A case decided yesterday, 5/3/12, perfectly illustrates the
power of cooperative boards. The case addresses whether the board, under the
Business Judgment Rule, may create a house rule that restricts subletting. In
the situation in the case the restriction imposed was as follows:
"no [l]essee
shall be permitted to sublet the whole or any part of an apartment or renew or
extend any previously authorized sublease for more than two years during any
four consecutive year period unless consent thereto has first been duly
authorized by a resolution of the Directors or . . . by [l]essees owning at
least 66⅔% of the then issued and outstanding shares of the Corporation."
The Appellate Court held that the board did have the power
to enact such a rule under the Business Judgment Rule. Even going further, the
Court rejected a prior decision to the contrary stating cooperative boards have
“the authority to freely adopt a new policy in the legitimate interest of the
cooperative”.
To read the decision, click here.
