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Rights of Co-op Shareholders Whose Apartments Were Damaged By Hurricane Sandy

Many coop tenants whose apartments were damaged by Hurricane Sandy are wondering if they have any rights to financial compensation, in the form of an abatement of maintenance, resulting from their apartments being rendered partially or totally uninhabitable. This post does not address issues regarding property damage or relocation costs if the apartment is completely unlivable. The amount of a particular abatement will depend upon the extent of the damage to the apartment and how long the conditions exist. The cooperator must notify the coop board or agent of the damage, preferably in writing, and demand immediate repairs and provide access if requested. Conditions such as mold should be remediated according to Department of Health guidelines by a qualified expert.

In general, a tenant gets a rent abatement one of two ways: 1) by making an agreement with the landlord/coop or 2) by withholding rent/maintenance, and defending the ensuing nonpayment case in Housing Court and reaching a settlement there or having a trial and asking the court to award the abatement. One could also sue in Small Claims or Civil Court but this is rare. The maximum abatement a tenant can obtain is 100% of the maintenance for the time period in question.

So the tenant should first contact the coop board and/or managing agent and request a reasonable abatement. Having handled hundreds of nonpayment habitability cases, I can say without hesitancy that reaching a negotiated settlement is far preferable to litigating these issues and it is extremely difficult to do so with a private attorney on a cost effective basis.

The Warranty of Habitability [Real Properly Law Section 235-b] applies to coops, and there is no exception under the Warranty of Habitability for "acts of nature" such as flooding or wind damage and therefore the shareholder/lessee should be entitled to an appropriate abatement if their apartment is rendered partially or completely uninhabitable. However, the relationship of a coop tenant to the cooperative is not the same as the relationship of a tenant to a landlord. A cooperator is a shareholder in a corporation which they have voluntarily joined. The monthly maintenance-the equivalent in a coop to rent- theoretically is all used for the costs of running the building that the tenant owns shares in. So coop boards will often not take kindly to a tenant who withholds maintenance, even if such withholding is legally and factually justified based upon the condition of the apartment. In my experience, coop boards will often litigate these cases more aggressively than private landlords and will even seek to have their legal fees paid pursuant to the terms of the standard proprietary lease [of course the tenant/shareholder would, under Section 234 of the Real Property Law, be entitled to recover their attorney's fees if the court deemed them to be the prevailing party; how to determine who is prevailing party in a nonpayment case with a breach of warranty defense has been the subject of much litigation and there is a body of reported case law on this issue].

Cooperators with mortgages should proceed cautiously because nonpayment of maintenance, even if justified, is a default under most mortgages.

If the coop is refusing to perform the repairs or is dragging its feet, it is recommended that the shareholder initiate an HP Proceeding in Housing Court. This is a lawsuit seeking a court order that the coop performs the repairs within the time frame required by law. These time frames vary according to the severity of the condition. Prior to filing it is helpful to get the City to send an inspector to visit the apartment and place violations; this can be done by calling 311 and asking for an inspection by the Department of Housing, Preservation and Development (HPD).

As in all cases involving building conditions, the tenant/shareholders will be more effective by organizing a group of shareholders to pursue these claims rather than acting individually.

Sam Himmelstein