LIEB BLOG

Legal Analysts

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.

Need disaster relief help?

Click here for the government's website to assist those in need of help and resources.

Flood exclusion to homeowners' policy litigation; Is it coming?

Many homeowners' insurance policies exclude coverage from the effects of flood and surface water or natural water below the surface of the ground without exception. 

As reported by Newsday, LIPA is estimating that 100,000 Long Island area homes and businesses have been devastated. Click here to read the article.  

Therefore, many community members will be seeking insurance to cover their loss. While the flood exclusion sounds pretty straight forward, it may not be. In fact, ambiguities in the exclusionary provisions of an insurance policy are resolved in favor of the insured. So, you should carefully read the exclusion and seek the advice of counsel prior to accepting your insurer's position that you do not have coverage. 

There are also unique situations for businesses with flood insurance. To illustrate, some policies require "safe storage" as a condition to obtaining coverage for valuable papers and records. In this situation, is this a strict requirement for coverage or does it instead have to be correlated (related) to the loss? These are questions that you should consider, research and than fight for your rights.  

However, the exclusion may be clear and you may receive a denial. So, can you sue your insurance broker for your experience of flood-related losses because they did not recommend that you obtained flood insurance or flood insurance with suitable policy limits (how much money will be insured)? The rule is that absent a special relationship with your insurance broker (which rarely exists pursuant to law and facts), your broker has no duty to recommend a special type of insurance. Therefore, you likely cannot sue your broker. 

Stay tuned, later we will discuss FEMA's designation of Flood Plain Areas and requirements for the purchase of flood insurance and how that may effect your loss.