COMMUNITY ASSOCIATION SEMINAR
CASE LAW UPDATE
Significant Legal Decisions of 2018
For Board members of Long Island
Condominiums, Co-ops and
Homeowners Associations
April 16, 2019 – Villa Lombardi’s, Holbrook, N.Y.
- SPECIAL MEETINGS
Factor v. Golf View Condominium I– Supreme Court, Richmond County
A November 2017 special meeting of the Condominium Board of Managers was held to fill two vacancies after the president and vice president resigned. The meeting and its outcome were contested, and the parties agreed to hold a September 2018 special meeting of the homeowners to elect new Board members. However, one party called for an August special meeting of the homeowners, which was also contested. The September meeting was never held and litigation ensued.
The Court ruled that the November 2017 Board meeting was a nullity. The By-Laws require a special meeting to be called by the President or upon request of three Board members, and neither of these conditions was met. The notice of the meeting was sent by e-mail, which was also not permitted by the By-Laws. The August 2018 meeting of the homeowners was also deemed a nullity since it was called by persons not properly elected to the Board, and because the proper procedures for calling a special meeting of the homeowners were not followed.
The Court ordered that an election meeting, to be supervised by an independent ballot association, be held in April 2019.
Takeaway – Rules are made to be followed.
- ANNUAL MEETINGS
Green v. Cristancho– Supreme Court, New York County
At a Housing Development Fund Corporation, a special meeting was called for April 2018 to elect new members to the Board of Directors. The results of the election were contested due to claims that certain shareholders were not in good standing and thus not eligible to vote.
The Court found that one of the shareholders who voted at the meeting was indeed not in good standing. However, the conduct of the election was monitored by an independent party (Neighborhood Housing Services of NY City) and the Court ruled that a minor procedural defect
would not be sufficient to overturn the election and cancel out the will of the community. There was also evidence submitted to the Court that the community was not being well run and was in dire straits financially. The Court suggested that the community could find a better use of its resources than to continue with litigation.
Takeaway – Board’s should not fiddle while Rome burns.
- SECOND-HAND SMOKE/ENFORCEMENT
Board of Managers of 400 Central Park West Condominium v. Henriquez-Berman – Supreme Court, New York County
The Board of the condominium initially brought an action against owners of a unit to, among other things, stop them from smoking marijuana in their unit, and allowing smoke to permeate into the common areas and neighboring units. The court granted the Board’s request for a preliminary injunction prohibiting the owners from allowing smoke to permeate into common areas and other units of the building. However, the owners continued to smoke in violation of the court order, and the smoke continued to infiltrate areas outside the unit. The Board then sought a permanent injunction as well as an order of contempt against the owners.
Upon offering a showing of considerable evidence that the owners continued to create a nuisance, despite being asked to stop, the court granted the Board’s requested relief. The Court issued a permanent injunction prohibiting the owners from allowing smoke to emanate from the unit, finding that the owners violated a right and are likely to continue under breach of contract theories and nuisance law (finding that the owners were in breach of contract as the smoking interfered with the peaceful possession of other unit owners). It found that the exposure to second-hand smoke could cause irreparable injury, meaning that money damages would have been inadequate to address the complaints. It also found that the harm to the Board and other residents far outweighed any loss the owners might suffer if they were prevented from smoking in their unit.
Additionally, the Board sought to hold the defendants in contempt and for sanctions against them, which the court awarded. The Board submitted proof that the defendants failed to comply with the 2017 court order,and that the residents and employees of the condominium have been prejudiced by the owners noncompliance, which has caused them to continue to suffer the nuisances created by the owners, and has caused the Board to incur the additional expenses associated with this action. Under these circumstances, the court found the owners to be in contempt. The court ordered that the owners be fined in the amount of the legal fees and costs incurred by the Board in connection with obtaining the 2017 preliminary injunction, as well as those legal fees and costs incurred by the Board in bringing this application for contempt.
Takeaway – If at first, you don’t succeed, you may have to try, try again, to obtain further relief from the court upon an owner’s continuing violation of the rules.
- DEFAMATION
Board of Mgrs. of Brightwater Towers Condominium v Shlivko– Supreme Court, Kings County
The Condo Board of Managers commenced this action against the defendant for defamation based upon a series of highly unflattering emails she sent to 400 other residents of the Condo, followed by her aggressively confronting and screaming at a member of the Board in the Condo’s lobby, prompting this suit. More specifically, inside of 2 weeks she sent 5 emails to the community containing numerous inflammatory allegations against the Board, initially complaining about their purported corruption and lack of trustworthiness, and growing bolder with each email to the point where she declared the owners were all suffering emotional and monetary distress “because of the Board’s illegal actions,” and going so far as to accuse them of wasting community funds on lawyers to cover their illegal deeds, and outright theft that would ultimately result in the Condo going bankrupt and the owners losing their homes and the value of same.
