Pop icon Madonna has reportedly filed suit against her chichi Central Park West co-op Board for blocking her purchase of her neighbor’s apartment, which apartment she intended to combine with hers. She has filed suit in Manhattan Supreme Court seeking to overthrow the Board’s decision.
I have not seen the court documents, but, as a New York attorney who has run up against this issue, I say she has a good case. It is one thing to deny her combination of apartments but quite another to block her initial purchase. She is, after all, an owner in the building and presumably financially reliable.
My guess is she was completely open with her plans to buy the apartment for the purpose of combining the units. A better strategy would have been to simply purchase the apartment and after closing, submit an application to combine the units. Now, she still would have risked a denial— but it’s not set in stone. Boards can be little dictatorships but they are only temporarily in power. As new Boards are elected, policies change. A subsequent Board might have approved the plans.
Source: New York Post.
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Technorati Tags: co-op, board rejection, madonna, new york, real estate, legal
JOE (or is it Rudy?) — What do you see as the potential legal claim? If the board has *some* rational basis for a decision and there is no (legally) discriminatory motive, why would a court intervene?
Of course, it is impossible to speculate effectively without some facts, but I would assume it more likely that the board has some reason that is facially valid, than to assume otherwise.
Maybe they have not permitted combinations in the past. Maybe they have had difficulties with some recent extensive renovations. Maybe they are concerned with one shareholder holding too many votes. Maybe they detect in The Material Girl a contentious attitude, such that they can reasonably predict that she will be (more of) a disputatious shareholder if she is trying to do a large renovation / combination.
When I was president of a coop board, we advised a seller / shareholder (before a contract was signed) that we were not inclined to approve a certain potential buyer because we perceived the potential buyer as a potential jerk based on the potential buyer’s attitude and questions about seeking approval to build up through the roof. Could we prove that the potential buyer *was* a jerk? No way. But we did not want to run that risk.
Yes, coop boards can be arbitrary and capricious. But they can also make judgment calls that they believe are in the best interests of the coop itself that disappoint individual shareholders.
But for her status as already a shareholder, this would be a no-brainer: *of course* they can turn her down (so long as not a civil rights violation, etc). Not sure why her status as a current shareholder should change that.
I am disappointed in the World Wide Web today, as I did not find the actual court filing in a quick Google search. It’s out there in the public record.
Yes, I think the Board can reasonably decline the combination of apartments. So, if that’s her only ground, the Board will likely win.
But, if she wants to fight the denial of her purchase (without regard to a combination), I think she has a great chance of winning because courts in New York apply what’s called the “Business Judgment Rule” to coop Board decisions. This means that as long as there is a reasonable business basis for the decision, the Board’s judgment will not be overturned by the court. This gives the Board a lot of latitude and discretion as to what’s reasonable. “Reasonable” in the context of the rule generally means financial repercussions– ie, higher security cost, higher insurance– all the usual reasons for turning down celebrities who wish to purchase (Madonna I believe was turned down before at another co-op). Now here’s the kicker why she wins (again, only on the purchase, not in conjunction with the combination)– she is already an owner! Any concerns on security, insurance etc do not apply. If she was not an owner, they can easily turn down her down.
It will all depend on how her lawyers frame the complaint. If they’re smart, they’ll argue strictly on the purchase, not the purchase w/combination. If she applied to purchase w/intent to combine, that decision will cost her. As I said, I would have advised her to just purchase and after closing apply to combine
Hope this clears it up a bit.
Oh yeah, almost forgot– it there is any other owner in the building who owns more than 1 apartment– bam! slam dunk win. It would be hard to argue it’s reasonable to forbid Madonna to own 2 apartments if the Board allowed others to do so.
Again, all this is speculation without seeing the court documents
–joe
I want to get a copy of the complaint but it is not included on New York Supreme Court site, any ideas?
Tracy
If you are in Manhattan, or know someone there, go to the Supreme Courthouse at 60 Centre Street (downtown near City Hall). In the basement is where you can look up a case by plaintiff’s last name (Ciccone) — Madonna’s legal name is Madonna Louise Veronica Ciccone. Get the case number (Index No.) and fill out a request form to “examine the file” and hand it to the clerk. It’s a public record so the clerk will get it for you. Good luck. Let us know what you find.