All Quiet on the Co-op Front

I just got elected to my co-op board and learned that the co-op is involved in a lawsuit where a shareholder has not paid maintenance for many months because he claims that his apartment is too noisy due to its location near a building-wide ventilation unit. I know that the co-op is required to maintain building-wide systems, but can he refuse to pay if this unit is necessary for the building to operate properly? Will we be able to get reimbursement of our attorney’s fees in this case?

As you probably know, the principal document establishing your co-op’s obligations to its shareholders is the proprietary lease, under which your co-op is the landlord (or lessor) and each of the co-op’s shareholders is a tenant (or lessee). If your co-op’s lease form is typical, your co-op is responsible to “keep in good repair all of the building” (with certain exceptions mostly regarding the interiors of apartments allocated to shareholders); and to “maintain and manage the building as a first-class apartment building.” In accomplishing that, your co-op’s board is protected by the Business Judgment Rule, which insulates its decisions from court review provided that they are consistent with the co-op’s contractual arrangements and do not involve bad faith, self-dealing, or discriminatory or otherwise unlawful conduct. So, if your co-op installed and maintains the ventilation unit consistent with these responsibilities and standards, then one might conclude that your co-op is acting properly and will readily prevail in litigating against the shareholder.

The shareholder has ample weapons, however, to use in defending his position. The typical proprietary lease provides that shareholders shall “quietly have, hold, and enjoy the apartment without any trouble…from” the co-op. This provision constitutes a version of what is known as the “covenant of quiet enjoyment.” This covenant is deemed implied in all New York State residential leases (including co-op proprietary leases) even if not formally stated. That creates the possibility of the courts construing the covenant even more broadly than as stated in your co-op’s form of proprietary lease.

To successfully assert the covenant of quiet enjoyment, a tenant must establish that the landlord’s conduct “substantially and materially deprived the tenant of the beneficial use and enjoyment of the premises…” (Jackson vs. Westminister House Owners Inc.) In its most basic form, the tenant must establish that the landlord actually evicted the tenant.

Co-op shareholders commonly will assert this covenant if they claim that their co-op deprived them of the right to use all or a portion of the space exclusively allocated to their apartments. In recent court cases, for example, shareholders have sued claiming that their co-op deprived them of use of the “terrace area, due to exterior renovations” (Jackson vs. Westminister House Owners Inc.), and of a “rooftop terrace” for certain gardening purposes (Murphy vs. Vivian Realty Corp.). In these cases, of course, the shareholders were more interested in securing a declaration of their rights to the “quiet enjoyment” of this space rather than securing any abatement of maintenance for the decline in the rental value of their apartments as a result of the deprivations they allegedly suffered.

The covenant of quiet enjoyment extends beyond actual “eviction” of a tenant from all or a portion of an apartment. A tenant also may suffer “constructive eviction.” That applies when the landlord did not eliminate or limit the tenant’s use of the apartment, but rather when the tenant was compelled to abandon the apartment usually because of some condition affecting the apartment. And if the abandonment is tenant-initiated and from only part of the apartment, it is deemed a “partial constructive eviction.”

For example, a co-op shareholder recently pursued litigation asserting her co-op’s violation of, among other things, the covenant of quiet enjoyment in connection with “noise, low water pressure and other unpleasant living conditions” (Jacobs vs. 200 East 36th Owners Corp.). The good news for co-ops is that the court dismissed this claim because “there was neither an actual or constructive eviction.”

Consequently, the covenant of quiet enjoyment might apply to the noise from the ventilation unit if your co-op’s shareholder could establish that it prevented him from using all or a portion of the apartment. And, in that event, the shareholder would be entitled to compensation to reflect this. Unfortunately for your co-op, however, that is just the beginning of the story.

In the 1970s, the New York State legislature perceived that the covenant of quiet enjoyment did not provide tenants with adequate recourse in the event of the substandard conditions in their apartments. It was considered unfair that tenants had to abandon their apartments to justify not paying rent.

