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Cooperative May Enforce Assessment Even if It Lacks a Valid Certificate of Occupancy

             Section 302 of the New York State Multiple Dwelling Law provides that a landlord may not enforce a claim for rent against a residential tenant where the premises lack a valid certificate of occupancy.  But this rule does not apply to a cooperative seeking to collect maintenance or an assessment from one of its tenant-shareholders, according to an appellate court’s decision in Grassfield v. JUPT, Inc., 208 A.D.3d 1219 (2d Dep’t Sept. 21, 2022).

The plaintiffs in this case were tenant-shareholders who had not paid an assessment.  They sued their cooperative seeking a preliminary injunction against the cooperative’s foreclosing on their shares and terminating their proprietary lease, asserting that the cooperative could not enforce the assessment because it allegedly did not have a valid certificate of occupancy.  A lower court denied plaintiffs’ motion for a preliminary injunction and the appellate court agreed.  The court held that cooperative tenant-shareholders “are essentially owner-occupants,” rather than “residential occupants” protected by Multiple Dwelling Law § 302.  In addition, plaintiffs failed to submit any evidence justifying their failure to pay the assessment.

For some legal purposes, the relationship between a cooperative and its tenant-shareholders resembles the relationship between an ordinary landlord and its tenants.  However, this decision is a reminder that cooperatives are a unique form of ownership and that ordinary principles of landlord-tenant law may or may not apply to a given situation, depending on the specific legal issues involved.