Alterations Resume

In Babeli v. East 13th Street Tenant Corp. a co-op’s attempt to stop an authorized apartment alteration was thwarted when the co-op failed to demonstrate that the shareholder was not proceeding in a proper manner consistent with the co-op board’s prior authorization.

In this case, plaintiff Carol Babeli moved for a preliminary injunction against defendants, the owners, board, and managing agent of the cooperative housing property at 7-13 East 13th Street, New York County, wherein she resided. Babeli was a shareholder in the co-op. The underlying action arose out of an October 22, 2002, contract between Babeli and the co-op, in which the board granted Babeli permission to perform alterations to her apartment so as to connect it by a new staircase with space Babeli held on the roof of the premises under her proprietary lease.

Babeli alleged that, in reliance upon the alteration agreement, she had hired contractors and begun renovation work. She further alleged that, upon initiating the work, the co-op attempted to have her purchase additional shares for the space on the roof. According to Babeli, the co-op had prevented her from proceeding with the renovation by imposing additional approvals not contemplated in the alteration agreement and that finally on December 24, 2002, the co-op sent notice to Babeli to cease and desist all construction work on the roof until further notice.

Babeli sought a preliminary injunction allowing her to continue and complete the alterations. She claimed that she and her husband had been forced to live in the midst of the renovation with a large opening in one portion of her apartment. The co-op opposed Babeli’s application.

The court noted that the case of Residential Board of Managers of the Columbia Condominium v. Alden was similar on its facts and therefore instructive. In that case, defendants husband and wife were owners of adjoining apartments in plaintiff condominium, which approved defendants’ plan to combine their apartments by incorporating the hallway between them. The renovations were substantially completed when a disagreement arose as to whether a building permit was required for the alterations.

The Alden court denied the condominium’s motion for a preliminary injunction to compel the defendants to restore the hallway to its original condition. It pointed out that the function of the provisional remedy of preliminary injunction was to maintain the status quo until there can be a full hearing on the merits, but not to obviate the necessity for the plaintiff to prosecute its action to completion. It further reasoned that the demonstration that such extraordinary relief was essential to maintain the status quo. Finally, the court found that even if the condominium were successful in showing that a building permit was required, the plaintiff had failed to demonstrate that injunction as opposed to monetary relief was warranted.

The court noted that the party seeking a preliminary injunction must establish (1) a likelihood of success on the merits of the underlying action; (2) the prospect of irreparable injury if the provisional relief is withheld; and (3) a balance of the equities tipping in its favor.

The court here found that Babeli had demonstrated a likelihood of success on the merits. The correspondence relating to Babeli’s alleged failure to coordinate with the co-op’s roof installer either predated the alteration agreement, in which the co-op granted Babeli permission to proceed with the alterations plan, or post-dated the co-op’s letter to Babeli concerning her purchase of additional shares.

The terms of the alteration agreement were further evidence that the co-op’s current roof concerns were merely a pretext for their refusal to abide by the agreement. Under that document, Babeli assumed all risks of damage to the building resulting from or attributable to the performance of work thereunder. The agreement stated specifically that such work covered roofs and maintenance of mechanical systems. It required Babeli to procure from her contractors a comprehensive property damage insurance policy in the amount of $1 million naming plaintiff and defendants as insureds. Thus, as there was no dispute that Babeli had met her obligations under the agreement, it was likely that Babeli would ultimately prevail on her action for breach of the agreement.

Moreover, the court was persuaded that Babeli was suffering irreparable harm by being forced to live amidst construction in progress that had been halted. This finding was consistent with Alden, where the court found that continuation of the work would not irreparably harm the condominium, even though no governmental permit had been issued for the work, but that the apartment owners would be deprived of the use of their premises if required to demolish the new construction.

Here, Babeli was currently being deprived of use of her premises as permitted under the alteration agreement, which was one of the effects the Alden apartment owners would have suffered had the court granted its condominium board’s request for provisional relief. The court found that in this situation, which was nearly the procedural reverse of the Alden case, extraordinary relief was essential in order to maintain the status quo, i.e. the circumstances at the time defendants granted Babeli permission to proceed with the alterations. Nor in the court’s view did a preliminary injunction give Babeli the ultimate relief sought. The question of Babeli’s purchase of additional shares attributable to the altered space remained to be resolved.

Finally, the equities tipped in favor of Babeli, as this was not the case in Alden, where the owners of a condominium unit had either not sought nor had been expressly denied approval for an alteration or renovation, but proceeded in defiance of the rules. Here, there was no dispute that Babeli complied with all the rules, obtaining all the necessary governmental permits and bank approval, and that based on her compliance, defendants granted her permission to execute the work. It would have been unjust to further delay Babeli in completing the renovation when defendants expressly granted her approval for the alteration. Therefore, Babeli’s motion for a preliminary injunction was granted and the work could resume.

Comment: 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.