In Emigrant Mtge. Co., Inc. v. Greenberg, NY Slip Op 50387(U) (D. Nassau County, 1st District March 8, 2012), the court considered a very important issue for co-op owners: whether the co-op owner could be evicted if he no longer owned his shares in the co-op itself.
The difference between owning a co-op and owning a condominium is that the co-op owner is given shares in the cooperative itself. On the other hand, the condominium owner is given a deed for the actual apartment that he purchases.
In the Emigrant case, the co-op owner pledged his stock as collateral for a debt. He defaulted and the creditor obtained the stock. The question was whether that also allowed the creditor to evict the former owner.
The Emigrant court first held that it had jurisdiction to evict the former co-op owner, notwithstanding the fact that the co-op itself (as opposed to the stock) was not owned by him. Even though the actual ownership solely involved stock, not realty, the court cited a number of cases that indicate that the ownership of stock in a co-op is effectively the same as ownership of real estate.
The court cited such examples as the fact that the sale of a co-op has been held to require writing under the Statute of Frauds, because it is a conveyance of realty. See Statute of Frauds (General Obligations Law 5-703); Maloney v. Weingarten, 118 AD2d 836, 837, 837, 500 N.Y.S.2d 320, lv. to appeal denied, 69 NY2d 608, 516 N.Y.S.2d 1023, 509 N.E.2d 358. Likewise, the shares of a co-op are not deemed to be securities for purposes of The Securities Act of 1933 and The Securities Exchange Act of 1934. See United Hous. Found v. Forman, 421 U.S. 837, esp854-860, 95 S.Ct. 2051, 2061-64, 44 L.Ed.2d 621 reh. Den., 423 U.S. 884. 96 S.Ct. 157, 46 L.Ed.2d 115.
In sum, the court held [a]s between the secured party and the defaulting tenant, the secured party has a superior right to the apartment and may seek to evict the defaulting tenant when his/her interest has been extinguished. Id. at 5.
Comments/Questions: gdn@gdnlaw.com
2012 Nissenbaum Law Group, LLC