COMMUNITY ASSOCIATION LAW SEMINAR
SIGNIFICANT DECISIONS OF 2013
April 8, 2014 – Holiday Inn Express, Centereach, NY
April 10, 2014 – Law Offices of Taylor, Eldridge & Endres, Smithtown, NY
April 23, 2014 – Law Offices of Taylor, Eldridge & Endres, Smithtown, NY
- RULE CHANGES
Baker v. 16 Sutton Place Apartment Corporation – Appellate Division, First Department
A shareholder sues his co-op corporation, claiming that the co-op’s decision to install a roof garden on the building was a breach of the covenant of good faith and fair dealing, a breach of fiduciary duty, and a breach of the proprietary lease. The court found that the absence of a roof garden was not an integral part of the lease. The court also recognized that the lease allowed for amendments, and the co-op Board had obtain approval for the roof garden by an amendment to the lease which was approved by an “overwhelming majority” of the shareholders.
Bottom line – Rules can change, and if the amendments are done properly, residents will be subject to those rules even if the rules were not in place when they purchased.
- ACCESS TO UNITS
York Towers, Inc. v. Kotick – Supreme Court, New York County
As part of a protracted legal dispute between two shareholders (the Koticks) and their co-op corporation, the shareholders complained that their air conditioning unit was making noise, which made it difficult for them to occupy the premises. The Board and superintendent entered the Koticks’ apartment when the Koticks were not home in order to listen to the noise they were complaining about. The Proprietary Lease allowed the Board “to visit and examine the apartment at any reasonable hour of the day…to make or facilitate repairs…” The Court refused to dismiss the trespass claim because the Board did not enter the unit to make or facilitate repairs.
Bottom line – A Board should always follow the rules, especially in an adversarial situation.
- LEASING RESTRICTIONS
Board of Managers of the South Star v. Grishanova – Supreme Court, New York County
Board brought an injunctive action to stop owner from using her condo unit as a “short term rooming house”. The Board claimed the owner was allowing an average of four persons per month to use her unit, some of whom showed the front desk international and out of state driver’s licenses upon their visit, in violation of the NYS Multiple Dwelling Law and the condominium By-Laws. The court found that the Plaintiff established the defendant’s disobedience of the By-Laws, and that the unit owner’s current use of the unit frustrated the purpose of the community and posed a potential threat to the safety of the condominium occupants. Accordingly, the court preliminarily enjoined the unit owner from letting, subletting or renting out her unit for less than 30 days and enjoined any visitor from staying in the unit for so long as the defendant was not using the unit as her residence.
Lesson learned – Rules restricting rentals, if clear, are enforceable.
- INDEMNIFICATION
Guryev v. Tomchinsky
Construction worker who sustained an eye injury while performing renovations inside a condominium unit sued the Unit Owner and Board for damages. The Unit Owner asserted cross-claims against the Condominium, and the Condominium moved for summary judgment, claiming that the Unit Owner was required to indemnify the Condominium against any and all such claims resulting from work performed inside of private units not under the Board’s control. The Unit Owner claimed that the indemnification clause contained in the renovation package submitted by him violated public policy. The court disagreed, holding that the Alteration Agreement signed by the Unit Owner included an express indemnification provision obligating the Unit Owner to indemnify the Board against claims for damages, injury or death arising out of the renovation work, and reiterated that the Board did not have authority to supervise, direct or control the work that caused plaintiff’s injury, and thus was not negligent.
Lesson learned – An indemnification clause can’t hurt.
- FAIR HOUSING ACT
East River Housing Corp. v. Aaron – Civil Court, City of New York
The Co-op Board brought an action seeking to evict the tenant for violating the proprietary lease by harboring a dog in the premises. Tenant asserted she suffered from depression and anxiety and therefore was entitled to keep the dog as a reasonable accommodation pursuant to the Fair Housing Act, the NYS Human Rights Law, and the NYC Civil Rights Law. The NYS Division of Human Rights (DHR) found that the evidence presented by the tenant did not support that the dog was necessary, only helpful, to her use and enjoyment of the home. The Civil Court then issued a stay of the eviction based upon the DHR re-opening the matter for re-consideration as well as a request from the Department of Housing and Urban Development for a stay.
Lesson learned – Successfully opposing a request for a comfort pet as an accommodation is theoretically possible, but not easy.
