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Adam Leitman Bailey, P.C. Wins Appeal of an Illegal Subletting Holdover Proceeding Utilizing the Novel Argument That Protracted Negotiations Extended the Cure Period

In 2008, the client saw an advertisement for a cooperative apartment for sale in Brooklyn. She learned from the seller’s broker that the apartment was being sold directly by the sponsor. This meant that if she purchased it for investment purposes, she would be permitted to rent out the apartment without the need to seek board approval and with no obligation to pay sublet fees to the board. The client represented to the seller’s broker that the purchase was an investment. The broker represented that, as long as neither the client nor a family member physically moved into the apartment, she would have an unfettered right to sublet it.

Just days after the closing, the seller’s broker personally located a tenant for the apartment and helped the client to execute a lease with the tenant to occupy the apartment.

Neither the client nor her family ever moved into the apartment and the client’s tenant resided there for two years without incident. Suddenly, the client received a notice to cure from the cooperative board. The board accused her of illegally subletting the apartment without seeking or obtaining board approval and of failing to pay sublet fees to the board.

At trial, in addition to arguing that the client was the holder of unsold shares, Adam Leitman Bailey, P.C. contended that upon receiving the notice to cure, and prior to the commencement of the holdover action, the client and her transactional attorney engaged in extensive settlement negotiations with the board. Thus, Adam Leitman Bailey, P.C. argued that the negotiations extended the tenant’s time to cure the improper sublet if any existed. This point was critical since the last time the subtenant was seen was after the notice to cure had been expired.

The trial court agreed with Adam Leitman Bailey, P.C.’s position, dismissed the holdover proceeding and found that the client was entitled to recover her legal fees. The sponsor appealed. Its purpose was to attempt to avoid paying legal fees rather than regaining possession.

The ploy proved unsuccessful when Adam Leitman Bailey, P.C.’s successfully argued in its brief and before the appellate panel that the negotiations had extended the cure period. This appears to be the first case that has applied this principle to a residential setting.

Jeffrey R. Metz represented the client on appeal. Christopher Halligan and Vladimir Mironenko represented the client at trial.

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