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BLOG / 12.16.22 /Kenneth R. Jacobs

HOW TO: Pass a Controversial Amendment to the Proprietary Lease

Ken Jacobs joins Habitat Magazine to discuss how to pass a controversial amendment to the proprietary lease.

Legally and practically. The way to pass a controversial policy, such as a smoking ban, is to amend the proprietary lease. The proprietary lease is considered a contract under New York law, and therefore the parties to the contract, which are the shareholders, can amend it. Usually, the lease requires a supermajority of 67% or 75% of all shareholders to amend it. So in order to accomplish the amendment legally, the board has to create the proposed amendment, put it in a notice of meeting to the shareholders, call the meeting and have the shareholders vote. That’s the legal way of handling it — but not the practical way, because people are inevitably going to have concerns.

Laying the groundwork. So what I would suggest is that the board first determine whether there’s a chance of getting this kind of support from the shareholders — either through discussions with them or a straw poll. Then when the board proposes the amendment, I suggest calling a town hall or a Zoom meeting and having a lawyer there to answer questions. The first question is going to be: “Is it legal to ban smoking in apartments?” The answer is: “Smoking is recognized as a legal nuisance by a number of courts. And because the proprietary lease is a contract, the shareholders have the ability to set the terms of that contract, and that would include which activities are allowed inside your apartment.”

If at first you don’t succeed… You may not get that required supermajority at the initial meeting. The majority of the shareholders present can vote to adjourn the meeting for another 30 days, and the board can use that time to gather additional proxies from shareholders in order to get to that threshold. Two keys here are education and patience. Boards can’t just assume that everybody is going to go along with them. They have to give people a chance to express their concerns and respond to them between the date they send out the proposal and the date of the vote. It may not work the first time, but you could try it again in six months or a year.