of respondents' warranty-of-habitability defense and abatement counterclaim, which respondents
raise against the arrears they owe. This second issue consumed greater than 95% of the trial,
which was held over nine days, but it requires only a brief discussion.
I. The Escrow
Agreement
A. The Facts
On December 3, 2001, respondent Shearman entered into an escrow agreement
with petitioner cooperative corporation "as a guaranty to the Apartment Corporation of full
compliance with the terms of the Lease and House Rules." (Escrow Agreement at ¶1.)
Shearman agreed, under the escrow agreement, to deposit $30,267 and to maintain a balance in
[*2]that amount. The escrow agreement also provided that
petitioner would return to Shearman any balance remaining in the escrow account when she
would sell the apartment so long as she "fulfilled all of her obligations under the lease and this
[escrow] agreement." (Escrow Agreement at ¶2.) The escrow agreement further provided
that any amount that Shearman was required to replenish into the escrow account would be
considered "additional rent." (Escrow Agreement at ¶3.)
Paragraph 1 of the escrow agreement notes that the agreement's overall goal is to guarantee
Shearman's full compliance with the proprietary lease and house rules. Full compliance under the
escrow agreement means that Shearman would fulfill all maintenance obligations and pay all
assessments, rent, and additional rent.
In compliance with the escrow agreement, Shearman deposited $30,267 to guarantee full
compliance with the proprietary lease and house rules. When respondents stopped paying rent,
petitioner, with respondents' consent by virtue of a letter dated April 2003 from Shearman, used