Community associations are quasi governments which can make their own rules provided that they don’t run afoul the law. Whenever changing rules, coop, condo, HOA and other community association boards must make sure that their good intention rule changes aren’t going to get them into trouble. With a litigious owner (especially one who is an attorney, “professional plaintiff”, a person without financial constraints or maybe just with strong principles), a board could end up in litigation which spans years and even after the board members are no longer even board members.
A good example of rule making gone wild happened in a New York cooperative called Woodstock Owners Corp. The coop enacted a no sublet policy but only with respect to owners who bought after a certain date (in that case October 2002). Bianca Razzano, a shareholder, was not allowed to sublet under that rule and she sued in 2009 and continued litigating, appealing, discovering, and fighting on and on for years. Eleven years later, the parties were still litigating with an order just being issued this year in 2020. She sued the coop Board, the management company and an individual board member.
On one appeal, the Court struck down the sublet policy, declaring it violative of Business Corporation Law Section 501(c) which essentially prohibits unequal treatment of shareholders. The litigation continued with Ms. Razzano trying to expand her case to include emotional distress damage claims. The Court put a stop to that, but this was years after the genesis of the dispute.
It is not clear whether the cooperative obtained legal advice regarding its sublet policy but it should have. In some instances, boards try to avoid incurring legal fees on rule making and take a let’s do it and see if anyone objects strategy. This is not advised. Experienced community association counsel should be able to advise a board and keep it out of trouble like the trouble experienced by the Woodstock cooperative got into, without incurring substantial legal expenses. The legal expenses that the cooperative, management and board member in the Woodstock case experienced, pales in comparison to the expenses of experienced legal advice.
Read the Bianca Razzano v. Woodstock Owners Corp. decision here and keep your board out of similar trouble. Don’t let matters spiral out of control.
