Business

What a way to wake up on Christmas morning. Happy holidays to all.

Robert Orr, president of the Las Brisas Condominium Association in Florida was arrested for the third time for installing hidden surveillance cameras in owners homes. I can understand the first time, but three times. Here is the article. Mr. Orr ought to hire himself a criminal defense attorney, but the condo association should put their insurance carrier on notice in case the victims decide to point their fingers back at that board for not taking action to remove President Orr after the first, then second arrest. Three times is a charm and perhaps the owners will take action if the board isn’t willing to do so.

Condo governing documents typically include a provision indemnifying board members for acting within the scope of their authority as board members. This conduct by Orr should fall without that indemnification, but one might ask what was the rest of the board doing after it learned about the first and second arrest for invading owners’ privacy and installing surveillance cameras inside homes without authority. If an association officer is accused for bad conduct like this, boards should consider whether removing the officer from his or her position is a good idea during an official investigation and resolution of the matter. Boards can change officers simply with a board vote. Boards have a fiduciary duty to all of their owners. If an officer is accused of installing cameras inside people’s homes, removing the officer is one of the first things a board should consider. Boards typically can’t remove board members themselves and need an owners’ vote to do so depending on their bylaws. Noticing an owners meeting for the owners to make a decision on board member removal may also be a good idea. In the end, the board is above any one member and if an officer acts improperly, the board should look out for the best interest of the entire community.

The appeals court which governs over Brooklyn, Staten Island and Long Island, just issued a decision holding that the Meadowbrook Pointe Homeowners Association, Inc.’s rule that dogs greater than 25 pounds can’t be on the association premises, was unenforcible and should have been done by an amendment to the HOA’s Declaration. That would have required a vote of 66 2/3% of the owners and then a recording of the amended Declaration against each of the HOA units.

The Second Department explained that:

[T]he plaintiff demonstrated, prima facie, that the board’s adoption of the house rule was not authorized by the condominium bylaws, and thus, the adoption of that rule was not protected by the business judgment rule (see Yusin v Saddle Lakes Home Owners Assn., Inc., 73 AD3d 1168, 1171; Strathmore Ridge Homeowners Assn., Inc. v Mendicino, 63 AD3d 1038). Since neither the condominium bylaws nor the condominium declaration of covenants, restrictions, easements, charges, and liens (hereinafter the declaration) contained any restriction on the size of dogs permitted on the condominium premises, the house rule constituted an amendment of a permitted use of the plaintiff’s unit, which, pursuant to Article X of the condominium bylaws, required approval by 66 2⁄3% of the homeowners at a noticed meeting, and an amendment to the declaration (see Gabriel v Board of Mgrs. of the Gallery House Condominium, 130 AD3d 482; Board of Mgrs. of Vil. View Condominium v Forman, 78 AD3d 628, 630).

Turan v Meadowbrook Pointe Homeowners Assn., Inc., 2022 NY Slip Op 07255

It is critical for boards to have experienced counsel analyze whether a rule change is sufficient or whether an amendment to the governing documents by an owners’ vote is necessary. Read the decision here.

Condominiums that want to give exclusive use of common space to a particular unit owner, often use a license agreement to do so. Selling common space requires approval by unit owners and sometimes all of them voting in favor of a sale because all unit owners in a condominium owns a percentage of the common elements. Boards get around this hurdle by using a license which is a legal instrument that has to be carefully drafted in order to comply with the law and avoid all sorts of problems for the condo.

A new case filed in the New York State Supreme Court in Manhattan shows how the devil is in the details of these license agreements and choosing specific wording in them can be problematic. In MGP 1011 LLC v. Condominium Board of The Citizen 360 Condominium, Index No. 654809/2022, the complaining plaintiff (identified as Mallory G. Parker, the sole member of the LLC in the complaint) bought a condo apartment in the defendant 82 unit condo from a prior owner who bought from the sponsor. The sponsor sold purchasers the exclusive use to parking spaces ($150k a space) and storage lockers as ancillary amenities, which were memorialized in license agreements by the sponsor controlled board to those unit owners. Parking spaces in the condo were licensed by the condo (because they are common element) to the unit owners.

In the license the condo specified that “Parking Spaces will be able to accommodate automobiles with a maximum weight of approximately 6000 lbs. and with maximum length of approximately 17 feet.” The condo could have left out that detail from the license, but didn’t. Well, Ms. Parker’s LLC bought a condominium unit from owners who bought the unit from the sponsor along with a license for a parking space, and is complaining essentially that the condo breached the license agreement because her Acura RDX SUV which is 3783 lbs. and 15.5 feet doesn’t fit in the parking space she licensed.