The court dismissed the Board’s complaint against Ms. Shlivko, reiterating that “a statement that is deemed a “pure opinion” is not actionable because “expressions of opinion, as opposed to assertions of fact, are deemed privileged and, no matter how offensive, cannot be the subject of an action for defamation.”
Takeaway – Choose your battles – and the tools available to you, wisely – you never know what the court will do.
- NUISANCE
Knapp Road/Remsen Road Homeowners Association v. RC Pulsars of WNY, Inc.– Supreme Court, Erie County
Benjamin Miles was the owner of property neighboring the Knapp Road/Remsen Road Homeowners Association. Miles leased his property to RC Pulsars of WNY, Inc. Miles obtained a Special Use Permit from the Town of Pembroke to allow Pulsars to fly radio- controlled model aircraft over the property.
Homeowners in the Association complained to the Town, Miles, and Pulsars about a near constant high-pitched noise from dawn until dusk during the eight-month flying season. They claimed that the planes interfered with the enjoyment of their properties in numerous ways. The homeowners complained that during the flying season planes flew over their homes, that they needed to shut their windows due to the noise, that they were unable to converse both inside and outside their homes, and that planes crashed into their yards. This interference lasted for several years.
The Association brought an action against Miles and Pulsars for private nuisance. In order to establish a claim of private nuisance, it must be shown that “(1) the Defendant interfered with the Plaintiff’s right to enjoy his land, (2) the interference was substantial, (3) the Defendant’s conduct was intentional, and (4) that such conduct was unreasonable under all the circumstances.” The Court found that based on the homeowners’ testimony, the Association established its claim of private nuisance and enjoined Pulsars from flying model airplanes at Miles’ property.
Bottom line – Substantial interference from neighboring properties can constitute a nuisance.
- COMMON ELEMENTS
McDonald v. Whitney Highland Homeowners Association, Inc.– Appellate Division, Fourth Department
The plaintiff homeowner’s home was flooded after a severe rainstorm. She claims that the damage was due to the failure of the HOA to properly maintain a drainage pipe located underneath her unit. The HOA Declaration required the HOA to maintain any pipes that service more than one unit, with the homeowner responsible for maintaining pipes that service only that home.
The Board’s plumber testified, at his deposition, that the drainage pipe was located within the footprint of the plaintiff’s unit and provides drainage for that unit alone. Plaintiff’s engineer, however, claimed that the pipe served as a drainage mechanism for the entire building of five units. The Court stated that, if the pipe provided a benefit to more than one unit, it may be a common element for which the board is responsible.
Takeaway – Engineers may be worth their weight in gold. Plumbers…not so much.
- FINES & SHORT-TERM RENTALS
Vidov v Morton Sq. Condominium– Supreme Court, New York County
In this case, the owner of a condominium unit brought an action against the Board seeking a declaratory judgment that fines imposed on her for using her unit as an Airbnb rental were void.
The Board alleged that the owner rented out her unit on Airbnb, in violation of the Condominium’s by-laws, for 119 nights. The Board fined the owner $1,000 for each night that the unit was rented out, for a total of $119,000. The Board argued that the fine was meant to act as a deterrent since it was seeking $300 more than the $700 the owner was collecting on the unit, per night it was rented.
The court held that where a community’s bylaws authorize its board to impose fines upon an owner for violations of the bylaws, the board’s determination will be protected under the business judgment rule (as long as the determination was made in good faith and reasonable). However, while the court found that the Board had the authority to fine, it did not provide the court with any authority to impose such a large fine. As a result, the court held that basing the fine on the amount that the unit owner earned was confiscation, and it annulled the fine as unreasonable.
Another point the court made was that while the owner claimed that the Board did not have proof of 119 individual nights of transient occupancy, her Airbnb listing left little doubt she engaged in at least some wrongdoing.
Takeaway–Fines are meant to deter an owner from violating the governing documents, and not meant for the Board to profit from the illegal behavior.
- FINES & SHORT-TERM RENTALS
Board of Managers of Downtown Club Condominium v. Sun– Supreme Court, New York County
The Board commenced an action against a condominium unit owner for, among other things, a permanent injunction prohibiting her from renting out her unit on a short term basis in violation of the community’s bylaws, and for fines for the violation of the condominium’s bylaws prohibiting rentals for periods of less than 30 days. The Board alleged that the unit was rented out or sublet on numerous occasions for periods of less than 30 days at a time. The Board twice imposed fines of $1,000 upon the owner for the violation of the bylaws, totaling $2,000.
