How current events impact your business and real estate holdings

Friday, November 02, 2012

Co-op destroyed in hurricane & evacuated, do you have to pay your maintenance?

No said the Appellate Court (1st Dept.) in Granirer v. Bakery, Inc.

In its decision, the Court said that there is an "abatement of their maintenance until the apartment is restored to a habitable condition". Further, the Court stated that there should be a 100% abatement of maintenance, which includes "their contribution to the cooperative's tax and mortgage obligations".

The Appellate Court quoted its prior decision in Suarez v. Rivercross Tenants' Corp for the proposition that "A proprietary lessee is entitled to the statutory protection [of the warranty of habitability] as well as the noninvesting, ordinary tenant".

The Warranty of Habitability is a statutory right embodied in Real Property Law section 235-b that is required in every lease in New York. It provides that the property shall be "fit for human habitation and for the uses reasonably intended by the parties and that the occupants of such premises shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety".

So, is an act of god, such as a hurricane, an exception to the Warranty of Habitability? No, said the City Court of Yonkers, Westchester County, when faced with this question in Spatz v. Axelrod Management Co., Inc.

Nonetheless, it must be notated that a Co-op shareholder's (unit owner's) refusal to pay their maintenance will likely result in the Co-op becoming insolvent and eventually being foreclosed upon and the shareholder's proprietary lease thereby being rendered void. So, in the end, shareholders refusal to pay maintenance based upon a breach of the proprietary lease's implied Warranty of Habitability is actually attacking them-self.

Its important for a shareholder who is considering not paying their maintenance to first review their proprietary lease and also consult with an attorney before acting and refusing to pay.