A Cooperative Board may amend the House Rules to prohibit washer/dryers in apartments, even where they were previously approved. Konigsberg v. 333 East 46th St. Apt. Corp., 2016 N.Y. Misc. LEXIS 2356, 2016 N.Y. Slip Op. 31180(U) (Sup. Ct. N.Y. Co. June 21, 2016).
The plaintiffs owned three apartments in the Cooperative. In 1994, they performed alterations combining their two sixth-floor apartments. Plaintiffs and the Cooperative entered into an alteration agreement which, among other things, authorized the installation of a washer/dryer in the apartment. The agreement provided that if the washer caused malfunctions in the plumbing lines that were not cured after notice from the Cooperative, the Board could require the washer to be removed. In 2004, plaintiffs performed further authorized work combining their fifth- and sixth-floor apartments and installing a stairway. Thereafter, in 2012, the Board of Directors adopted new House Rules, incorporated by reference in the proprietary lease, prohibiting installation of washers and dryers without prior written Board approval.
In 2014, a fire caused by a contractor hired by the Cooperative caused damage throughout the building, including a fire in the laundry room in plaintiffs’ apartment. Plaintiffs removed their washer/dryer, which had been damaged in the fire. In 2015, the Cooperative allowed plaintiffs to perform work to restore their apartment, but initially would not permit them to replace the washer/dryer. Ultimately the Cooperative notified plaintiffs that it would allow a new washer/dryer to be installed following an “inspection on staircase/electrical (to assure structural integrity of building not compromised)”. Plaintiffs refused to permit an inspection. Instead, they sued for a declaratory judgment and an injunction requiring the Cooperative to allow a new washer/dryer and prohibiting any inspection.
The court held that plaintiffs’ claims were timely. “[P]laintiffs [did] not allege that the Coop was acting in violation of its own governing documents, which would subject them to the four-month statute of limitations associated with Article 78 proceedings.” Rather, plaintiffs asserted that the Cooperative breached the alteration agreement and proprietary lease. These were breach of contract claims, governed by a six-year statute of limitations, which commenced to run at the time of the alleged breach in 2015.
The court suggested that plaintiffs would have prevailed on their claim for breach of the alteration agreement if it were not for the Board’s amendment of the House Rules. However, the Board’s action in amending the House Rules to prohibit washer/dryers in apartments was entitled to the protection of the Business Judgment Rule. The Cooperative’s policy had previously been to permit washer/dryers. However, “the new rule restricting washer/dryers was adopted because of the board’s concern that the plumbing in the building was quite old and the use of the washing machines could create problems with the pipes throughout the building, resulting in the need for expensive repairs.” Plaintiffs did not deny this was the reason for the new rule. In fact, one of the plaintiffs was a Board member in 2012 and had voted for the new rule. Plaintiffs had not been discriminated against, as the Board had received 11 requests for permission to install washer/dryers since 2012 and denied all of them. Although plaintiffs stressed that they had previously been allowed to have a washer/dryer, the House Rules expressly provided that they were subject to amendment at any time, and the proprietary lease contained a “non-waiver” clause.
The court also held that under the proprietary lease and House Rules, the Board had the right to inspect plaintiffs’ apartment, upon reasonable notice to them. Plaintiffs’ refusal to permit inspection constituted a breach of the proprietary lease, entitling the Cooperative to recover reasonable attorneys’ fees.