The Board of Directors has a fiduciary duty to the shareholders to act in the best interest of the Coop, and should discuss this matter with a lawyer as it is a complicated one.
Most Coop leases contain a provision authorizing termination of a shareholder's lease if the Leesee's conduct is sufficiently objectionable. The lease should also contain a provision that a special meeting can be called to terminate a lease (often by a two-thirds vote) in the case of sufficiently objectionable conduct. The lease will specify whether the Board itself can terminate the tenancy or whether the shareholders themselves need to terminate the tenancy (often by 2/3 or 3/4 vote).
This sort of situation occurred in 40 West 67th Street v. Pullman (100 N.Y.2d 147  ), where the Court of Appeals ruled that where a cooperative board acts for the purposes of the corporation, within the scope of its authority, and in good faith, that the courts should defer to the cooperative board's determination that the conduct is objectionable in terminating a lease.
One problem the Board faces, is that if the Board doesn't act, the shareholder who is being disturbed may be able to sue the Board for failing to act in the best interest of the Condominium complex, which is why I say again that the Board really should hire a lawyer, at least to get preliminary advice.
I, like many lawyers, offer free consultations.
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Dear Board Member:
There are two widely utilized procedures for dealing with the problems associated with a nuisance shareholder and a shareholder whose conduct is objectionable. The proprietary lease provides for the Board to serve a notice to cure upon the shareholder based upon the default provision of the lease, and in the event the shareholder does not correct the behavior, the lessor should terminate the lease and commence a summary holdover proceeding. If the apartment is mortgaged, the notices must also be served on the shareholder's bank or lender as required by the Recognition Agreement. The eviction proceeding is in the New York City Housing Court. At a trial, the cooperative must prove the events of default that culminated in the service of a notice to cure and termination of the lease. Typical defenses by shareholders are based on grounds that the cooperative waived the right to object to the conduct because the cooperative continually accepted maintenance payment from the shareholder with knowledge of the alleged breach.
The right to utilize the summary holdover proceeding is provided by statute at New York Real Property Actions and Proceedings Law Section 711 (1).
Using this method requires that"*** the landlord shall by competent evidence establish to the
satisfaction of the court that the tenant is objectionable.***"
That clearly requires a trial and a satisfactory conclusion for the cooperative to win, and the shareholder would have the right to appeal an adverse judgment by the trial court to the Appellate Term, First Judicial Department.
The other method, is one that eliminates the Housing Judge deciding that the cooperative proved the objectionable conduct. This procedure (now known as a Pullman Case) is useful in a case such as yours where the cooperative engaged in a long delay in acting to alleviate the noxious intrusion of the neighbor's noise and behavior and has the advantage of avoiding the burden of proof required in a Housing Court proceeding. This process allows the cooperative in the exercise of its business judgment, to bring an in-house hearing concerning the behavior of the nuisance neighbor, where with proper due process notices and an opportunity to be heard, the shareholder is charged with objectionable conduct that allows for the Board to terminate the lease on a vote of the shareholders.. The determination of the cooperative is not subject to review by a judge in the Housing Court, and if the shareholders vote to authorize the board to terminate the proprietary lease based on objectionable conduct is made by the Board, the only review of the Board's decision is made by means of an Article 78 proceeding in New York State Supreme Court. The Board is generously protected in making the decision to terminate the lease in this manner by the effect of the Business Judgment Rule, and if the decision of the Board is upheld, or if the shareholder does not challenge the determination to challenge the termination of the lease, Housing Court has limited jurisdiction in the subsequent eviction proceeding, or the Board may begin the eviction proceeding in the Supreme Court.
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The Board may also be found liable in damages to the shareholder who suffered the injuries caused by the objectionable shareholder while the Board did not take any legal steps to prevent the continued infliction of the injury.
Your attorney should have brought these options and issues to your attention when the shareholder first complained about this bad behavior, so you have a lot of issues to deal with.
Hire an attorney.
The answer provided to you is in the nature of general information. The general proposition being that you should try to avoid a bad outcome if you can.