Could your condo bylaws save you from a costly lawsuit? A recent Brooklyn court decision highlights the critical role bylaws play when unit owners and their Board of Managers clash.
Case Background
- Plaintiffs (unit owners) alleged negligence by the Condominium Board and individual members in addressing water damage within their unit.
- The Board argued that the condo’s bylaws provide personal liability protection to board members.
Key Legal Principles
- Business Judgment Rule: Courts generally defer to condo board decisions made within their authority and in good faith. Plaintiff must demonstrate fraud or self-dealing to overcome this protection.
- Condominium Bylaws: These form a contract between the board and unit owners. Bylaws often include provisions specifically limiting individual liability of board members for actions taken in their official capacity.
Court’s Ruling
- Negligence claims against individual board members were dismissed due to protections under the condominium bylaws.
- Board-level claims (breach of duty, negligence) remain pending.
- Additional rulings denied summary judgment for both sides, highlighting the factual issues still in dispute.
Takeaways for Boards & Property Managers
- Bylaws as Safeguards: Well-drafted bylaws offer substantial protection in lawsuits alleging negligence or breach of duty, provided board members acted within their authority and in good faith. Periodic review of bylaws is essential.
- Fiduciary Responsibility: The board still maintains a duty of care towards the condominium property and unit owners. Neglect or willful disregard of this duty may expose the board as a whole to liability.
- Proactive Maintenance: Address potential issues (e.g., water leaks) promptly to minimize damage and mitigate the risk of disputes escalating to legal action.
- Thorough Documentation: Maintain meticulous records of board actions, maintenance, and owner communications. This serves as evidence of responsible decision-making.
- Discovery Compliance: Non-compliance with discovery procedures can hinder your defense. Understand the obligations from counsel regarding the preservation and sharing of case-relevant information.
Here is the decision (Szymczyk v. Board of Managers of 363 16th Street Condominium).
