareholders saw her with the dog in the lobby and let us know. We told her to get rid of the dog. We had the doorman and the super tell her that the dog had to go. Finally we got a lawyer to write a letter and she got rid of the dog."

Another problem for the same board illustrates how buildings can tough it out, which is sometimes all you can do. This involves a woman who rents one of the sponsor apartments under a rent-stabilized lease.

"She hasn't had a rent increase in ten years because she keeps citing the building for violations," says the beleaguered president. "If the boiler goes down, she calls the city immediately to register a complaint, even though we have it back up and running the same day. In one week, she had the city here four times. But there is nothing we can do about her because she has the stabilized lease. We redecorated our lobby and she called [the] Landmarks Preservation [Commission] and complained. We are on a landmarked block but we are not a landmarked building. She e-mails me every day about this and I just e-mail her back that she is misinformed. She e-mails me again and I email her back that she is still misinformed. We have also instructed the staff not to talk to her about anything. There is not much else we can do. The sponsor would love to get rid of her too, but he's in the same situation. Meanwhile we have a co-op to run and we're not going to let her stop us."

EASY TARGETS

Managing agents often take the brunt of shareholder misbehavior. "I have had situations in which I have to deal with people who are mean, sinister, and abusive," says Michaele McCarthy, senior account executive at Charles H. Greenthal Management, who has built her reputation on turning around troubled buildings and is not intimidated by anyone. "Some people will lie and cheat and do just about anything to get what they want. It's our job to deal these people and we always do it in a professional way, but that still doesn't stop you from having your stomach clench when you hear their voice on the phone."

Steve Kessler, director of operations for John J. Grogan & Associates, believes that in cases in which one neighbor is disturbing another the best initial approach is to keep the board and other authority figures out.

"Inserting an authority figure too early can cause one or both parties to become resentful and can actually make things worse," says Kessler. In one of his buildings, an older woman, who is hard-of-hearing and living alone, would fall asleep watching TV. The volume was way up so that she could hear it, but she also would have a few drinks in the evening. Her downstairs neighbor who worked late would come home and hear the TV blasting away. He would call the doorman, but they wouldn't be able to wake her up to answer the door.

"We encouraged the downstairs neighbor to talk with her," says Kessler. "He showed her the timing feature on her TV which would turn it off at a pre-set time. She was grateful to him for trying to resolve the problem amicably. They have become friendly and now they are working together to investigate whether wireless headphones will work for her."

Kessler also notes that the kinder, gentler neighbor-to-neighbor method doesn't always work. "We had another situation in another building where they did not have a carpeting requirement." Forget the fact that the floors were poorly constructed (the fault of the sponsor) and that one shareholder, a very conscientious woman, spent her life tiptoeing around her apartment. It all went for naught, because her downstairs neighbor heard every step and reacted vehemently.

"His response was to take his stereo speakers and lay them on the floor facing up, turn up the volume to full blast and leave," says Kessler. "She tried to discuss this with him, but he refused to talk. He was having personal problems and she ended up as his target. I think that happens a lot and that is often what is behind shareholder behavior problems," notes Kessler. The board intervened and the two neighbors went through a period of calm. Then he started up again with the speakers.

"I told them both to keep a journal of the incidents for a month. She did, he didn't. After she turned in her journal we had a lawyer send him a letter. So far, he has behaved, but I won't be surprised if he goes back to his old ways again," says Kessler.

Indeed, that may be the most important lesson that board members can take away from these situations. The problems between shareholders are often never solved. "We had one where one neighbor played her piano late at night in her living room which had a common wall with the bedroom of her next-door neighbor," says a former board president of a 100-unit Manhattan co-op. He had to get up early every morning to get to work. Any disruption in his sleep set him off and an otherwise normal person would belabor board members with lengthy diatribes full of invective toward his neighbor. The board investigated and got her to agree not to play after 10 P.M. That lasted a couple of years. Then it started up again and the board had her install soundproofing. That lasted another few years.

Even though he had gotten what he had asked for, after a couple of years, the shareholder re-opened the war, this time complaining about any piano-playing at all. He claimed the sound that came through was an intrusion and he was after total removal of the piano.

"There is only so much you can do," says the former president. "As with everything else in a co-op, you have to rely on people being reasonable, when they are not you just have to keep doing what you can to keep peace."

John Janangelo, president of Bellmarc Property Management, puts it another way: "You are trying to curb personal behavior and that is not easy to do." His company recently had to deal with a shareholder who was harassing his neighbor over nothing in particular. "He was simply doing it because he could," says Janangelo. "The building had to take action quickly. We alerted the staff and instructed them to report any incidents. There is a chain of command in a building and you need to make use of it. The doormen should let the super know whenever there is an incident and the super should know to report it to the managing agent and begin to document it." Janangelo believes in the board taking action early on and is skeptical of the neighbor-approaching-neighbor strategy. "If they could work things out, they wouldn't be having the problem."

But intervention efforts aren't always fruitless and sometimes the answer is quite simple. "In one of our rental buildings, we had an older woman who had no family and no friends. She was pretty much a shut-in," says Kessler, "except that at night she would often roam the halls naked and accost the other tenants in the building. She also decided that her upstairs neighbor was a drug dealer and every form of a low-life. She sent me letters practically every day accusing him of terrible things and she would get on the elevator with him and harangue him unceasingly."

The solution was to call in the visiting nurses service. "They began to monitor her health and her diet. She needed medication, which they provided along with a weekly vitamin shot. Since then we have had no problems at all."

Objectionable conduct is the bane of any board member's existence. You can and must deal with it, but don't expect to achieve any thing more than a mixed record. "Ultimately," says Kessler, "the only real teeth a board has is the proprietary lease and the threat of rescinding it from an objectionable shareholder."