HABITAT Magazine

Q: A shareholder in a Queens co-op was physically assaulted by another shareholder in the laundry room. The victim filed a police report, but nothing came of it, and the co-op board has apparently not done anything to discipline the aggressive shareholder. The co-op’s proprietary lease states that objectionable conduct will not be tolerated. If the shareholder attacks again, could the board be sued? Can the aggressor’s lease be terminated?

A: Typically, when a verbal or physical confrontation happens in a common area such as a laundry room, each party involved will give a different version of events, replies the Ask Real Estate column in The New York Times. Therefore, a board of directors may have difficulty determining what actually happened and who is at fault.

If the shareholders involved in the dispute disagree about what happened and there is no hard evidence,such as a surveillance tape or an eyewitness account, the board can send a letter to the allegedly aggressive shareholder stating the accusation against him and reminding him that the alleged conduct violates the law and the co-op’s proprietary lease, says Steven Sladkus, a partner at the law firm Schwartz Sladkus Reich Greenberg Atlas.

Caution is advised. If the person accused of the assault is denying it and there is no proof, “the board shouldn’t become the judge and jury all of a sudden,” Sladkus says. “The board has to be fair about this if there’s no proof.”

If, on the other hand, there is hard evidence to support the victim’s claim, the aggressive shareholder’s lease could be threatened with termination for “objectionable conduct.” The proprietary lease will state how this could happen — a vote of the board of directors or the shareholders, or both.

New York courts typically will defer to a co-op’s decision to terminate a shareholder’s lease for objectionable conduct under the business judgment rule, as long as the board acts within the scope of its authority and follows the procedures in the proprietary lease, says Jennifer Karnes, who practices real estate law at Becker.

Lease terminations are serious matters, so the governing documents will probably contain strict provisions on how the board must carry them out. These steps can include a written notice to the shareholder and a special meeting where the shareholder can state his case.

And, yes, the board could face liability if it knew about an aggressive shareholder and failed to act.