- PROPERTY MAINTENANCE
People of the State of New York (Town of Brookhaven) v. Strathmore Ridge Homeowners’ Association, Inc. – District Court, Suffolk County
The HOA was cited by the Town for the failure to maintain a fire alarm system, a misdemeanor. Eight years previous to this violation, there was a fire at the HOA which precipitated certain summonses being issued by the Town. At that time, the HOA entered into a stipulation whereby it agreed to properly inspect, test and maintain the fire alarm system. In the present case, the HOA now attempted to argue that the individual unit owners were responsible for maintaining the fire alarm system and not the HOA. The court found that the original developer installed the system, suggesting ownership by the HOA, and further found it “disturbing” that the HOA agreed to maintain the system in 2005 but was now claiming they it was not responsible for the system. The court found the HOA guilty as charged and directed the defendant to appear at the probation department for intake and preparation of a report to be presented at sentencing.
Lesson learned – Don’t fool around with fire alarm systems, both to save lives and to save face.
- PROPERTY MAINTENANCE
Konami v. Galleria Condominium
Condominium owner brought suit against 2 other unit owners, the Condominium, its property manager, and window manufacturer to recover damages incurred (over $100,000) after custom windows and part of the building exterior fell onto Konami’s enclosed terrace, severely damaging it and destroying certain other personal property. The custom windows had been installed by the upstairs unit owners. The plaintiff alleged that the defendants were negligent in their installation of the windows and in the maintenance of the building. The Condominium moved to dismiss the case, asserting that, because the By-Laws limit the Condominium’s obligation to repairing the Common Areas and expressly excluded personal property, there was no legal basis upon which it could be held liable for damages. The court disagreed with the Condominium, holding that, while the By-Laws do limit the Condominium’s obligation to make repairs to the Common Areas and expressly excluded any liability with regard to personal property in the event the building is damaged by fire or other casualty – that does not relieve the Condominium, as a matter of law, from being liable for damages to unit owners’ personal property if caused by its negligence.
Lesson learned – By-Law provisions regarding Board responsibilities need to be applied in the proper context.
- PROPERTY MAINTENANCE
Pedalino v. Woodhill Green Condominium – Supreme Court, Dutchess County
A condominium unit owner sued the Condominium Board to recover damages incurred as a result of a broken and leaking pipe located under her unit, which burst and caused significant damages and mold contamination inside of her unit. The Board moved for summary judgment and to dismiss plaintiff’s complaint, alleging that it had done everything required of it to investigate, correct and repair the reported leak, and thus was not negligent. It is undisputed that the pipe in issue was located in the Common Areas and that the damages to plaintiff’s unit were proximately caused by the broken and leaking pipe. The court granted the Board’s motion and dismissed 5 of the 6 claims asserted against the Board (e.g., gross negligence, breach of fiduciary duty, breach of quite enjoyment, nuisance, etc.), finding that the unit owner failed to show that the Board’s efforts to repair the problem were not made in good faith and in furtherance of the Condo’s legitimate interests. However, the Court refused to dismiss the claim of negligence, finding that the Board provided no evidence as to when the leak was first discovered and how often the pipe had been inspected.
Lesson learned – You can’t please everybody all the time, but you still have to try.
- BOOKS and RECORDS
Pomerance v. McGrath – Appellate Division, First Department
A condominium unit owner seeks the names and addresses of the other unit owners in connection with an election. The Court finds that while the Condominium Act gives unit owners the right to review certain books and records, it does not list the names and addresses of unit owners as a document that is reviewable. However, the Business Corporation Law does allow co-op shareholders access to this information and the Court notes that this right existed at common law. Thus, the Court applies the same rationale to condominium unit owners.
Bottom line – Courts will often rule in favor of disclosure of information.
- BUSINESS JUDGMENT RULE
Goldstone v. Gracie Terrace Apartment Corporation – Appellate Division, First Department
A co-op shareholder suffers damage to her unit, including flooding and mold, when a 10,000 gallon water tank above her unit overflows. The renovation and repair plan adopted by the Board would result in a 50 square foot reduction in floor space of her apartment, which was originally more than 1,400 square feet. The shareholder submits an alternative proposal which preserves the size of her apartment but which would result in substantial renovations to the building and substantial expense. The court finds that the diminution of space is “de minimis” and that the shareholder can be compensated monetarily for the loss. The court also found that the Board properly acted pursuant to its fiduciary duty to the corporation in not adopting the more expensive renovation proposed by the shareholder.
