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Cooperative Board Ordered to Consent to Tenant-Shareholder’s Application for Roof Deck

A tenant-shareholder in a cooperative decided to install a new roof deck on the portion of the roof above his apartment. He hired an architect to prepare plans for the proposed roof deck.  Because the Cooperative owned the building, the application for approval of the plans by the New York City Department of Buildings (DOB) had to be submitted by the Cooperative, not the shareholder.  The shareholder asked the Cooperative to submit the application.  The Board of Directors advised the shareholder that the Cooperative would not execute the application because use of the roof for recreational purposes would violate the building’s certificate of occupancy.  The shareholder’s architect then requested and obtained a determination from the DOB that recreational use of the roof deck would be allowed, subject to certain conditions.

Armed with the DOB’s determination that installing a roof deck would be permissible, the shareholder again asked the Board to execute the application for DOB approval of the plans.  The shareholder set a deadline to hear back from the Board and stated that he would treat a lack of action as a refusal.  The Board did not respond and the shareholder filed an Article 78 proceeding against the Cooperative and its Board members to compel the Cooperative to execute the application.

The Cooperative moved to dismiss the Article 78 proceeding as “not ripe for determination” because the Board had not taken final action on the shareholder’s request.  A lower court rejected the Board’s argument, finding that the shareholder had sought to the best of his ability to obtain a decision from the Board.  On the merits, the court held that the Cooperative’s failure to submit the DOB application was not protected by the Business Judgment Rule.  The only basis given for the Board’s inaction was that the shareholder’s revised plans for the roof deck allegedly did not satisfy the DOB’s conditions.  However, “[d]eciding not to submit an application because of its potential dismissal by the DOB is not within the scope of the [Cooperative’s] authority. It is rather the DOB’s authority. Moreover, the [Cooperative] should know that it has no authority to determine whether an application to the DOB will be granted or not.”

The Cooperative appealed, but the appellate court agreed that that by the time the shareholder filed his court proceeding “it was apparent that the board’s failure to make a determination on the request or even respond to his letter was the equivalent of a refusal and that further efforts to obtain a response from the board would have been futile.” Moreover, no arguments had been presented for overturning the lower court’s ruling against the Cooperative on the merits.  However, because the shareholder sought and was granted relief only against the Cooperative as an entity, the proceeding was dismissed insofar as it was asserted again the individual Board members.  Matter of Sullivan v. 226-8 East 2nd Owners Corp., 2018 N.Y. App. LEXIS 6273, 2018 N.Y. Slip Op. 6314 (1st Dep’t Sept. 27, 2018).