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Court Enjoins Coop’s Termination of Proprietary Lease

The shares corresponding to a cooperative unit were owned by the estate of a tenant-shareholder who died in 2006. In 2018, the estate asked the Cooperative to transfer the shares to the former tenant-shareholder’s son, who had resided in the unit since 1994. The Board denied the application, asserting that the son was not financially qualified. The estate and the son brought a lawsuit seeking to compel the Board to approve the transfer and, in the interim, to prohibit the Board from terminating the proprietary lease or selling the unit while the litigation was pending. A lower court granted a preliminary injunction and an appellate court has affirmed. Olcott v. 308 Owners Corp., 2020 N.Y. App. Div. LEXIS 8192, 2020 N.Y. Slip Op. 08006 (1st Dep’t Dec. 29, 2020).

The proprietary lease provides that “[i]f the Lessee shall die, [the board’s] consent shall not be unreasonably withheld to an assignment of the lease and shares to a financially responsible member of the Lessee’s family.” The court held that under this provision, “[t]he cooperative board’s decision to deny the transfer application is subject to a heightened standard of reasonableness.” Here, the son who was seeking to have the unit transferred into his name “had been the building’s resident for over 25 years and was current on the maintenance charges. Regardless of whether his income was closer to the lower amount the cooperative claims or the higher amount that plaintiff claims, the lower income appears sufficient to demonstrate that he was able to pay maintenance charges, especially in view of his undisputed history of payment.”