Troublesome Tenants: Nuclear Option

In 1998, financial professional David Pullman – who had already made headlines working with David Bowie to package the singer’s copyrights and music catalog into what he trademarked as “Bowie Bonds” – bought Apartment 7B at 40 West 67th Street, near Central Park.

Then he went wild.

He ranted, raved, and circulated defamatory fliers about various perceived transgressions at the Rosario Candela prewar classic. He pushed the co-op board – and the shareholders – to their limit, and then some. Finally, in a landmark turn, 100 percent of the shareholders voting in a special election, representing 75 percent of the shares, agreed to kick him out.

The subsequent lawsuit resulted in the precedent-setting court decision in 40 W. 67th Street v. Pullman, which solidified New York State co-op boards’ nuclear option: eviction for “objectionable” behavior. Combined with a previous, equally famous case – Levandusky v. One Fifth Avenue Apt. Corp., which established that courts can’t second-guess co-op boards’ business judgment in most situations – Pullman gave boards control over objectionable behavior that didn’t rise to the level of criminality. It also introduced a new word to the language. Attorneys now routinely warn misbehaving shareholders that they might be Pullmanized.

Granted, that is an extreme action. “The morale of a small building where Pullman is used, it’s terrible,” says attorney Adam Leitman Bailey, principal at his eponymous law firm. “It’s a bad thing to live in a building where you’re afraid of being evicted.” And that fear extends to board members, who are shareholders themselves. “Today it may be you,” he says metaphorically. “Tomorrow it may be me.”

One reason a board might want to avoid a Pullman action is that even after a successful vote to terminate a lease, a co-op still has to file a lawsuit to evict the offending tenant-shareholder.

One courtroom alternative, says Steven Wagner, a partner at Porzio, Bromberg & Newman, is “a motion for declaratory judgment and injunction. That’s a supreme court action, as opposed to a housing court proceeding, in which a board alleges you have a rule prohibiting whatever the conduct is, that this shareholder or family occupiers are ignoring it, and that in essence the shareholders are challenging the board’s effort to enforce. You’re asking the court to declare the validity of the rule, the board’s right to enforce it, and to enjoin the tenant-shareholder from further similar conduct.”

So when should a board pull a Pullman? Cases involving hoarders and others with mental-health issues that put the rest of the building at risk are fairly common. But many are less clear-cut. Are there practical alternatives? Or do bad shareholders simply never change? And when push comes to Pullman, what exactly does a board need to do?

Documenting Problems

They say, “With great power comes great responsibility.” So what’s the most responsible way for a co-op board to act when the situation isn’t affecting the health or safety of residents? (Pullman is rarely used in condos.)

The first step is to establish that you have continuing, repeated issues with a given shareholder – and Pullman has been invoked in cases of frequent loud music, uncontrollable dogs, obscene behavior, and even a refusal to replace old, loud, excessively vibrating air conditioners – because judges will look askance at a board going nuclear over one-off problems or if negotiation hasn’t been tried. “There has to be documented, long-standing problems that just won’t go away,” says Bruce Levinson, a veteran Manhattan attorney in private practice, “leaving other occupants frustrated and legitimately feeling someone should be cast out.”

“Courts don’t like forfeitures,” says John LaGumina of The LaGumina Law Firm. “If you’re taking away someone’s significant asset, courts are going to look a little more closely than with other cases. But if the case is appropriate – and it has to be pretty extreme to be appropriate – you may have no choice.”

That’s what’s happening at an 80-unit, five-building co-op complex on the East Side of Manhattan, says a board member who requested anonymity because the issue is active. “It’s a case of multiple instances of bed bugs and either smoke or fire conditions and also Collyer’s,” he says, referring to what the International OCD Foundation calls Collyer Brothers Syndrome and the American Psychiatric Association calls hoarding disorder.

