This was originally published on the SGR blog.
Nancy McCaskill bought the shares for a cooperative apartment in Mount Vernon, New York in April 1998. At the time she entered into possession a washing machine was installed.
In 2014, the Board of Directors enacted the following House Rule 21:
The Board of Directors having determined that the plumbing systems of the Buildings are not sufficiently robust to allow use of washing machines without damage to the plumbing and to other apartments, washing machines, dryers or combination washer/dryer machines are not permitted to be used or kept in any apartment.
The cooperative did not contact McCaskill regarding her washing machine after enactment of House Rule 21.
In 2017, McCaskill installed a new washing machine without notifying or obtaining permission from the cooperative. On June 9, 2017, the washing machine caused a flood in the apartment. After the flood, the managing agent wrote to McCaskill demanding that she remove the washing machine. On July 19, 2017 the Board learned from McCaskill’s attorney that the washing machine had been installed after the enactment of House Rule 21 and replaced after the flood. McCaskill refused to remove the replacement washing machine. The coop moved to terminate McCaskill’s proprietary lease.
Proprietary Lease Paragraph 13 authorized the Board to adopt new House Rules.
Proprietary Lease Paragraph 18(c) provided that:
If, in the Lessor’s sole judgment, any of the Lessee’s equipment or appliances shall result in damage to the building or poor quality or interruption of service to other portions of the building, or overloading of, or damage to facilities maintained by the Lessor for the supplying of water, gas, electricity or air conditioning to the building, or if any such appliances visible from the outside of the building shall become rusty or discolored, the Lessee shall promptly, on notice from the lessor, remedy the condition and, pending such remedy, shall cease using any appliances or equipment which may be creating the objectionable condition.
And Proprietary Lease Paragraph 31 authorized the Board to terminate a lease after a notice of default to the tenant and an opportunity to cure.
The Board served a notice to cure; McCaskill did not remove the washing machine; and the coop terminated the lease and filed a summary (holdover) proceeding to evict McCaskiill from the apartment. The parties stipulated to the facts.
The Board contended that its failure to act with regard to the preexisting washing machine did not create a vested right for McCaskill to use washing machines in her apartment in perpetuity. The coop also contended that the Board was within its power to amend the House Rules to require removal of all washing machines. And the Board finally contended that its inaction with regard to the pre-existing washing machine did not amount to a waiver of House Rule 21 regarding the new washing machines installed by McCaskill.
McCaskill contended that her use of the washing machine in her unit, in contravention of House Rule 21, was permitted based upon a grandfathering rule. McCaskill also contended that assuming arguendo that the Court found that her use of the washing machine was a violation of the Proprietary Lease, it was not such a breach of a substantial obligation that warranted a termination. And McCaskill finally contended that, if the Court found her to be in breach of a substantial obligation of the Proprietary Lease, that she was entitled to a post-judgment opportunity to cure.
The Court found that McCaskill was permitted, for more than three years, to keep the pre-existing washing machine despite the enactment of House Rule 21. In 2014 the Board did not contact her regarding her particular washing machine after the enactment of House Rule 21. And, despite the enactment of House Rule 21, McCaskill was allowed to keep and use a washing machine in her apartment.
The Court also found that there was no agreement regarding the McCaskill’s right to purchase a new washing machine in the event of the disrepair of the washing machine which was present at the time she took possession of the apartment. And once the coop became aware of the new washing machine the Board timely demanded that the washing machine be removed.
The Court noted that, in the context of cooperative residential dwellings, the business judgment rule provides that a court should defer to a cooperative board’s determination “so long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith. And cited several cases where it was held that a cooperative’s house rule prohibiting the installation of washing machines and dryers in individual apartments was an appropriate exercise of a cooperative’s board’s authority where said rule was promulgated because of concerns for the welfare of the cooperative as a whole.
McCaskill acknowledged that House Rule e 21 was duly enacted. As she did not dispute that the Board was within its authority to enact House Rule 21.
House Rule 21 itself states that the rule was enacted after the Board made a determination the plumbing system of the cooperative buildings were not sufficient to allow the use of washing machines in the individual apartments. Thus, the Court found that House Rule 21 was enacted by the Board for the well being of the cooperative as a whole, within the scope of its authority and in good faith. Accordingly, the Board was within its rights to demand that McCaskill remove the washing machine and in terminating the McCaskill’s Proprietary Lease when she failed to comply once proper notice of her default was served.
The Court also rejected McCaskill’s contention that her use of a washing machine was not a breach of a substantial obligation of the lease. Paragraph 13 of the Proprietary Lease specifically states that the lessee covenants to comply with all such House Rules and that breach of the House Rules shall be a default. As such, McCaskill’s use of the washing machine was a breach of a substantial obligation.
Additionally, the Court found that the coop did not waive its right to enforce House Rule 21. The Proprietary Lease contained a non-waiver provision. In any event, a waiver is the voluntary abandonment or relinquishment of a known right. And the coop sought to enforce House Rule 21 when the Board became aware that McCaskill purchased and installed a new washing machine..
Accordingly, the Court found that McCaskill was is in default of the Proprietary Lease. And Ordered her to cure her default and remove the washing machine from her apartment.
Lesson learned: It is not always easier to ask for forgiveness than for permission.