At a hearing, the managing agent produced evidence that short term rentals are not allowed by the governing documents, the Board’s written policy regarding short term rentals, and copies of screenshots on the internet advertising the unit for rent on sites such as VRBO and HomeAway. Account statements reflecting the fines that had accrued were also submitted.
The Court held that where a condominium’s governing documents authorize the board to impose fines upon a unit owner for his or her violation of the bylaws, the board’s determination to impose such fines is within its inherent power and protected by the business judgment rule as long as the determination was made in good faith, and the fine is not confiscatory.
Here, the court found that the two $1,000 fines for illegal use of the unit as a transient hotel over a period of more than one year were considered reasonable, and not confiscatory.
Takeaway – Fines may be upheld where they are imposed to deter improper conduct and are akin to a “slap on the wrist” as opposed to a way for the Board to profit.
- NUISANCE
Hirschhorn v. Board of Managers of 169 Hudson Street Condominium– Supreme Court, New York County
Jason Hirschhorn was a unit owner at 169 Hudson Street Condominium. Hirschhorn repeatedly complained to the Board about loud noises and vibrations emanating from the unit directly above his which was owned by Jennifer and Nicholas Vorhoff. The Board investigated and verified that the Vorhoffs’ unit was in compliance with the Condominium’s rule that 75% of the unit be carpeted. The Board took no further action in response to these complaints. Hirschhorn then brought an action against the Vorhoffs for nuisance and against the Board for breach of contract and breach of fiduciary duty.
In order to establish a claim for nuisance, a Plaintiff must show “(1) an interference substantial in nature, (2) intentional in origin, (3) unreasonable in character, (4) with a person’s property to enjoy land, (5) caused by another’s conduct in acting or failure to act.”
The Court found that Hirschhorn failed to establish that the noises he complained of were not incidental to normal apartment dwelling. Hirschhorn had alleged in his complaint that the noises at issue were footsteps and children running. The Court stated that these types of noises were not unreasonable and did not constitute a private nuisance.
With respect to the claims against the Board, the Court found that the fact that the Board did not take any action beyond verifying that the Vorhoffs’ complied with the carpeting rule did not constitute a breach of contract. The Court also found that there was no breach of fiduciary duty because the Board, as opposed to the individual Board members, owed no fiduciary duty to unit owners.
Takeaway – Boards are not required to take action against noise complaints beyond what is required in their governing documents and House Rules.
- COMMON CHARGES and WAIVER
Hall v. Windbrooke Home Condominium– Appellate Term, Second Department
Mr. Hall commenced this small claims action against the Board to recover $4,945.98 in common charges he paid to the Condo for over a year and half (from September 1, 2014 through January 31, 2016) because his unit had been totally destroyed by fire through no fault of his own, and thus he was entitled to an abatement of the common charges for the period until the reconstruction of his unit. He also argued that the Condo Board had breached the bylaws when it applied for a variance that caused an additional delay in the reconstruction of his unit. The Board of Managers argued that the bylaws do not permit the abatement of common charges and that its decision to apply for a variance was protected under the business judgment rule. The small claims court agreed with Mr. Hall, but its decision was reversed by the Appellate term, which agreed that nothing in the by-laws allowed an owner to cease making the common charges required of all owners. It further found that the business judgment rule covered the Board’s decision to apply for a variance, that it was done in good faith and within the scope of its authority for a legitimate corporate purpose.
Takeaway – EVERYONE must pay their Common Charges, period!
- COMMON CHARGES and SPECIAL ASSESSMENTS
Board of Managers of 111 Hudson Street Condominium v. 11 Hudson Street, LLC, et. al.– Supreme Court, New York County
The Condominium Board imposed a special assessment of $25,000 to be used for legal fees and expenses for ongoing litigation. The Board also approved an increase in common charges in the amount of $227,000 to fund future legal fees anticipated in that same litigation. The owner of the commercial unit refused to pay its share of both these fees, claiming they were not properly authorized.
The Court found that a question existed as to whether the common charge increase was to be part of the “general operating reserve” or whether it was an expense “not anticipated” when the budget was compiled. The answer to this question would determine whether approval of the Board or the homeowners was required.
However, the Court did find that the Board’s imposition of the special assessment was proper. The By-Laws provided the Board with the authority to impose assessments of up to $25,000 without requiring homeowner approval.
Takeaway – When your governing documents are ambiguous, satisfying the higher standard will usually be the safer course of action.
- BREACH OF FIDUCIARY DUTY
Stinner v. Epstein– Appellate Division, Second Department
A New York City co-op building suffers a bed bug infestation, and plaintiff claims it took the Board ten months to hire an exterminator to address the issue, resulting in plaintiff incurring expenses. Plaintiff also alleges that the Board’s foot-dragging was due to a $25,000 payment to a Board member for water damage to his apartment.