A married couple there is “not providing access for purposes of eliminating the bedbugs, and [has] taken bedbug-infested clothing to the laundry room, unprotected, and left [it] there while waiting for washers and dryers,” says the board member. “We have tried to address this with them. Within days of the apartment being cleaned out” under board aegis, “the hoarding started again. They didn’t want any social service agencies coming in. A dozen to two dozen tenant-shareholders have written letters either encouraging or demanding the board take action to have them removed for health and safety reasons. Nobody wants to hurt these people or have them sell their apartment at a fire sale or auction, but they have to take responsibility.”

Assuming your case is less extreme than that, “You first want to try to enforce the house rules in a civil manner,” says LaGumina. “So informal notice is a good step. If that doesn’t result in any meaningful change, then do a formal written one.”

Upping the Ante

For the next step, “Somebody who knows the person should try to talk to them” on behalf of the board and the other residents, says Wagner. “If they’ve lawyered up, then it’s [the board’s] lawyer to [the shareholder’s] lawyer.”

If these steps fail to change the offending behavior, “A lot of boards do a ‘probationary stipulation,’ where typical provisions include giving the tenant-shareholder a second chance,” Bailey says. “This says you agree to behave for two years without problems, and if you continue the disruptive conduct, you’ll be evicted.”

All the while, as you’re taking these less drastic alternatives to Pullman, you still must prepare for the worst since playing nice doesn’t always work. “You really have to build up a case,” says Levinson. And it helps to not only follow the proprietary lease to the letter but also exceed it. “You always need to send a notice,” he adds. “Not necessarily a notice to cure, because that might be an act of futility with someone who’s perpetually ignoring directives they receive, but you do have to give notice. You’re going to start the case because that’s the right thing to do. And a lot of judges will ask, ‘What did you tell them?’ And you can say, ‘We’ve given notices, we’ve given opportunities, we’ve done this and that.’”

According to LaGumina, boards should gather as much detail as possible to shore up their case. “Part of the [standard] proprietary-lease provisions is whether the conduct was repeated after notice,” he says. “And the notice has to be specific. Otherwise the court may find it too ambiguous to enforce.” What kinds of details? “It depends on the issue, but dates, times, witnesses – the more the better.”

Pullmanizing in Practice

Now let’s say that despite your legitimate best efforts, a Pullman action is unavoidable. What then? Typically, a co-op meeting in which the accused has a chance to defend himself or herself follows.

“If the initial notice was detailed enough and the person repeated the conduct, you’ve satisfied the predicate notice and due process provision,” says LaGumina. “Now you set up the special meeting. Send a meeting notice, saying the purpose is to vote whether or not to terminate a lease due to undesirable conduct after written notice. Make sure the offending person gets a copy of the notice. It’s like any other special meeting, and [shareholders] can even use proxies.”

While some proprietary leases allow the board alone to vote, he says, “Most require the shareholders. The ones that allow only the board, the courts will look at those cases more closely. If you have the shareholders’ vote, the court will see that just about everyone in the place doesn’t want that person living with them.”

Sometimes, says attorney Marc Schneider, managing partner of Schneider Mitola, an offender at that point will often accept a resolution “where they agree to sell the apartment, since they’re better off selling it of their own volition than having their [shareholder] rights terminated, in which case it can get a price below market value” because of a compressed time frame.

In fact, that’s the resolution pending at the East Side co-op. “The couple has gotten a lawyer and we’re negotiating with the lawyer,” says the board member. “They have indicated they don’t want to live in the building, they just want to leave, and we’re negotiating [such issues as] a time frame, what happens if they don’t sell the apartment, and also their continued occupancy. If they’re willing to relocate while they’re trying to sell, we’ll give them more time without litigation.”

And what of the famed Pullman himself? Says Bailey – who took him on as a client after the dust settled and represented him in his apartment sale – “He’s living in California, his business is doing very well, and he’s still suing the law firm representing the cooperative for his legal fees.”

Some things never change.