Paula Chin: Welcome to Legal Talk, a conversation about governance issues that New York's co-op and condo boards are tackling today. I'm Paula Chin with Habitat, the New York City magazine for co-op and condo board directors. My guest is Moshe Bobker, a partner at the law firm Tane Waterman & Wurtzel. When shareholders violate the terms of a proprietary lease by not making the apartment their primary residence boards, are certainly within their rights to go to court to evict them.
Sometimes it's the right move and sometimes not so much. Moshe, you recently handled a case where the board may have been a bit too hasty. Can you tell us about it?
Moshe Bobker: Absolutely. So this particular case involved an HDFC, which as you probably know, has a primary residence requirement in its lease as most HDFCs do.
And they had, we had actually represented the shareholder and the occupant in this particular case. And the board did commence a holdover proceeding alleging that the shareholder was not occupying the apartment as his primary residence, which was required by the lease, and seeking to evict both him and the occupant, who had been living in the apartment for about 23 years or so at the time.
Paula Chin: So this was both the shareholder and a relative that had been here for 25 years?
Moshe Bobker: That's correct, yeah. So the, this had actually started with a board approved sublease agreement from the shareholder with the occupant. And you know how things go and, people didn't do anything. People didn't know about it. Whatever it was. Obviously they knew about it, but time goes by and things change. Nobody said anything about it for, as I said, 20 plus years and then out of the blue, the this proceeding was commenced.
Paula Chin: Now, why do you think the board, after, as you said, 25 years, decided to take action?
Was this a new board and I presume they were not the board that had handled the original agreement?
Moshe Bobker: Yeah, that's a very good question. I can only speculate about, what kind of prompted this at this time. I'm gonna feel safe in guessing that this was not the same board as 20 years ago.
Although you never know. I really couldn't say what happened at this point in, in, and again, in other cases we've seen, the board or new management comes in and they, something brings the issue up for them. They realize, Hey, by the way, there's this issue we weren't aware of. We have to do something about it.
And typically what re we'll speak to their counsel and, get advice about how to proceed. In this case, as I said, because we represented the shareholder, not the board, I don't know what, again, what the kind of back, the backroom communications were with the board amongst themselves, with management and with their attorney about what, again, what prompted this and why now.
Paula Chin: And what actually happened?
Did the board, what is a board legally required to do in terms of notifying the shareholder, notifying the resident? Is there a timeframe and did they do all of this?
Moshe Bobker: Yeah so there's, the lease will govern, as and each lease has, different requirements as far as notices to cure or notices of default, notice of determination. The standard proprietary release has a 30 day notice to cure period before a termination for general lease defaults. And, depending on the type of default that, that amount of time can be shorter, but the kinda the standard is 30 days. In this particular case, the board and just to, to take a step back for a second, if I might.
Oftentimes boards the lease would not require, for example, a demand letter or something like that from the board to the shareholder notifying them the issue, giving them the opportunity to resolve the issue one way or another, amicably, efficiently and cheaply. But it is oftentimes a good idea to do that because, if it does work, as I said, it's more efficient, more economical to do it that way.
In the, in this case, the board did, did not do, did not attempt that. And I don't know if that was, again as a legal advice, from their counsel that they decided to avoid that or to forego that. But they did, serve notices and then commence the holdover proceeding pretty quickly, which is when we got involved is when the, when the whole was actually commenced.
And so they did, they went straight to the litigation route as opposed to this, a pre-litigation if you will, request or letter or something to try and resolve it amicably.
Paula Chin: And what happened? What was the sequence of events here after they went the litigation route?
Moshe Bobker: Yeah, so we were in court for a while. As anyone who's been who's dealt with New York City Housing Court knows that no matter pretty much what happens, it never goes quickly. There were discussions, we had alleged, among other things that, she had been there for that, for quite a long time.
There were arguments about waivers, there were arguments about, about, or request that transfer it from the former shareholder, or from the shareholder, I should say, to the occupant. Initially these, they, these talks didn't really progress. And then at some point, having been, before the court several times trying to figure out if there was a resolution here, the board did approve a transfer from the shareholder to the occupant, essentially solidifying her position in the building, which again, she's been living at, in, in for, again, quarter century, give or take. And it was, I don't wanna say a formality because, there was obviously, legal arguments.
There was no formal decision from the court about who was right and who was wrong. But she had been there for such a long time and this really just, it resolved the issue that the board had raised, allowed her to remain in the apartment. I'd like to think everyone walked away happy, which is not something that often happens in litigation, and so that it resolved in a way, like I said, that is, left everyone as happy as can be in these kind of situations.
Paula Chin: So it ended up fine, but the board could have saved itself a lot of time and money had it not gone straight to litigation. Is that right? Is that the takeaway here?
Moshe Bobker: That's in my opinion, yeah. I mean that there's always something you can learn from every case.
In this particular case, I think there probably would've been a value to the board in sending out a demand letter or a request. We call it a demand letter. It sounds threatening. And it certainly doesn't waive any rights about bringing a holdover proceeding or, enforcing the corporation's rights.
But it does give the shareholder occupant, whoever is on the other side of it from the board, the opportunity to get the board's perspective on the issue. Find out, figure out whether they are actually in breach or not. Is there something, is there a misunderstanding on either side? And to try and resolve it.
And I can't say certainly that this is a 100%, a foolproof method for resolving every issue. There's a reason we have courts, but it is certainly something that in most cases is a very cheap and can be an efficient way to resolve a case. And even if it works, one out of 10 or 20 times that's thousands of dollars that the board and the building would be saving if it can resolve it. And I think in this particular case, again, considering the fact that she'd been there for such a long time, the board knew her well. This was not the kind of situation where there two sides and they hate each other.
And there's, the idea that this is gonna be resolved easily and quickly is laughable. This was, this was one of those situations where it would've made sense to have a conversation, have a discussion, and try and work it out. 'Cause I think that, as you said, would've saved both sides time and money.
And it would've been a much more efficient way to resolve it. Yeah. To me the takeaway is in addition to, again, trying to think of alternative solutions to court, which is always inefficient, is always time consuming, and expensive is to really have, the board should be thinking about what their long term, what their solution, what
they're, what they really want out of whatever this the matter is. So is there really, is there a goal to have the shareholder or the occupant removed? Is there a goal to resolve the issue? Is there a goal, something else? Every case is gonna be different, and obviously every board has to come to its own conclusion.
But having that conversation with their council early on, I think is very valuable so that you can strategize and plan accordingly.
Paula Chin: And not change what sounded like a rather amicable situation into an adversarial one, and therefore creating more headaches for yourself.
Moshe Bobker: Yeah, absolutely. And I think, again, the more adversarial, the more expensive and the more you know, it can waste time and money.
And I'm glad that in this particular situation that I dealt with recently, it ended off amicably. We did, we did consummate the transfer that everyone was very friendly. As I said, the board knew her which is why raises the question as to why we ended up in court so quickly right away.
And as I said, I can only speculate about why, but I think this is the best case scenario as far as resolutions go, where everyone walks away happy. Oftentimes, if the board is not, is not fully informed or makes a rash decision, you can often be buying yourself a long and expensive litigation.
Without really that being your goal or without knowing what your risks and rewards are.
Paula Chin: Moshe, this has been really informative. I think there's a great lesson here for board directors. Thank you so much for joining us.
Moshe Bobker: My pleasure. Thank you so much for having me.