JENNIFER--NO PROGENY?

Sometimes one sentence in a Court's decision means a clear-cut victory.

Here is a case in point. On June 11, 2002, the Court of Appeals, New York State's highest court, announced its decision in 511 West 232nd Owners Corp. v. Jennifer Realty Co. The New York Times Sunday Real Estate section, the popular bible of New York City real estate, devoted substantial space to the decision for two successive Sundays, nearly a record for any single decision.

And rightly so, for this case was to decide a most important point for every New York City building converted from rental to cooperative or condominium ownership. Does every sponsor or promoter of a cooperative (or condominium) plan make an implied contract with every purchaser of an apartment to sell all apartments in the building to resident owners as quickly as possible? This is an important point because, if such an implied contract exists in every case, it removes from the promoter the ability to rent vacant apartments at decontrolled rents when the market for sales is weak (as in the period 1989 to 1995) or when rentals are more profitable.

The trial judge found no such implied contract. The Appellate Division, the intermediate appellate court, found that there was. An appeal to the Court of Appeals followed.

Interest naturally ran high, both on the promoters' side and the apartment buyers'. The Council of New York Cooperatives and Condominiums engaged counsel and filed a friend-of-the-court brief; so did the Real Estate Board of New York, Inc., the trade organization of real estate brokers.

Our firm was retained to prepare and file a friend-of-the-court brief by the Rent Stabilization Association of New York, Inc. (known as RSA), and also by the Community Housing Improvement Program, Inc. (known as CHIP).

CHIP is a trade association that represents over 2,500 owners of residential apartment buildings in New York City. CHIP was founded in December, 1966. CHIP provides educational services to its members, and sponsors seminars, lectures and workshops on real property ownership and management. CHIP is actively involved in monitoring legislative and judicial developments affecting its members, and reporting and explaining legal developments to its members.

CHIP is or has been the property owners' voice on numerous government and civic bodies, including the Owners Advisory Committee of the New York State Department of Housing and Community Renewal, and the New York City Mayor's Advisory Committee on Child Lead Paint Poisoning. Many of CHIP's members are sponsors of cooperative and condominium conversions, or are holders of units in such conversions. Many also anticipate being involved in future conversions.

RSA is the largest trade association of residential property owners and managers in New York City. RSA represents approximately 25, 000 owners and managers of residential rental properties in New York City. RSA's members own or manage over one million residential rental units, regulated and unregulated, as well as cooperatives and condominiums. RSA's members range from small, relatively unsophisticated property owners to large-scale, professional, capable and experienced owners and managers. The vast majority of RSA's members are in the former category. RSA was incorporated in 1969, and provides advocacy for, guidance and instruction to, its members. RSA assists its members in complying with the impenetrable thicket, confusing not only to laymen but to lawyers, of legislation (State, Municipal and Federal), regulation, decisional law, and administrative interpretation that engulf the New York City property owner.

Our point was simple: in the thousands of pages of statutes, judicial and administrative decisions, regulations and opinions of administrative agencies that regulate every aspect of cooperative and condominium conversions in New York State, there is no hint that any such implied contract exists or ever existed. If it is to be invented, it is for the legislature or the Attorney General (in whom primary regulatory authority is vested by law) to invent it, not the courts. We cited legislative and administrative materials exhaustively in support of our clients' position.

The Court of Appeals recognized the merits of our position and refused to find a general, broad-spectrum implied contract. It left any such determination for another day. The Jennifer case is confined to the unique set of facts existing there, and there will have to be a full-dress trial to see if there is any merit to the claim that, in that specific case, any contract exists.

The winning sentence? The Court said "At this pre-answer stage of the litigation, we need not reach the merits of plaintiffs' contract cause of action and therefore do not address the issue of whether, as alleged, the sponsor impliedly promised to sell all its unsold shares".