The Sins of the Father

Can you be booted out of your apartment for a crime you didn’t commit?

You’ve lived in your co-op for almost a decade. Without warning, the board announces it plans to evict you. The reason? A previous shareholder performed an apparently unauthorized alteration in what is now your apartment. You didn’t do it, and you didn’t know about it. Is the proposed eviction fair?

In New York City cooperative apartment buildings, when shareholders perform alterations in their apartments, they are generally required to enter into an alteration agreement, which states, among other things, that a shareholder must obtain co-op board approval and Department of Buildings (DOB) permits before starting work.

In Coliseum Tenants Corp. v. Benmark, the shareholder who remodeled the unit did neither of these things. That was news to the current shareholder, Gadi Benmark, who had purchased an apartment at 30 West 60th Street in 2007. The space was marketed as a “one-bedroom-plus,” and before purchasing it, Benmark was provided a copy of the floor plan.

Eight years after the sale was approved, Benmark received a “notice to cure” from the board, which alleged that the apartment had been illegally subdivided from a “one-bedroom to a one-bedroom with a separate guest room,” in violation of the proprietary lease. The board said it had not become aware of the unauthorized alteration until 2015, when the manager found the apartment advertised on the Airbnb website. Benmark submitted a proposal to legalize the alteration. The board responded with a second “notice to cure.” When Benmark did not remove the wall, the board served him with a “notice of termination,” requiring him to surrender and vacate the premises within five days.

The case went to court. The board argued that the alteration was performed without its permission or a DOB sign-off, and that even if Benmark did not make the alteration, he stands in the shoes of his predecessor shareholder and is responsible for the alteration.

Testimony revealed that the alteration was not made by the last shareholder who lived there, but by the shareholder before that. Given that more than two decades had passed since the changes were made, the manager was unable to confirm with certainty that the board had not given permission for the construction of the wall. Moreover, Benmark and other witnesses testified that building staff and board members had been inside the apartment over the years and had not questioned the legitimacy of the layout.

The cooperative argued that Benmark had breached the lease provision that required shareholders to comply with all laws, and that these changes had been performed without a DOB permit. The court found in favor of Benmark on this point. It cited a de facto waiver of the alteration agreements and also the little-used defense of laches, which is defined by one source as “an unreasonable delay by the plaintiff in bringing the claim.” The Benmark case showed:

•    that the cooperative had a valid claim but...
•    it had delayed in asserting its claim without showing a good cause for the delay;
•    Benmark would lose significant value in the apartment if forced to remove the alteration; Benmark would then have to market it as a one-bedroom rather than a junior-four, which has a significantly higher price tag.

The court found that, although the cooperative had acted promptly after seeing the layout of the apartment on the Airbnb website, testimony showed that the apartment had been in that configuration for years. Indeed, the floor plan was included in Benmark’s application package for purchase. A board member testified that he had been inside the apartment. Further testimony showed that it would have been impossible to perform the alteration without the building staff seeing materials being delivered to the apartment. The court also noted that the board had waived its claim because it knew of the apartment reconfiguration for many years but had not challenged it.  On this point, the board argued that even though Benmark may not have constructed the alteration, as an assignee of the lease he stood in the shoes of his assignor. The court disagreed.

The Takeaway

This case is an important reminder to purchasers: always do your due diligence. Purchasers may want to review DOB records and have their lawyer get as much information as possible from the managing agent – not just what can be gleaned from board minutes. If a purchaser suspects an alteration may have been performed without appropriate permits and sign-offs, it would be prudent to obtain from the cooperative written confirmation that the alteration work was done with consent, or an indemnity from the seller, should an issue involving a previous alteration arise.

Further, this case highlights the importance of properly maintaining records. We believe this problem will be minimized given the data programs available and the current practice of scanning most documents electronically.

Finally, although it is not discussed in depth in the decision, Benmark was using the apartment for short-term rentals, in violation of the law and therefore the lease and building rules. There is no discussion as to whether Benmark has ceased that practice.

Richard Siegler (rsiegler@stroock.com) is counsel, and Dale J. Degenshein (ddegenshein@stroock.com) is special counsel at Stroock & Stroock & Lavan. The authors wish to thank Julia Casteleiro for her assistance in preparing this “Case Notes.”