Proprietary Lease Did Not Give Unit Owner Exclusive Right to Parking Space

This was originally published on the SGR Blog.

Did Coop’s Course of Conduct Effectively Grant Such Exclusivity?

Sara Baer asserted causes of action for a declaratory judgment, breach of contract, and trespass to chattel, and sought a permanent injunction against 825 Ocean Corp. She alleged in her complaint that she was the proprietary lessee and holder of cooperative shares for unit 2D at 930 East 7th Street in Brooklyn. In 2004, when she purchased those shares, she was told that a parking space was provided, which was ancillary to the premises. She further alleged that the parking space was provided for in the proprietary lease and that her decision to purchase shares within the building was based upon her right of continuing use of the parking space. She contended that, on or around February 2011, Ocean Corp. sought to allow another person to use, and sought to keep her, from continuing to use the parking space.

Ocean Corp. moved for an order granting summary judgment and dismissing the complaint, and contended that the complaint should be dismissed as Baer’s causes of action were all premised on the claim that she had possessory right and interest in the parking space because, as a non-resident shareholder, pursuant to the Ocean Corp.’s policy regarding the use and distribution of parking spaces, Baer was not entitled to utilize a parking space. Since Baer did not reside in the apartment, she was not entitled to use of the parking space.

They further argued that the decision to reassign the parking space, once Ocean Corp. became aware that Baer no longer resided at the apartment, was a product of the policy of the cooperative board of directors as contained in a parking license agreement that assigns parking spaces to resident shareholders only. Ocean Corp. further contended that use of a parking space was based upon placement on a parking space waiting list, and the parking policy was a result of board governance and was protected and not generally reviewable by the court in accordance with the business judgment rule.

Baer cross-moved and argued that summary judgment should be denied as Ocean Corp. failed to meet the prima facie burden requiring Ocean Corp. to establish that the parking policy was in fact a product of the board’s governance. Summary judgment should be granted in her favor given that the proprietary lease reflected that the parking space was part of the apartment. and contended that even assuming, arguendo, that the proprietary lease did not provide for Baer’s exclusive use and right of possession of the parking space, the parties nevertheless orally modified the lease to confer upon her exclusive rights to the parking space.

In the context of cooperative 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. However, decision making tainted by discriminatory considerations is not protected by the business judgment rule.

Turning to the merits, the Court found that Ocean Corp. met its prima facie burden, contending that Baer did not have a right to the parking space, given that it was not provided for in her proprietary lease or by means of the ownership of her shares in the cooperative corporation. In addition, Baer had no claim to the parking space because she no longer resided at the apartment. The parking policy was based upon the fact that there were fewer parking spaces than units and parking spaces can only be provided to resident shareholders based upon their position on a waiting list. In support of that position, Ocean Corp. relied upon Baer’s deposition, the proprietary lease, the deposition and affidavit of building manager Elie Gabay, and the parking license agreement.

Gabay, as part of his affidavit, stated that the proprietary lease for the cooperative does not provide for exclusive use of a parking space and that “only resident shareholders are assigned parking spaces and when a resident shareholder moves out, the parking space assigned to the resident shareholder is given to another resident shareholder on the cooperative’s [parking space waiting list.]” A review of the proprietary lease by the Court confirmed that exclusive use of a parking space was not provided. The parking license agreement provided that the “Licensee resides in Apartment pursuant and subject to the terms of a Proprietary Lease entered into with Licensor by the holder(s) of the Licensor’s shares allocated to the Apartment…” That evidence was sufficient for Ocean Corp. to meet its prima facie burden showing. The policy was clear. Residence at the unit was required to obtain a right to utilize a parking space, and supported Ocean Corp.’s contention that the parking policy was within its authority, made in good faith, and in furtherance of the cooperative’s legitimate interests.

In opposition, Baer contended that she had raised a material issue of fact regarding whether Ocean Corp.’s pattern of conduct, in continuing to allow her to use the parking space and billing her for its use, confirmed that there was an oral modification of the proprietary lease resulting in conferring exclusive rights to use and possession of the space to her. She also argued that the proprietary lease indicated that the parking space was part of the apartment, and that the prior unit lessee and shareholder agreed that the parking space would be exclusive to her and that constituted an oral modification of the relevant documents. In support of her position, Baer relied on the proprietary lease, her deposition and affidavit, an affidavit from the prior shareholder lessee, Steven E. Ginsburg, and other documents related to fees paid in relation to the parking space.

Baer’s affidavit stated: “I believe that the Parking Space is and was included with my purchase of cooperative shares for the Premises, as the Proprietary Lease defines “the apartment” as “the rooms in the building as [partitioned] on the date of the execution of this lease designated by the above-stated apartment number, together with their appurtenances and fixtures and any closets, terraces, maid’s rooms, balconies, roof or portion thereof outside of said [partitioned] rooms, which are allocated exclusively to the occupant of the apartment.”

As part of his affidavit, the prior unit lessee and shareholder stated that the parking space was included with the purchase of the cooperative shares for the [apartment] because he “attempted to exchange it for another [parking] space in the Building, and was informed by the Board of Directors of the cooperative that [he] could not do this as that particular Parking Space (#30) was assigned to and included as a part of the shares and lease for Unit 2D.”

Baer contended, in the alternative, that it was the understanding of both her and Ginsburg that the parking space was included in the sale of the shares in the cooperative and that this understanding should be considered as an oral modification of the relevant documentation.

Notwithstanding that testimony, Ginsburg and Baer, without the approval of Ocean Corp., did not have the authority to amend the proprietary lease-which did not provide for an exclusive parking space. Ginsburg could not transfer an interest he did not have. Ginsburg and Baer could not unilaterally modify the lease. The lease, in section 50 entitled “Changes to Be in Writing,” stated that “[t]he provisions of this lease cannot be changed orally.” Ocean Corp. raised the existence of the no oral modification clause, but Baer contended that the parties’ course of conduct reflected the parties’ intent that rights in and to the parking space be conferred upon her attendant to her purchase and ownership of cooperative shares.

To overcome such a clause and enforce an oral modification to a written agreement a party must demonstrate either that the oral modification had in fact been acted upon to completion or, where there was only partial performance, that the partial performance was unequivocally referable to the alleged oral modification. Baer’s testimony, taken together with Ocean Corp.’s failure to address the allegation that it continued to allow her to use the parking space and billed her for its use, created a material issue of fact regarding whether there was an oral modification of the proprietary lease in relation to Baer’s rights in the parking space.

Baer successfully raised issues of fact in opposition to Ocean Corp.’s motion, but Baer failed to show, as a matter of law, that there was an oral modification and what the terms of that modification were. Accordingly, both parties’ motions for summary judgment were denied.

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