Most cooperatives’ proprietary leases contain restrictions on tenant-shareholders’ ability to sublet their apartments. These restrictions may include the requirement that any sublease requires board approval, limitation on the amount of time for which an apartment may be sublet or the frequency of sublets, or imposition of a reasonable fee. When a tenant-shareholder sublets an apartment in breach of the proprietary lease, this may result in a notice to cure and ultimately in termination of the proprietary lease. However, if the tenant-shareholder seeks to cure the breach by evicting the subtenant, a court may not permit the cooperative to oust the tenant-shareholder. This is what occurred in Mansfield Owners, Inc. v. Robinson, 45 Misc. 3d 133(A), 2014 N.Y. Slip Op. 51667(U) (App. Term 2d Dep’t Nov. 6, 2014).
In this case, the cooperative, as landlord, brought a holdover eviction proceeding against the tenant-shareholder who it alleged had illegally sublet her apartment. The court agreed that the sublet was illegal and granted a judgment in favor of the cooperative. However, the court stayed issuance of the warrant of eviction of the tenant-shareholder until October 31, 2012 to allow time for the tenant-shareholder to cure the breach by removing the subtenant.
The tenant-shareholder asserted that she had cured the breach of the lease by obtaining the subtenant’s agreement to move out by no later than June 30, 2012. When the subtenant failed to move out as agreed, the tenant-shareholder served a notice of termination on the subtenant in July and then commenced a holdover eviction proceeding against the subtenant in September. The subtenant ultimately vacated on November 20, 2012. The landlord-tenant judge held that the tenant-shareholder had taken timely action to cure and, therefore, the judgment against the tenant-shareholder would be vacated, even though the subtenant did not vacate until 20 days after the court-ordered October 31, 2012 deadline had passed. The cooperative appealed.
The appellate court agreed with the lower court that the tenant-shareholder “had timely cured by terminating the sublet, commencing a holdover proceeding and obtaining a final judgment before the expiration of the court-ordered cure period, and that the delay in the actual eviction of the subtenant was not undue and could be deemed de minimis.” For these reasons, “the issuance of the warrant [of eviction against the tenant-shareholder] was properly stayed, thereby protecting [the tenant-shareholder] ‘against any other losses incident to the forfeiture, including in this case, the loss of [her] stock in the cooperative which could result from the termination of [her] lease.’”
However, while the appellate court held that the landlord-tenant court properly vacated the warrant of eviction, it held that the judgment in the cooperative’s favor should not have been vacated. The appellate court’s ruling does not specify what relief the cooperative remains entitled to in light of this split ruling. At a minimum, the cooperative would presumably be entitled to recover its attorneys’ fees, in light of the usual proprietary lease provision allowing the cooperative to recover its attorneys’ fees if it prevails in a dispute caused by a tenant-shareholder’s breach of the lease.
In many cases, when a cooperative confronts a tenant-shareholder with evidence of improper subletting, the tenant-shareholder will assure the cooperative that the subtenant will soon be leaving. A board of directors may wish to manage such a situation either by bringing its own holdover eviction proceeding, by requiring the tenant-shareholder to promptly bring such a proceeding (and monitoring the proceeding to ensure that it moves forward on as timely a basis as possible), or both, and by requiring the tenant-shareholder to pay all of the board’s resulting expenses. The board should consult with counsel as soon as it learns of an impermissible sublet to formulate a strategy that will result in removal of the unauthorized occupants and deter future unauthorized sublets.