Habitable Habitats

Is your home habitable? And do you, as a co-op owner, have a right to habitability? The implied warranty of habitability in the New York State statute, at Section 235(b) of the New York real property law, applies to written and oral leases for residential premises. In the leading case, Suarez v. Rivercross Tenants Corp., the statutory implied warranty of habitability was applied to proprietary leases of cooperative apartments.

Marcello Suarez occupied a cooperative apartment in a building owned by Rivercross Tenants Corp. The tenant-shareholder complained to the co-op that the air conditioning and heating unit in his apartment did not heat the apartment during the 1978 winter season, and he eventually hired someone to repair the heating units. Suarez brought an action on the grounds of a breach of his lease and a breach of the duty to supply heat under the implied warranty of habitability, and moved for summary judgment. The co-op cross-moved for summary judgment and submitted an affidavit detailing management’s steps in addressing the problem.

The appellate term, first department, was faced with an issue it had not previously addressed: whether the warranty of habitability applied to the relationship between tenant-shareholders and the co-op in a cooperative apartment building. The court noted that proprietary leases should not be distinguished from other types of leases, as it “creates a landlord-tenant relationship between the stockholder and the cooperative corporation.” The appellate term, second department, held in Jimerson Housing v. Butler that the relationship between a cooperative and a stockholder “is that of landlord and tenant to the extent that [the cooperative] may maintain a summary proceeding against [the stockholder].”

The court examined the language of the New York real property law in determining whether the warranty of habitability applies to proprietary leases. The court also referenced the New York County Civil Court’s decision in Hauptman v. 222 East 80 Street Corp., in which that court discussed the legislative intent behind the warranty of habitability and held that “[t]here is nothing here which indicates an intention by the Legislature to exempt cooperatives from the ambit of the warranty.”

After examining the language of the law and prior decisions, the court ruled that “[a] proprietary lessee is entitled to the statutory protection as well as the non-investing, ordinary tenant. While there is thus created the anomalous situation that one who is essentially an owner (by virtue of his purchase of shares) is in a sense suing himself, the situation is not vastly different from any stockholder who has occasion to sue the corporation of which he is a pro rata owner by purchase of stock.”

However, the court held that Suarez’s summary judgment action was properly denied, since there existed questions of fact to be determined. The court stated, quoting Park West Mgt. v. Mitchell, that “[t]he co-op is no absolute insurer of services which do not affect habitability nor is it a guarantor of ‘every amenity customarily rendered in the landlord-tenant relationship.’”

Significantly, the court noted, “while it is not indisputable that health and safety are adversely affected by insufficient heat, not every such deprivation will constitute a breach of the warranty [of habitability].” A decision as to whether a breach occurred is based on many factors, including the extent, the effect on health, and any corrective measures taken by the co-op. The court explained: “The test is whether or not the defects deprived the tenant of those essential functions which a residence is expected to provide as viewed by the eyes of a reasonable person.”

The court found a landlord-tenant relationship is created by the proprietary lease, thereby rendering the cooperative corporation liable for breach of the warranty.

A shareholder may claim damages for a breach and/or withhold maintenance payments during the period in which it occurs. In Mastrangelo v. Five Riverside Corp., the amount of damages was calculated as the difference between the shareholder’s regular maintenance and the rental value of the premises during the breach of the warranty of habitability.

The warranty cannot be asserted by a shareholder who does not occupy the leased premises. Therefore, if the tenant-shareholder sublet the cooperative apartment, he or she cannot later assert a breach. The courts have held that a subtenant also has no cause of action in such cases because the subtenant does not have a contractual or landlord-tenant relationship with the cooperative corporation. A landlord-tenant relationship, however, exists between the tenant-shareholder and the subtenant, who would have a cause of action against the shareholder. The shareholder may then cross-claim against the cooperative.

The application of the warranty of habitability to cooperative apartments is based on the landlord-tenant relationship under the proprietary lease between the cooperative and its tenant-shareholders. No such relationship exists in condominiums between a condominium’s board of managers and the unit-owners. In fact, the relationship in a condo is the reverse. In a condominium, the unit-owner owns the undivided interest in the common elements. The board of managers is the governing body, but has no ownership interest and acts as the agent of the unit-owners. Since the condominium unit-owners do not lease their units, they are not considered tenant-shareholders and cannot assert a breach of the statutory warranty of habitability, or withhold their common charges or assessments. However, the courts have held that condominium boards must still repair common areas, even though the warranty of habitability is not applicable to them. If a unit-owner leases the owner’s unit, then a landlord-tenant relationship would exist between the owner and the subtenant, who may assert the warranty of habitability against the unit-owner.

How does the warranty of habitability apply to your co-op? And what is the responsibility of cooperative corporations to respond to such claims?

First, the court in Suarez stated: “Even the breach of an applicable housing code violation is not decisive. In some instances, it may be that the code violation is de minimus or has no impact upon habitability.”

Also, the multiple dwelling law (MDL) and the New York City housing maintenance code (HMC) require New York City cooperative corporations to maintain the premises in good repair. For example, the co-op is generally responsible for the repair of interior walls and ceilings in apartments. While the proprietary leases generally require the shareholder to paint, maintain, and repair the interior of his or her apartment, the MDL and HMC may require the cooperative corporation, as owner, to correct a condition inside the apartment. The cooperative corporation may thereafter charge the shareholder for the cost of doing that as additional rent under the terms of the proprietary lease.

In addition, the managing agent of your cooperative should promptly advise the board of directors of any claims by tenant-shareholders. The agent should evaluate the complaint and, if necessary, obtain a report from the building’s architect or engineer. In many instances, a failure or delay in responding to tenant-shareholders’ complaints may result in the filing of complaints with government agencies that otherwise might be avoided. Inspections of your building by such agencies can result in additional code violations in common areas being filed by inspectors responding to complaints. Those may be even more costly to correct.