In 1975, the legislature enacted Real Property Law (RPL) Section 235-b, which codified what is commonly known as the “implied warranty of habitability.” That meant that there would now be a warranty that allowed the tenant to assert claims against a landlord because of substandard conditions. Tenants could stay put and withhold rent when their landlords sued for non-payment of rent.

The legislature also established broad statutory guidelines about the nature of the conditions that would constitute a breach of this statute (“conditions which would be dangerous, hazardous or detrimental to their life, health or safety”), In the ensuing years, the courts considered thousands of cases in which tenants asserted the implied warranty of habitability to justify not paying rent. And co-op shareholders felt free to withhold maintenance.

(Smart shareholders with warranty of habitability complaints realized that it is always far better for them to continue paying maintenance and to sue their co-ops for affirmative relief. Then, if they lose, they are not responsible for the co-op’s attorneys’ fees and disbursements.)

Nonetheless, a seminal case (Park West Management Corp. vs. Mitchell)did state that “a landlord is not required to ensure that the premises are in perfect or even aesthetically pleasing condition.”

With all of that by way of background, let’s return to the issue at hand. There is no question that noise (and its close relative vibration), at some level of intensity and frequency, can affect the habitability of an apartment. But the courts will put tenants to the test of proving that health, wealth, or safety is at stake, and that the landlord acted irresponsibly in responding to the noise problem.

For example, in 2007, an appellate court (in Armstrong vs. Archives LLC) reversed a finding of summary judgment in favor of an apparently non-co-op tenant asserting breach of the warranty of habitability based on “noise emanating from a neighboring apartment.” The appellate court held that a trial was required to determine whether the tenant was entitled to relief from the landlord in spite of the tenant’s undisputed showing of “many complaints,” and the co-op’s sending of a “notice of cure reciting the dates and substance of noise complaints against the offending tenant.”

The courts are not very fond of the idea of subjecting landlords to noise claims under the warranty of habitability. On the other hand, landlords cannot expect to receive a free pass regarding noise. An appellate court (in Nostrand Gardens Co-op vs. Howard, 1995) affirmed a trial court’s finding that a shareholder was entitled to a 50 percent abatement of rent because of “excessive noise emanating from an apartment that neighbored the [shareholder’s] apartment through the late night and early morning hours…” The court was impressed with the shareholder’s “evidence regarding the nature, scope and duration of the breach and the effectiveness [presumably, ineffectiveness] of the measures that were taken by the landlord to abate the nuisance.”

In situations in which the co-op is causing the noise, as in your situation, the cases cut both ways. On the one hand, the ventilation unit must be located somewhere and possibly disturb at least some shareholders. As long as the co-op acts reasonably to reduce the impact, the shareholder should not have viable claims. Indeed, in one sense, a co-op shareholder is a part-owner, so asserting warranty of habitability claims is effectively suing himself or herself.

On the other hand, noise complaints are very similar to other assertions that the co-op is not properly maintaining the habitability of the building or the apartment at issue. And the installation, operations, and maintenance of the ventilation unit are within the co-op’s control. Therefore, if the noise is proven excessive, the shareholder arguably is entitled to some relief. Consistent with this, courts have ruled against co-ops with regard to noise from building systems. Also quite troubling is that the court has indicated that the “remedy for such a breach [of the warranty of habitability] is not restricted to a rent abatement” and remanded the case to the lower court for a trial on this issue.

On that final note, your co-op should be quite careful with regard to the litigation that you described. If the ventilation unit exceeds New York City legal standards for noise or vibration, or is otherwise demonstrably intolerable whether in terms of intensity or duration, then the shareholder could very well prevail in the litigation in an amount that exceeds the withheld maintenance and recoup his attorneys’ fees and disbursements.

While the courts will give deference to your co-op’s business judgment about the location, specifications, and condition of the unit, that surely is no blank check, especially if less offensive alternatives are available for reasonable costs. Even though the complaining shareholder is a part-owner who should have been aware of the unit at the time of purchase, that will probably not be enough to tip the case in your co-op’s favor.