Bottom line – In some circumstances, the rights of an individual may need to be subordinated to the welfare of the community.
- COLLECTION of ASSESSMENTS
Board of Managers of the 25 Charles Street Condominium v. Seligson – Appellate Division, First Department
At a 2007 meeting, the members of the Condominium Board adopted a budget. This budget included assessments, late fees and interest to be assessed to a certain owner who had not paid since 1994. The owner refused to pay, claiming the Board was without authority to make the assessments. Subsequently the Board brought an action seeking a declaration that their actions were valid. The court ordered that another Board meeting be held in 2009, at which the unit owner was again found to be delinquent. The Court found the action of the Board to be valid, stating the Bylaws authorized the assessments as well as the accrual of interest on the non-payment of assessments. However, the court also found the Board waived its ability to collect interest and late fees where the amount of time that passed between the accrual of interest and when the Board took action to collect (14 years) was not “prompt” as demanded in the Bylaws.
Lesson learned – Don’t wait too long to pursue non-paying homeowners.
- SPECIAL ASSESSMENTS
40-50 Brighton First Road Apartments Corp. v. Kosolapov – Appellate Term, Second Department
The co-op corporation imposed a special assessment to finance repairs to the façade of the building. A shareholder opposed the assessment, claiming that the repairs were not needed, the Board should have financed the expense, and the assessment was actually needed to balance a shortfall in the co-op’s annual budget. The Court found that the Board had considered and rejected financing as not in the best interest of the co-op, and while the special assessment was used to cure a budget shortfall and replenish reserves, these measures were required because budget and reserve funds had been used to pay for the repairs. The assessment was, thus, an “indirect financing” of the façade repairs.
Bottom line – The business judgment rule is alive and well.
- RULE ENFORCEMENT
Tucciarone v. The Hamlet on Olde Oyster Bay HOA – Supreme Court, Nassau County
Bamboo from Tucciarone’s property grew onto a neighbor’s property as well as the HOA common property and the neighbor sues Tucciarone and the HOA. In an attempt to get Tucciarone to remove the bamboo from the neighbor’s property, the HOA fines Tucciarone thousands of dollars and then denies him access to the community by car. The nearest parking is a mile away and Tucciarone brings suit against the HOA, objecting to the HOA actions. The Court notes that the HOA has submitted no evidence that the Board’s decision to fine Tucciarone and to deny him access was properly reached – no notice of meeting, no minutes, and no resolution. The Court is also bothered by the Board’s attempt to force Tucciarone to settle with the neighbor.
Bottom line – All actions by a Board must be taken at a meeting and action by the Board should always be documented.
- WITHHOLDING BOARD CONSENT
Kaplan v. Park South Tenant’s Corp. – Supreme Court, New York County
Co-op shareholder brought suit against Board after it refused his application to make certain repairs to the inside of his unit (installing an exterior air conditioner and 3 condensers on the private terrace; creating 2” holes in an exterior wall to connect it with the interior; and relocating cable conduits within the interior walls), and seeking to enjoin the Board from taking any further action to prevent him from making said renovations. The shareholder argued that, while the Proprietary Lease does require the Board’s written consent before any renovations may be made – the Board’s consent may not be unreasonably withheld, and that the Board’s denial of his minimal application was in fact, unreasonable. The Board asserted that the proposed work would violate the House Rules, that this kind of substantive work on and in the building was “contrary to longstanding board policy,” and that it was reluctant to grant the application because of the fear that it would set a precedent for similar applications from numerous other shareholders in the future. The court sided with the shareholder, a 73 year old man who suffered from cardiovascular conditions that required him to reside in an adequately cooled residence, finding that the proposed changes would have minimal, if any affect on the building or other shareholders, and that the wiring sought to be replaced inside was nearly 50 years old and fragile, and most importantly, it disregarded what it described as the usual “but what if everyone else asks to do the same thing?” argument. The court further stated that in such an event, the Board should do its duty to evaluate all such requests fairly and objectively – as the court did not see the logic of denying a benefit to one person simply because not everyone else can have the same benefit – “unless everyone else is eight years old.” The court granted the plaintiff’s application and issued the requested injunction preventing the co-op from taking any act to prevent the plaintiff from completing the proposed work.
Bottom line – Serving on a community association board is an art, not a science.
