Coops created by an HPD sale of City-owned buildings engaged in dispute over an obligation to share commercial space income. In 2003, the City conveyed 14 buildings, located on the West Side of Manhattan on 87th, 88th, 89th and 95th Streets. The buildings were to be converted Housing Development Fund Corporations (HDFCs), which are low-income residential cooperatives owned by tenant-shareholders . Three of the 14 buildings contained commercial space. Under the City’s conveyance, the City and the 14 buildings entered into an agreement for a portion of the commercial rental income to be paid into a reserve fund, which would be used to the benefit of all 14 buildings. So far, only $5,000 from the commercial rental income has been deposited into the reserve fund.
The City and the owners of six of the HDFCs without commercial income filed a lawsuit asking the court to enforce payments by the three HDFCs with commercial income. The City alleged that the three defendant-HDFCs were under a contractual duty to pay a portion of the commercial income into the reserve fund. The City cited reports, minutes from community board meetings, and other documents as proof that the three HDFCs with income from commercial space were under contract to make the payments which benefitted all of the HDFCs. The defendant-HDFCs denied the existence of a contractual obligation and argued that the purchase agreements failed to require them to make the payments.
The trial court, after a hearing, ruled in favor of the City and the plaintiff-HDFCs and entered summary judgment ordering the three defendant-HDFCs to make the payments.
The Appellate Division, First Department affirmed in part and reversed in part. The Appellate Division ruled that there was an issue of fact as to whether the contract had in fact come into existence between the three defendant-HDFCs and the six plaintiff-HDFCs. The Appellate Division, however, affirmed the lower court’s ruling that the Department of Housing Preservation & Development had authority to impose such a requirement if it indeed had done so. The Appellate Division sent the case back for a trial on whether the three HDFCs receiving commercial income breached the contract imposed by HPD by not sharing the income with the six HDFCs without commercial income.
City of New York v. 100 W. 88th St. Hous. Dev. Fund Corp., 32 N.Y.S.3d 67 (1st Dep’t 2016).
