Advisories

Court Appoints Temporary Receiver of Cooperative to Manage Building While Litigation Is Pending

Two factions of tenant-shareholders in a Cooperative both claimed the right to manage the Cooperative. A litigation is pending involving allegations that the Cooperative is being mismanaged to the point that its very existence is in danger.  The court granted a motion by the defendants for the appointment of a temporary receiver until the litigation is fully resolved.  11-15 St. Nicholas Avenue HDFC v Shaw, Index No. 656214/2016 (Sup. Ct. NY Co. May 1, 2018).

The evidence before the Court reflected a Cooperative whose affairs were in serious disarray.  One tenant-shareholder’s affidavit established that the Cooperative had failed to file tax returns; that it had failed to pay tens of thousands of dollars in utility bills, thus incurring substantial late fees and risking the shut-off of services; and that unexplained cash withdrawals had been made from the Cooperative’s bank account.  In addition, the shareholder swore that the Cooperative routinely failed to collect rent or maintenance from shareholders and tenants, permitted several residents to live in the building rent-free, failed to retain a managing agent, had not prepared annual financial statements, had defaulted under its mortgage; and had let the building fall into disrepair and become vermin-infested.  Still further, the Cooperative allegedly failed to timely register with City authorities as a Housing Development Fund Corporation, thus jeopardizing its status as a cooperative.  Another shareholder submitted an affidavit similarly complaining of the poor conditions and management of the building and the lack of any response to requests for repairs.

The court held that these sworn, detailed allegations were sufficient to warrant the appointment of a temporary receiver. The receiver was authorized to take possession of and manage the property, to collect rents and maintenance, to retain a managing agent, and to evict unauthorized persons from the premises.  By law, the receiver’s appointment will remain in effect until the conclusion of the litigation or further order of the court.  Ganfer Shore Leeds & Zauderer, LLP represents the defendants who successfully moved for the temporary receiver’s appointment in this case.

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