You Can’t Come In!

May a co-op be liable to a shareholder for property damage when the shareholder refused to provide access to his apartment? That was the question in Leschins v. 3777 Independence Corp.

Plaintiff Preston Leschins sued his cooperative and its managing agent for breach of the warranty of habitability, breach of the covenant of quiet enjoyment, breach of fiduciary duty, and property damage based on a breach of the proprietary lease. The only issue tried was Leschins’s property damage claim.

Leschins had been a shareholder since July 1984. Beginning around 1986, a ceiling crack and other damage occurred to the walls of Leschins’s apartment. Leschins never asked the superintendent to make any repairs.

In 1996, Leschins wrote to the board asking permission to sublet. At that time, he noted that he suspected there were roof leaks into his apartment. He next wrote to the board in 1999, asked permission to sublet and mentioned the leaks. Leschins did not request repairs. Instead, he stated, “I have neither complained nor made any issue of these problems in all of the years that I have owned my apartment (nor would I ever do so, having served on the Board of Directors myself).”

In 2002, defendant Goodman Management began managing the building. The board asked Goodman to draft a letter informing Leschins that he could no longer sublet. It did so and the apartment was vacated.

Sometime after the letter was received by Leschins, he met with the super and Arthur Meltser, a representative of the managing agent, in the apartment. Leschins explained that he thought the roof was leaking and showed them the damage on a wall. Meltser and the super offered to fix the wall at the co-op’s expense. Leschins said he would “think about it.” Other than a one-line mention in a 2003 letter that the apartment needed to be repainted because of leaks, there was no request in Leschins’s letters to the board that the co-op inspect for leaks or repair the damage.

Leschins wrote a July 31, 2003, letter which stated that there was toxic mold in the apartment. The co-op’s attorney responded within one week and stated that, if there was mold “that needs to be remedied, please send specific details regarding that condition to the managing agent, together with a set of keys to the Unit (which you are required to have delivered to the managing agent under the terms of your proprietary lease) for access and the condition will be reviewed and dealt with accordingly.”

Leschins did not respond and the co-op was not given keys or access. Leschins next complained about toxic mold in a March 4, 2006, letter that referenced an environmental report from Olmstead Environmental Services. There was no mention of leaks nor a specific request for repairs. The co-op requested but was refused access to investigate the mold complaint.

Leschins only gave access after being served with a notice of inspection in the litigation. Upon gaining access, the co-op arranged for its engineers, Lawless & Mangione, to inspect the apartment and the roof to determine the cause of any damage.

Lawless & Mangione’s employee, Bif Antil, did the inspection and issued a report dated January 9, 2007, which noted that no recent leak had been reported, no moisture had been detected, a small amount of damage was found on the kitchen wall, the roofing and flashing were in good condition and the bedroom closet had some damage, but was dry. According to Antil, it was not possible to determine if water was penetrating the roof and he recommended performing a water test. Antil stated that the roof and drains were in good repair. He said that testing, which included the need to open the wall, was necessary to determine the source of damage.

The co-op retained its own environmental specialist to inspect for mold. The inspection was held on October 24, 2007 and the report reflected that an insignificant level of mold had been detected on the kitchen wall. Tests from other areas in the apartment showed no mold. The environmental company recommended that the mold in the kitchen be cleaned with an anti-microbial agent.

Counsel for the co-op wrote Leschins in June 2007 stating that it was prepared to make repairs in accordance with the recommendations of the co-op’s professional advisers. Leschins did not allow access and did not allow the repairs to be made. In January 2009, Leschins turned down another offer made by the co‑op to investigate the cause of damage and make repairs.

It was demonstrated at trial that the walls could be repaired by chopping out the bad plaster (they did not need to be completely torn down and rebuilt), that the existing fixtures could be cleaned, and that the floors were not damaged. Remediation was unnecessary if there was no mold in the apartment. The court also found that most mold was not toxic, but that certain allergic reactions could be triggered by mold. In order to be subject to possible adverse effects, the person must have lived in the apartment.

The court explained that, as a shareholder, Leschins was bound by the terms of the proprietary lease. Specifically, it stated that the co-op “and its agents and their authorized workmen shall be permitted to visit, examine or enter the apartment... at any reasonable hour of the day upon notice ... to make or facilitate repairs in any part of the building... and to remove such portions of the walls, floors and ceilings of the apartment... as may be required for any such purpose, but the Lessor shall thereafter restore the apartment... to its proper and usual condition at the Lessor’s expense if such repairs are the obligation of the Lessor, or at the Lessee’s expense if such repairs are the obligation of the Lessee.”

