Shareholder-Tenants Contest Assessment for Local Law 11 Facade Work

Landlord cooperative corporation sued to evict 56 tenant-shareholders for failing to pay a special assessment to finance completion of building facade repairs required by Local Law 11. The court granted landlord's request to dismiss three of tenants' defenses. Tenants appealed and lost. Tenants had claimed that landlord didn't show the need for the assessment, that the board of directors had fraudulently misrepresented that the assessment was for purposes of Local Law 11 when, in fact, the assessment was imposed to balance a budgetary shortfall for the 2010 fiscal year, and that the board's bad-faith actions weren't protected by the business judgment rule. But the board had advised tenants that an $800,000 special assessment might be needed for facade work and had rejected a proposed mortgage when its terms included raising the maintenance charges. The building's bylaws and proprietary leases gave the board financial management authority, and there was no showing of fraud. The board's actions were taken to further the co-op's interests and were protected by the business judgment rule.

40-50 Brighton First Road Apartments Corp. v. Kosolapov: 2013 NY Slip Op 23099, 2013 WL 1320427 (App. T. 2 Dept.; 3/20/13; Pesce, PJ, Weston, Rios, JJ)