Park East Apartments, Inc. v. 233 East 86th Street Corp., 60 N.Y.2d 644 (1983)
In co-operative conversions under the Rent Stabilization Law and Code, the declaration of effectiveness requires purchase agreements from at least 35% of all tenants in occupancy, including those in rent-stabilized and rent-controlled apartments.
Summary
This case concerns the validity of a co-operative conversion plan for Alwyn Court. The central issue was whether the sponsor met the 35% tenant purchase requirement under the Rent Stabilization Law and Code when filing the declaration of effectiveness. The New York Court of Appeals held that the 35% requirement must include tenants in both rent-stabilized and rent-controlled apartments. Because the sponsor failed to meet this requirement, the declaration of effectiveness was annulled. The decision emphasizes a strict interpretation of the law to protect tenants during co-op conversions.
Facts
The 233 East 86th Street Corp. sought to convert Alwyn Court into a co-operative. The Attorney-General accepted the filing of the declaration of effectiveness of the eviction plan for cooperative conversion. Park East Apartments, Inc., representing tenants, challenged the validity of the conversion, arguing that the sponsor had not met the required 35% tenant purchase threshold. The dispute centered on which tenants should be included in the base for calculating the 35%.
Procedural History
The case originated in the Supreme Court. The Appellate Division reviewed the Supreme Court’s decision and later granted leave to appeal to the Court of Appeals, although it did not express an opinion on the critical issue of the 35% requirement. The Court of Appeals then heard the case to resolve the dispute.
Issue(s)
Whether, on the date the declaration of effectiveness of the eviction plan for co-operative conversion was filed, a sufficient number of tenants in occupancy of Alwyn Court had agreed to purchase their residential apartments to warrant the declaration’s effectiveness under the Rent Stabilization Law and Code, specifically regarding the base group for calculating the 35% requirement.
Holding
No, because the 35% threshold for tenant purchase agreements must include all residential apartments in the building, encompassing both rent-stabilized and rent-controlled units. The sponsor failed to meet this requirement.
Court’s Reasoning
The Court of Appeals focused on interpreting Section 61(4)(a) of the Code, which states, “In establishing a base for computing the required 35 percent all residential apartments in the building shall be included”. The court interpreted this sentence to mean that the base must include all tenants in occupancy of residential apartments, regardless of whether they are subject to rent stabilization or rent control. The court acknowledged inconsistencies in the Attorney-General’s interpretations and a lack of clarity in the law and code sections. However, it concluded that a strict interpretation was necessary. The court stated that the quoted sentence should be read as “mandating at least that there be agreements to purchase on the part of 35% of the tenants in occupancy of all residential apartments in the building, including apartments subject to rent stabilization and apartments subject to rent control.” Since the sponsor did not meet this requirement, the court found the declaration of effectiveness invalid. The court also noted that the enactment of chapter 555 of the Laws of 1982 largely resolved these issues for the future, making it unnecessary to address other questions raised by the parties. The practical impact of this decision is that sponsors of co-op conversions must accurately calculate the 35% requirement, including all tenants, to ensure the validity of their conversion plans. This protects tenants’ rights and ensures compliance with the Rent Stabilization Law and Code.