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Tenant-Shareholder Whose Terrace Was Unusable for Two Years Granted Maintenance Abatement for Breach of Warranty of Habitability

A cooperative tenant-shareholder whose terrace was unusable for two years because of safety issues is entitled to a reduction in his maintenance, because the Cooperative breached the warranty of habitability. Goldhirsch v. St. George Tower & Grill Owners Corp., 2016 N.Y. App. Div. LEXIS 5944, 2016 N.Y. Slip Op. 6060 (2d Dep’t Sept. 21, 2016).

The plaintiff became a tenant-shareholder in the Cooperative in May 2007, when he purchased an apartment that shares an exterior terrace with a neighboring apartment. In June 2007, the terrace was damaged by a storm. An engineer’s inspection revealed that the terrace was unsafe, and the Cooperative placed it “off limits” until the spring of 2009, when it was reopened. However, in August 2009, the terrace was again closed so the Cooperative could conduct “major renovations.” This second closure continued for more than two years as the Cooperative conducted exterior work required by law.

The tenant-shareholder sued the Cooperative on claims including breach of the proprietary lease and breach of the warranty of habitability. Discussing the scope of this implied warranty, the court observed that the warranty is breached where leased residential premises “have not met the reasonable expectations of the parties.” The court found that “[h]ere, the plaintiff established that the water damage and subsequent closures of the terrace rendered it unfit for the uses reasonably intended by the parties. . . . Accordingly, plaintiff is entitled to recover damages under his warranty of habitability cause of action for all periods of time that the terrace was closed.”

The court also held that the Cooperative had breached the proprietary lease during the 2007-2009 period in which the terrace was closed due to the storm damage, in light of the lease’s requirement that the Cooperative shall “at its expense in keep in good repair all of the building, including all of the apartments,” and that the Cooperative must “proportionally abate” the maintenance if “damage resulting from fire or other cause shall be so extensive as to render the apartment partly or wholly untenantable.” The court rejected the Cooperative’s argument that these provisions did not apply to the terrace because plaintiff shared the use of the terrace with another apartment. The proprietary lease’s language on this subject was ambiguous, and therefore would be construed against the Cooperative as the drafter of the lease. The court also rejected the Cooperative’s invocation of the Business Judgment Rule, because the rule “does not shield cooperatives from liability for breaches of contract.” It cited precedent observing that “[a] breach of a tenant’s proprietary lease by the cooperative’s board of directors may be the best of the options open to the board, but that does not protect it from liability for that breach.” However, an issue of fact existed as to whether the Board breached the lease for the terrace closing beginning in 2009, because the proprietary lease provides that the maintenance will not be abated for work required by law, unless due to the Cooperative’s negligence, and the evidence was insufficient to determine whether the Cooperative had been negligent.