Co-op Board Can Terminate Shareholder Tenancy Based on Objectionable Conduct

Shareholder tenant sued landlord cooperative corporation and asked the court to set aside and declare void and unenforceable notices of termination of her proprietary lease that were issued by landlord in 2021 as well as a notice of nonjudicial sale of her apartment. The co-op board had decided to terminate the shareholder tenant's interests in the co-op as well as her proprietary lease based on objectionable conduct. Landlord co-op asked the court to dismiss the case.

The court ruled for landlord. The co-op acted under the business judgment rule to terminate the tenant's interests in her apartment. A court can't look further to independently evaluate the co-op's actions unless the tenant shows that the co-op acted outside the scope of its authority, in a way that didn't legitimately further the corporate purse, or in bad faith. Here, the tenant didn't demonstrate any improper action by the co-op board. The board acted after holding a meeting with notice and obtaining a two-thirds vote from its board members. The co-op had sent tenant multiple letters and emails outlining the grounds of its objectionable conduct claim. And co-op documents permitted landlord to continue to collect monthly maintenance charges from tenant without waiving its rights to proceed against her. The fact that the co-op issued several amended termination notices to tenant also created no waiver. Landlord's final termination notice was specific enough to advise tenant of landlord's reasons for termination. The co-op had withdrawn its notice of nonjudicial sale, so the court didn't make any ruling on tenant's objection to that. 

Matter of Peters v. Caton Towers Owners Corp.: Index No. 526106/21, 2023 NY Slip Op 30142(U)(Sup. Ct. Kings; 1/11/23; Sweeney, J)