The defendant Board members motion to dismiss the breach of fiduciary duty claim is denied by the trial court and affirmed by the Appellate Division. Not only is the business judgment rule not available to Board’s that have acted improperly, but personal liability may also attach if Board members treated shareholders unfairly.
Takeaway – Avoid impropriety – and even the appearance of impropriety.
- BUSINESS JUDGMENT RULE
280-290 Collins Owners Corp. v. McCaskill– City Court of New York, Mount Vernon
Nancy McCaskill was a shareholder in 280-290 Collins Owners Corp. At the time she purchased the apartment in 1998, there was a washing machine installed in the apartment. In 2014, the Board enacted a House Rule prohibiting washers and dryers to be used or kept in any apartment since it had been determined that the plumbing systems in the building could not handle the use of washing machines. McCaskill installed a new washing machine in her apartment in 2017. On June 9, 2017, the washing machine caused a flood in the apartment. McCaskill then replaced this washing machine with another new washing machine. The Board demanded that McCaskill remove the washing machine from the apartment which she refused to do.
The co-op then brought a holdover proceeding seeking to terminate McCaskill’s proprietary lease on the grounds that she had violated the terms of her lease by installing a new washing machine in her apartment. McCaskill claimed that her continued use of washing machines in her apartment was permitted due to a grandfathering rule.
The Court found that the Board’s enactment of the House Rule at issue complied with the Business Judgment Rule since the Rule was for the well-being of the cooperative and the Board acted within the scope of its authority and in good faith. The Court noted that the parties had not agreed that McCaskill had the right to purchase a new washing machine in the event the washing machine in the apartment at the time the House Rule went into effect broke. The Board was therefore within its rights to demand that McCaskill remove the new washing machine and to seek to terminate McCaskill’s lease when she did not comply.
Takeaway – Reasonable rules will be entitled to protection under the Business Judgment Rule.
- DISPLAY OF THE FLAG
Board of Managers of Clinton West Condominium v. Desmond– Supreme Court, New York County
The Board of Managers of Clinton West Condominium sued Mr. Desmond seeking a preliminary injunction to allow the Condo access his unit to remove a U.S. flag and flagpole they contend he improperly installed to the exterior of the building in violation of the Condominium’s declaration, by-laws, and rules.
Desmond argued that his right to fly the American flag is enshrined in the NY Condo Law (Real Property Law §339(j)), which states in pertinent part that “no action or proceeding for any relief may be maintained due to the display of a flag of the United States measuring not more than four feet by six feet. It is uncontested that his flag was well within the size limit.
The Board asserted that the quoted section of the Condo Law does not preclude it from bringing an action to require that a flag be removed from the building’s common areas, but rather restricts a condominium’s board from enacting or enforcing a by-law or rule which would restrict a unit owner from displaying a flag within the confines of that unit owner’s own unit. They also argued that the statute only prohibits the board from preventing a unit owner’s display of the American flag; it does not grant the unit owner a free license to trespass on the community’s common areas; thus he is free to display the flag within the confines of his unit and the Board has not prohibited that right. Additionally, the Board showed that the flag and flagpole brackets have not only damaged plaintiff’s property, they also hang over the common areas and pose a threat to the general public as well as other unit owners.
The court agreed with the Board, holding that the Condominium Act prohibits the board from preventing a unit owner’s display of the American flag, but does not prohibit the board from enacting rules and regulations relative to the location and installation of any personal item which may interfere with other occupants or create a nuisance in the Common Elements. Further, the Board’s objection didn’t concern his display of the flag, but rather the location and installation of the flag and flagpole on the exterior of the building. He is still free to display the flag from within the confines of his unit.
Takeaway – Life is good when you know the rules, live by them and apply them equally and fairly.
- BOARD INTERVENTION IN THIRD PARTY DISPUTES
Francis v. Kings Park Manor, Inc. et. al.– United States Court of Appeals, Second Circuit
In a multi-family apartment complex, a dispute arises between two tenants, with one waging a “relentless campaign of racial harassment, abuse and threats” against the other. The Court ruled that the landlord, who did nothing to stop the harassment, could be held liable under the Fair Housing Act for failing to intervene promptly in tenant-on-tenant racial harassment which it knew or should have known about and had the power to address.
While condominium and HOA boards probably have less power to address such situations than a landlord (or co-op board), any community association board should take active steps, within its authority, to address and resolve conflicts between residents, especially those which involve accusations of discrimination and harassment.
Takeaway: Boards need to be pro-active in resolving inter-resident disputes, for the protection of the residents involved, the community as a whole, the Board and individual Board members.
