Courts Find That Co-ops Can Pursue Nonpayment Proceedings Even Without Producing Signed Proprietary Leases
In our May 2024 newsletter, we warned that a nonpayment proceeding filed against a delinquent tenant-shareholder is at risk of being dismissed if the co-op cannot produce a current, up-to-date proprietary lease signed by the tenant-shareholder, citing a decision issued in 2022 by the Appellate Term of the First Department, 6 West 20th St. Tenants Corp. v. Dezertzov, 75 Misc. 3d 135(A) (N.Y. App. Term. 2022).
In good news for co-op boards, that holding was later reversed on appeal, with the court finding that where the co-op had produced the offering plan, by-laws, and current form of lease, “there is no question of fact as to whether defendant is bound by the terms of the cooperative's form proprietary lease even though an executed copy could not be located.” 6 West 20th St. Tenants Corp. v. Dezer Properties LLC, 230 A.D.3d 1050, 1051 (1st Dep’t 2024). That decision has since been cited even more recently in Ford as trustee of Joan Ford Revocable Living Trust v. Ford, 88 Misc.3d 1203(A), 246 N.Y.S.3d 917 (Sup. Ct. Queens Co. Jan. 8, 2026), which also found that the unsigned form of lease included in the nonpayment petition was “self-authenticating pursuant to the ancient documents rule.”
Thus, while it obviously remains good practice for co-ops to maintain copies of stock certificates and signed leases, there is now a firmer basis on which to pursue non-paying shareholders even where the board lacks those records.
Court Finds That Contractor "Willfully Exaggerated" A $1.4 Million Mechanic's Lien
In a case worth noting for any co-op or condo building that enters into a construction contract (meaning, all of them), the Supreme Court, New York County recently issued a decision granting summary judgment against a contractor for willfully exaggerating a mechanic’s lien.
The decision in G Builders II, LLC v. Great Midwest Ins. Co. and Summit Glory Property, LLC, Index. No. 152153/2022 (Sup. Ct. N. Y. Co. Dec. 24, 2025), arises out of the redevelopment of 28 Liberty Street (f/k/a One Chase Manhattan Plaza). The Plaintiff is a construction company that had been hired in 2021 to construct a food hall at the property. In 2022, the contractor filed a mechanic’s lien against the property in the amount of approximately $1.4 million in purported unpaid costs and expenses.
To set the context, a mechanic’s lien is a statutory device by which a contractor (or anyone who provides labor, materials, and services for the improvement of real property) can secure payment for unpaid amounts owed to them. Mechanic’s liens are powerful weapons in this regard, because the presence of a lien can cloud title to the property, making it difficult for the property owner (and in co-ops and condos, for the shareholders and unit owners) to sell or refinance their property. If left unpaid, the contractor can even foreclose on the property to secure payment of the liened amount.
To protect property owners from contractor abuse, the law prohibits the “willful exaggeration” of liens. If a contractor is found to have deliberately and intentionally overstated the amounts due to them, their entire mechanic’s lien can be voided and they can be liable for damages and attorneys’ fees.
This is why construction agreements often contain specific rules against contractors including certain categories of expenses in a mechanic’s lien (e.g., labor costs or overhead and profit), which inclusion would be contractually deemed to constitute “willful exaggeration” of the lien.
In the G Builders case, the defendants had argued that the contractor had willfully exaggerated almost its entire lien amount in at least nine different respects. As counsel asserted at oral argument, “[t]here was not a stitch of work done on this property, zero materials delivered, zero labor performed. Literally, the only thing the plaintiff did at this property was to take measurements.”
In its decision, the court agreed that the lien amounts were significantly overstated, noting that “the Project was nowhere near substantial completion,” and that “no subcontractors were ever paid.” Accordingly, the court took the relatively unusual step of granting summary judgment vacating the lien, and referring the matter for an inquest to determine the defendants’ damages and attorneys’ fees.
Condo Board Successfully Appeals Decision On Unit Alterations But Big Problems Loom
The Appellate Division, First Department recently issued a decision involving a messy and complicated dispute between a condo board and its commercial unit owner implicating the scope of authority of a condo board to regulate unit alterations that affect the building as a whole, with the decision likely to spur further litigation between the parties. The dispute in Board of Managers of the 80th At Madison Condominium v. 1055 Madison Avenue Owners LLC, 2026 N.Y. Slip Op. 00005 (1st Dep’t 2026), involves an Upper East Side mixed use condo association and its commercial unit owner. The building, located on the northeast corner of 80th Street and Madison Avenue, has a distinctive double-height base level clad in granite. This ground floor level contains, among other things, the building’s residential lobby and a single commercial unit.
The commercial unit owner proposed subdividing the commercial unit into three different retail spaces. In order to do so, the unit owner had proposed punching additional shop windows through the granite façade near the corner, disassembling a mezzanine level and catwalks used to access certain building pipes and valves located in the ceiling above the commercial unit’s 20-foot high interior space, and drilling anchorages into the granite façade to hang new signage for the prospective new retail tenants.
The parties engaged in lengthy negotiations over an alteration agreement, but could not reach agreement, and the commercial unit owner went ahead and did all of the work contemplated by the unsigned alteration agreement anyway, including installing the new windows, removing the mezzanine and catwalks, and installing new signage outside.
The board sued, seeking declaratory and injunctive relief and monetary damages, and the parties eventually cross-moved for summary judgment. The lower court issued a decision which denied most of the relief sought by both parties. Even though it agreed that the board had an easement to access the building pipes and valves, the court denied the request for declaratory and injunctive relief ostensibly because the board had a contractual remedy to restore access. With respect to the exterior windows and signage, again the court denied relief even though it conceded that the unit owner had installed the windows and sign without permission, because the unit owner would suffer a “hardship” if its improperly installed windows and signage were removed.
On appeal, the First Department found that the board should have been granted a declaratory judgment that the unit owner had no authority to alter the exterior façade or demolish the mezzanine and catwalks without board permission, noting that a showing of “irreparable harm” is not a predicate for granting declaratory relief. On the other hand, the court largely refused to disturb the lower court’s decision denying injunctive relief to the board, finding that requiring the unit owner to restore the catwalks and removing the signs would be “extremely costly” and “disruptive to defendant’s tenants,” even though the board had produced expert testimony that the lack of immediate access to the building pipes constituted a continuing violation of the Building Code.
It is unclear from the decision how the board’s easement to access building pipes and valves will be restored. In addition to being a regulatory requirement, this is clearly a life safety issue and it will be imperative for the board to exercise its contractual right and fiduciary obligation to enter the commercial space and restore that access as soon as possible. Unless the parties are somehow able to negotiate a settlement, it seems inevitable that as soon as the board’s contractors arrive to restore the catwalks, the parties will be back in court.
- The foregoing case summary is adapted from a submission to HABITAT Magazine’s Co-op & Condo Case Law Tracker subscription service
