The Battle for the Extra Rooms

Who has the right to use ancillary rooms directly outside the service door of a specific apartment? The answer should be simple, but it rarely is. In Green v. Board of Directors of 880 Fifth Avenue Corporation and Francis L. Mitterhoff, the parties were faced with the classic question of whether the offering plan or historic use prevails.

Background

The property at 880 Fifth Avenue was converted to cooperative ownership in 1947. Ronald Green purchased the shares allocated to Apartment 17E in 2001. Apartment 17F was owned first by Irving Schneider (since 1970) and then, in 2011, by defendant Francis Mitterhoff. There were two rooms that were located just outside the service entrance of 17E and had “17E” written on the doors. They were, at least initially, intended to be used as a maid’s room and bathroom for 17E. When he purchased the shares for 17E, Green was told that those two rooms had been, at some point, transferred to Schneider.

Green came to believe, however, that those representations were false at or about the time Schneider was selling his apartment to Mitterhoff. Green demanded that the board provide documentation as evidence of the transfer. The board could not produce any amendments or assignments, but there was a reallocation of shares so that 17E’s shares were decreased while 17F’s shares were increased. Further, Schneider made representations to Mitterhoff that those rooms were to be used by the owner of 17F.

The Lawsuit

Green sued for an order declaring that he was entitled to use those rooms. All parties moved for summary judgment. The board responded that, at some point after 1947, a portion of 17E’s living room had transferred to 17F, the two disputed rooms were transferred from 17E to 17F, and 49 shares of stock were transferred from E to F. The documentation, however, was (as is unfortunately often the case) far from precise.

The co-op and Mitterhoff made several arguments as to why Green’s action should be dismissed. They claimed:

1. Green had ten years in which to sue (the statute of limitations), yet he did not bring an action until decades after Schneider had come into possession of the space.

2. There is a statute that says the person in possession of real property is presumed to have the right to possession, although the presumption can be rebutted.

3. The principles of adverse possession allowed Mitterhoff to retain the space.

Green, for his part, argued that he should be entitled to judgment because the co-op and Mitterhoff could not establish that a transfer took place. He asserted that any purported transfer was not documented as required by the statute of frauds, that is, it was not documented in writing or signed by the then-owner of 17E.

The court reviewed the claims of the parties and determined that, even though the co-op and Mitterhoff did not have documents showing the transfer of the two rooms, they were able to establish that Mitterhoff had acquired the space through adverse possession and that, in any event, the statute of limitations had expired.

Adverse Possession

The court examined adverse possession and prior cases that held that, even though it is a “real property” concept, adverse possession is applicable to co-ops. The elements necessary to establish adverse possession are that possession must be (i) hostile and under a claim of right; (ii) actual; (iii) open and notorious; (iv) exclusive; and (v) continuous. In discussing the element of “hostile” possession, the court explained that hostile does not necessarily mean that the party has to show enmity or a specific act of hostility; courts have decided that there is a rebuttable presumption of hostility when there is possession accompanied by the usual acts of ownership.

Green admitted that he knew he was not going to own the two rooms when he purchased his apartment. He was basing his claim on his review of the 1947 plan, 11 years after he had purchased. The court found that the plan no longer reflected the space configuration or the share allocation, as it had been revised. There was no question that the 17F occupants had used the space for at least 44 years.

Statute of Limitations

As to the statute of limitations, noting prior case law, the court again treated the shares and rooms as real property. The judge relied on a statute that provides that an action to recover possession to real property cannot be started unless the plaintiff or her predecessor “was seized or possessed of the premises within ten years before the commencement of the action,” and thus the statute did not begin to run until the board adopted the resolution.

Green claimed that the statute of limitations did not run from the time 17F began using the space. Rather, he argued that his time ran only from 2011 when the board passed a resolution about the space – a resolution Green claimed was void.

The resolution, which was adopted just before the time Mitterhoff purchased from Schneider, stated that the board had “confirmed” that owner of 17F was entitled to use the two rooms.

The court disagreed. The purpose of the resolution was not to allocate the rooms to 17F but to “confirm” the rights to use that space to Mitterhoff as potential purchaser. In other words, the court explained, the resolution was intended to resolve an issue the board and Mitterhoff believed – rightly so – could result in litigation.

The Takeaway

This is a situation that managers and practitioners see every day. A “transfer” or some formal or informal agreement was reached years earlier and the paperwork, if it ever existed, is nowhere to be found. What can a board (and an affected shareholder) do?

The defendants here were able to show historic use and prior agreements through the testimony of Schneider and his daughter. The information they were able to provide was important in this instance because Mitterhoff needed to be able to demonstrate that the Schneiders used the area for a period of years – at the very least for more than a decade.

Presumably, they asked the board to review its records and confirm, in a resolution, that Schneider had the right to use the rooms. Although Green tried to use the resolution as a “starting point” for the statute of limitations, the court was able to rely on the language of the resolution, which stated that the board “confirmed” Schneider’s rights.

If a shareholder has the right to use space that is not within the four walls of that shareholder’s apartment, the shareholder may want to confirm with the managing agent what paperwork is on file with the building. Better yet, the shareholder may want to give to the managing agent a copy of any documentation regarding the space so that it can be retained in two places.

Attorneys:
For Plaintiff:
Epstein Becker & Green
For Mitterhoff: Wolff & Samson
For Co-op:
Cantor Epstein & Mazzola