—No Parking in Parsippany
“While it is understood that lessees who occupy their cooperative units may feel that they have a priority right to use the extra parking spaces because of the proprietary lease language that you cite—lessees "may enjoy in common with all other lessees the use of the common property"—the misconception from a legal point of view is that a sub-tenant's use of the common property is different from the use of the common property by the lessee under the proprietary lease. When a lessee under a proprietary lease rents his or her unit, the rights to use the common property flow to the tenant. The tenant, for this purpose, stands in the shoes of the proprietary lessee.
“The language you cite from the proprietary lease is very similar to language in the New Jersey Condominium Act, which provides that "the right of a unit owner to use the common elements shall be a right in common with all other unit owners ... to use all common elements in accordance with the reasonable purposes for which they are intended ..." Despite that language in the Condominium Act, tenants of unit owners would enjoy the same right to use the common elements as the unit owner, absent a provision in the governing documents to the contrary.
“We turn next to the issue concerning the expense of maintaining the second spaces that certain proprietary lessees enjoy. You indicate that there is an additional charge of $20 per month for use of the additional spaces, which is the same charge as for the primary space to which each proprietary lessee is entitled. You indicate that you would prefer that the cooperative determine the actual cost of maintaining these parking spaces through an analysis by the cooperative's accountant and use that calculation to charge the lessees who have second spaces. While there is nothing improper about that approach, there is also nothing in the law that requires it.
“The business judgment rule, a judicial rule used by courts to gauge the actions of corporate boards, provides that any judgment of the board will not be upset by a court if two standards are met. First, that the board is authorized by law or the corporation's governing documents to make the decision at issue and, second, that the board's decision is not the result of fraud, self-dealing or unconscionable conduct. Some courts have added a third standard, which is that the board's decision is "reasonable," though courts grant boards significant deference before finding that an action was "unreasonable." It is highly likely that the cooperative's bylaws give the board the right to determine the fees for parking spaces. It is assumed that there is no proof of fraud or self-dealing. The fee you describe would not be considered "unconscionable."
“Thus, the last line of inquiry by a court might be whether the decision to charge $20 per month is unreasonable. Initially the burden would be on you to show that it’s unreasonable. If that burden was met, the board could then have the opportunity to rebut your showing. Thus, if you wished to proceed further, you would have to show that the cost being charged is so out of scale with what the costs actually are, that the board is conveying an unreasonable benefit on the owners who have the second spaces to the detriment of the remaining shareholders. The board is not required to make this analysis with to-the-penny accuracy. This isn't a matter of showing that the actual costs, as compared to the parking charge, is off by 10, 20 or 50 percent, but that it's so far off that there is a material financial burden being placed on the remaining shareholders in the cooperative. This would be a very substantial burden to overcome.
“While you are certainly entitled to recommend to the board that it consider alternate methods of allocating the costs of maintaining the parking spaces, it would not appear as a matter of law that you would be successful in compelling the board to use a different methodology.”