Court decision victory for co-ops on subleasing.

A recent Appellate Court decision upholds the authority of a cooperative apartment building's board of directors to enforce subleasing policy, and, in effect, represents a major victory for all New York co-op boards, says attorney Edward T. Braverman, head of Braverman & Associates, P.C., who represents and is a consultant to more than 80 cooperative apartment properties in Manhattan and the boroughs.

The Appellate Court struck down a finding by Judge Peter Wendt interpreting the "roommate" law. The court held that a shareholder under the "roommate" provision of the Real Property Law must use her apartment as a primary residence to be able to claim that an additional occupant is a "roommate," and not a sublessee requiring board approval.

Braverman explains that by finding that a shareholder must live in the apartment as a "primary resident" to have a "roommate," the Appellate Court effectively returned subleasing control to the board. "That is the key element of the Appellate Court's decision reversing Judge Wendt," Braverman said.

He added that "subleasing has become a hot issue in New York's depressed co-op real estate market, because, while co-op boards want to be able to regulate occupancy to the legal extent possible, there are many co-op shareholders who want to sell their apartments and move out, but cannot get their price.

"A logical alternative for them," he continued, "is to sublet and move. But, a policy allowing unrestricted subletting in a co-op building could create a property with excessive renters instead of owners, and an ambience that most co-op boards and tenants want to avoid. Too many sublets in a building," he added, "can also hurt a co-op's chances of refinancing its mortgage."

Braverman emphasized that under the Appellate Court's decision in Lincoln Guild Housing Corp. vs. Stuckelman, a co-op's tenant-shareholders can still sublease their apartments, but that the board continues to have the authority to oversee this practice. If Housing Court Judge Wendt's interpretation was allowed to stand, Braverman said, it would have had the potential of undermining the ability of all New York co-op boards to regulate subleasing activity in their buildings.

The Appellate Court concluded that, by allowing a distant relative to occupy her apartment in her absence without the approval of the board, the shareholder had breached her obligations under her proprietary lease, and that the co-op corporation owning the co-op building was entitled to possession of the shareholder's apartment.

The case arose when an elderly tenant-shareholder, Anna Stuckelman, broke her hip and was moved into a convalescent hospital. Anna Stuckelman wanted her grandniece, Nona Stuckelman, to be allowed to use the apartment. The Board insisted Anna Stuckelman submit a sublease application, which the board then approved. A year later, the sublease expired, but the grandniece continued to occupy the apartment, and the co-op board said this violated Anna Stuckelman's proprietary lease. It petitioned the lower court for possession of the apartment.

Anna Stuckelman, through counsel, claimed that a provision of Section 235-f of the Real Property Law--the "roommate" provision--renders unenforceable the clause in her lease restricting occupancy to the lessee and members of her immediate family.

Under the "roommate" law, Stuckelman claimed, it is unlawful for a landlord to restrict occupancy of a residential premises to the tenants and their immediate family. Judge Wendt agreed, but the Appellate Court found that the grandniece occupied the apartment as a subtenant, not as a "roommate."