In many ways, shareholders in a residential cooperative corporation, who are issued a proprietary lease or occupancy agreement to permit them to reside within their apartments, are very similar to ordinary residential tenants. For example, a shareholder and the cooperative corporation are in a landlord-tenant relationship, with the rights and obligations of the parties established by the provisions of a proprietary lease. A shareholder’s “rent” obligations (commonly referred to as “monthly maintenance” payments) flow from the provisions of that agreement, and, in the event of a default by a shareholder, whether non-monetary or monetary in nature, standard landlord-tenant procedures must be followed in accordance with the lease and New York law.

However, a recent case by the Appellate Division, Second Department, has reinforced one important distinction between a residential rental tenant, and a shareholder in a cooperative corporation. Before we identify the distinction, it is necessary to first provide some statutory background.