United States: Terrace Tiff At Worldwide Plaza

Paul M. Lincoln sued Residences at Worldwide Plaza in Small Claims Court for “loss of use of property.” He sought damages for the loss of use of his condominium unit’s outdoor terrace as a result of renovation of the building's exterior.

The material facts were not disputed at trial. Lincoln owns Unit 7G at the Residences, a multi-unit condominium building located at 350 West 50th Street, New York, New York. The apartment is 624 square feet, nearly identical in most respects to the other “G line” units above and below the apartment– with the exception of a large terrace adding an additional 1,028 square feet. Given the relative size of the terrace and apartment, Lincoln regularly utilized the terrace for personal use and to host gatherings, particularly during warmer months. For the additional square footage compared to other apartments, Lincoln paid $335 more per month than other “G line” unit owners lacking terraces.

As of the trial date, for approximately seven months, Lincoln's terrace was rendered unusable, having been used as a staging area for façade work, as periodically required by Local Law 11 for buildings over six stories. At trial, Lincoln explained that he expected the construction to continue for at least another seven and a half months. Accordingly, while Lincoln did not dispute the necessity of the façade work, he argued that the façade work could be done in a different manner not rendering his terrace unusable, and that he should be compensated for the period that he paid (and will continue to pay) $335 more per month in maintenance fees than those without terraces without receiving the benefit of the terrace, representing a substantial reduction in the overall square footage of the apartment.

Small claims judgments must “do substantial justice between the parties according to the rules of substantive law.”

Civil Court noted that: "A cooperative or condominium is by nature a collection of often competing views regarding personal living space, and decisions taken to benefit the collective interest may be unpalatable to one resident or another, creating the prospect that board decisions will be subjected to undue court involvement and judicial second-guessing. Allowing an owner who is simply dissatisfied with a particular board action a second opportunity to reopen the matter completely before a court, which—generally without knowing the property—may or may not agree with the reasonableness of the board’s determination, threatens the stability of the common living arrangement."

The very concept of cooperative living entails a voluntary, shared control over rules, maintenance and the composition of the community. A shareholder-tenant voluntarily agrees to submit to the authority of a cooperative board, and consequently the board may significantly restrict the bundle of rights a property owner normally enjoy.

However, under the warranty of habitability, the obligation of a tenant to pay rent (or maintenance) is dependent upon a landlord’s satisfactory maintenance of the premises in a habitable condition. The warranty provides that the occupants shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety. The warranty of habitability is applicable to coop proprietary lessees.

Courts have held that the business judgment rule “does not shield cooperatives from liability for breaches of contract. A breach of a tenant’s proprietary lease by the cooperative’s board of directors may be the best of the options open to the board, but that does not protect it from liability for that breach."

The proprietary lease in this case did not contain a common provision stating that “No abatement of rent or other compensation . . . shall be made or allowed because of the making or failure to make or delay in making any repairs, alterations or decorations to the building . . . or for space taken to comply with any law, ordinance or governmental regulation . . . unless due to Lessor’s negligence.”

The coop documents were subject to contract law. When parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms. Courts must construe contracts “so as to give full meaning and effect to all of its provisions”. Courts may not alter the contract to reflect notions of fairness or equity or extrinsic facts.

Lincoln relied upon the “offering plan,” which stated that “[t]he purchaser of a Residential Unit which has a Terrace appurtenant thereto shall have the exclusive use of such Terrace, subject to the right of the Residential Board to regulate its use.” The plan also provided that exclusivity of terrace use was “subject to” the Board’s reasonable regulation, discussed in other provisions.

For example, the by-laws provided that “The Residential Board shall be entitled to make determinations with respect to [o]peration, maintenance and supervision of all Residential Limited Common Elements. The Condominium Declaration provides that “The Residential Limited Common Elements” include, “[f]or purposes of structural and extraordinary repairs and replacements, all Terraces, including any fixture, equipment or Facilities used only in connection therewith but subject to the Rules and Regulations and other terms of the Plan regulating the use thereof.” This permitted the use of certain elements, including Claimant’s terrace, but does not address any costs associated with repairs.

The By-Laws also provided that “[a]ll normal maintenance, repairs and replacements of any Terrace or Storage Room Unit shall be made by the Residential Section Unit Owner having access to such Terrace or Storage Room Unit at his own cost and expense, but any structural or extraordinary repairs or replacements to such Terrace . . . shall be made by the Residential Board and the cost and expense thereof shall be charged to all Residential Section Unit Owners as a Residential Common Expense.” Lincoln interpreted the “cost and expense” to include the diminution of value of his apartment stemming from the inaccessibility of his terrace; and argued that he should be reimbursed by fellow unit owners for the overcharge.

The Court found the by-law to be ambiguous; however, since the Board was deemed to have drafted the documents the Court found that it was reasonable to construe the ambiguity in the lease against the coop, the party that "drafted" the lease. And found “cost and expense" to encompass the diminution of the value of Lincoln's apartment as a result of the construction. In cases of doubt or ambiguity, a contract must be construed most strongly against the party who prepared it and favorably to a party who had no voice in the selection of its language.

Reading these provisions together, the Court found a breach of warranty of habitability and no provision limiting an abatement under the circumstances. Compliance with Local Law 11 may have been necessary, and the Board's use of the terrace rather than installation of a shed equally reasonable. The fact remained, however, that Lincoln paid for a benefit which the declaration and by-laws guaranteed, but which Lincoln did not receive.

The Court concluded that Lincoln was entitled to recover a full abatement encompassing the fair value of the terrace, calculated as seven months up to the date of trial multiplied by the additional amount ($335) that Lincoln paid compared to other units lacking terraces, totaling $2,345.00.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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