The court explained that a tenant’s failure to provide a key or permit access to perform repairs was a substantial violation of the tenancy. In light of the language in the proprietary lease, if a tenant complained and then refused to permit the landlord to make repairs, he would not be entitled to damages and his claim would be dismissed. The court discussed case law which held that landlords will not be liable for breach of the warranty of habitability where a tenant made it impossible for the landlord to repair conditions in an apartment.

The evidence in this case established that Leschins breached substantial provisions of the lease by refusing to provide a key and refusing to allow access for purposes of inspecting, testing, and making repairs. Leschins admitted he never asked the super to make repairs, that he turned down an offer in 2002 to perform work, that he did not respond to requests for his keys or for access in 2003 and 2006, and that he refused to permit testing and repairs offered by the co-op in 2007 and 2009.

The court also found that any damage that existed in the apartment was a direct result of Leschins’s intentional refusal to grant access. The court discussed well-established rules of equity which state that one cannot complain about or receive damages for the very issue he has allowed to exist and grow worse. The court found that the co-op was fully responsible for damage caused by the leaks, if any, regardless of whether it arose from a pipe or the roof.

The court looked to the proprietary lease and the business judgment rule to fashion a proper remedy. The court discussed the landmark case of Levandusky v. One Fifth Avenue Apt. Corp. The court explained that, in Levandusky, the plaintiff performed alterations to his apartment, including moving a steam riser. Although the co-op’s engineer was of the opinion that moving a riser was technically feasible, he advised against it. The board refused to permit Ronald Levandusky to move the riser and Levandusky, who had already performed the work, challenged the board’s decision. New York’s highest court upheld the co-op’s determination and explained that co-ops are a “quasi-government” where proprietary lessees “consent to be governed, in certain respects, by decisions of the board.” The court explained that the board’s authority could not be disturbed so long as it was for the general interest of the corporation and done in good faith. A shareholder could not challenge or dictate the manner in which remedial work was undertaken, for this was the province of the board. This was particularly so where the board retained and relied on experts.

The court explained that the Levandusky decision had been directly applied to instances where a shareholder sought to dictate the manner in which repairs were to be made. The court explained that an appellate court held in another case that “defendants’ decisions concerning the manner and extent of repairs and renovations to the building were within the scope of their authority under the bylaws and proprietary lease of the cooperative and were therefore shielded from judicial review by the Business Judgment Rule.”

The court explained that the evidence demonstrated that Lawless & Mangione were retained to inspect the apartment and the roof, that they did so, that they concluded that the cause of the damage was unknown, that they recommended that tests be performed and that, thereafter, repairs be made. As to the mold, the co-op’s expert determined that an anti-microbial cleaner could be used to clean the mold. The co-op was permitted to rely on these professionals and plaintiff could not dictate the work to be performed. The complaint concerning Goodman, the manager, was also dismissed.

Leschins did not establish that the co-op had breached the lease and the court ruled against him.

Comment: It was undisputed that Goodman was the co-op’s managing agent. A managing agent working on behalf of a co-op could not be held liable unless there was clear and explicit evidence that it intended to make itself personally bound. There was no evidence that Goodman ever intended to be personally and separately bound for any action it took. The court noted that an agent would not be exempt from liability if it acted outside the scope of its authority; however, Leschins presented no factual support for this theory.

This case reminds us that the law will not help a shareholder who fails to comply with his or her obligations under the proprietary lease. Plaintiff attempted to obtain money damages from the co-op because there was water damage in his apartment. However, it was clear that the co-op was willing to make the repairs, but that plaintiff would not grant it access. The court reviewed the parties’ rights and responsibilities under the proprietary lease and the Business Judgment Rule and determined that the co-op’s obligation to repair was contingent on plaintiff’s obligation to provide access. Importantly, the court held that the shareholder could not dictate the method or manner of repair. The co-op had the right to determine how the repairs were to be made, particularly since it retained experts and was relying on their advice.

The case also reminds us that managing agents will not be liable for acts taken in their capacity as managing agent. A managing agent will only be liable if its actions evidence an intent to be separately responsible or if it acts outside the scope of its authority.

Attorneys:
For Plaintiff: Pro Se, although an attorney
For Defendants: Cantor, Epstein & Mazzola
Disclosure: One of the co‑authors previously represented the defendants in this matter.