Landlord of Purported Co-op Unit Fails to Prove Apartment Exempt from Rent Regulation

Landlord, claiming that she was a co-op building shareholder, sued to evict an unregulated tenant of an apartment after terminating the tenancy. Prior to trial, tenant asked the court to stay the eviction proceeding because tenant claimed that the DHCR and the NY State Attorney General's office were investigating whether the building was in fact a cooperative, and because tenant had filed a complaint with the DHCR that landlord had failed to renew his lease. Based on documents provided by landlord, the court denied tenant's request and held a trial. However, after trial, the court dismissed the case, finding that landlord failed to prove that the apartment was exempt from rent regulation. The court noted that housing court doesn't determine questions of title or ownership in summary eviction proceedings. But housing court can rule on whether a landlord has met its burden of proving that a dwelling is exempt from rent stabilization by virtue of being a cooperative unit. Here, the court ruled that landlord hadn't proved that the apartment was a co-op apartment. The court found that the building was a "'cooperative" in the same sense that a Potemkin village is a vibrant metropolis."

Landlord's offering plan, amendments to the offering plan, and acknowledgements from the AG's office were sufficient to prove that the building was a cooperative. But this co-op operated as it would when one discrete landlord held sole title to the building. In the 40 years since the alleged conversion of the building to co-op status, the only apparent board members have been the apartment's landlord and her attorney. The co-op has never held an election for board members. Landlord set the maintenance for the apartment on her own according to her attorney. Aside from the sale of shares to a member of landlord's immediate family, only one other shareholder has purchased shares in this co-op. Landlord's persistent ownership of shares for a majority of the apartments in the building for 40 years further called into question whether the building was a bona fide cooperative. Upon conversion to a co-op, landlord undertook a duty in good faith to timely sell as many shares in the building as necessary to create a fully viable cooperative. Instead, landlord as the co-op sponsor, has continued to treat most apartments in the building as rental properties.

The eviction proceeding was dismissed. But, since the court had no authority to rule on property ownership questions, the court's ruling was made without prejudice to the rights, remedies, and claims of either party.

Baldwin v. McCarry: Index No. 305742/2020, 78 Misc.3d 1214(A), 2023 NY Slip Op 50226(U)(Civ. Ct. NY; 3/24/23; Stoller, J)