I am sure that the condo will defend the case or figure out a way to settle it, but one lesson from the dispute is that condo boards have to be very careful in crafting license agreements. Words really do have meaning and sometimes, like in the Parker – Citizens 360 Condominium dispute, it’s better not to use them at all and at other times being very specific it important. Here is the complaint for inquiring minds.

New York condominiums have a variety of ways to collect amounts owed by unit owners. If demands and being nice do not cause owners to pay their obligations, then condo boards have tools available to cause owners to pay.

If the unit owner is renting the unit, the condo can send a notice to the renter and demand that the renter pay its rent to the condominium until the arrears are paid. Some renters comply after receiving the notice but others do not because they are fearful of retribution by their landlord unit owner (which is prohibited by law). The condo can escalate the matter and bring suit against the unit owner and the renter to force the payment.

If there are common amenities, condos may be entitled to withhold those amenities until arrears are paid. So lack of access to health clubs, pools, parking, etc. may be just the medicine that the unit owner needs to clear their arrears. Careful consideration of the condo governing documents and applicable laws should be done by an attorney to make sure the condo is within its rights to withhold certain amenities.

Condo governing documents also usually contain a provision allowing the board to escalate the payment of a whole years worth of common charges. Certain notices are required and then the entire remainder of the year becomes due and owing by the unit owner. Concerning over this happening could cause a unit owner to pay.

Under governing documents, condos typically have an automatic lien over the common charges and other amounts due by owners to the condo. To put the world on notice that the lien exists, condo boards usually record a common charge lien against the offending unit in the land records. They’ll need to do this if the board decides to foreclose that lien. After recording, sending a lien to a unit owner sometimes is enough to get them to pay or at least start a dialog about a payment plan if the board will allow such a plan. Some do with terms built into the agreement like interest on what is essentially a loan, a confession of judgment which means that the condo gets judgment if the owner defaults on the agreement without having to go through a full blown court proceeding, and other terms that are favorable to the condo.

Another route for a condo board is to bring a money judgment action against the non-paying unit owner. At the end of the lawsuit which can be in a variety of courts depending on the amount due, the condo can get a judgment for money. Having the judgment in and of itself could convince the unit owner to pay or enter into an agreement regarding payment. Judgments are good for 10 years so the likelihood of collection spans a long period of time. Unlike the common charge lien which is against the condo unit only, the money judgment can be used to go after other assets owned by the unit owner.

Collecting against a judgment could be as simple as looking at the last check that the unit owner wrote to the condo and serving a restraining notice against that bank. Unit owners who don’t want to pay and have done some research on collection, may have already closed that bank account. Some try to evade collection by paying with money orders or in ways that do not disclose a bank name and account number. There are restrictions on restraining notices that have to be followed. If the condo doesn’t know which bank the unit owner uses, there are strategies to find them. Once restrained, the bank account can be executed upon and if owned with others, turnover proceedings can be initiated.

Other avenues for collection include going after non-liquid assets such as brokerage accounts and stock ownership, or from a business owned by the unit owner (NY Marshals can place a levy on the business, stopping the unit owner from collecting draws, bonuses, interest without paying the debt to the condo).

If the unit owner is working, their wages can be garnished. A NYC Marshal can garnish up to 10% of the owner’s wages. Just faced with the possibility of garnishment and their employer learning about their debt may cause an owner to pay his or her arrears with the money they are keeping under a mattress.

Another approach to collection is finding other real property owned by the unit owner and making sure the money judgment lien is recorded against the property in the land records. It’s similar to a common charge lien on the condo unit (which has higher priority that money judgment liens). The money judgment lien can be placed on other real property and foreclosures of that property can be pursued.

If the unit owner transferred assets to others to evade recovery, there are tactics to reverse transfers that are fraudulent conveyances and seize the assets to pay off the amounts owed. If money is owed to the unit owner by others, we can cause that money to be seized from the others persons or entities.

Another target for collection is personal property. I can’t tell you how many times a board member advises, the person is in arrears but they are driving a brand new car. The car could be leased and thus owned by a leasing company, but if the car, boat, motorcycle, art, jewelry or other personal property of value is owned by the unit owner then it is fair game for collection.

If all of the above doesn’t produce money to pay the arrears, discovery can be taken to learn about assets or other ways that collection can be successful. We can serve written questions that must be answered under oath. We can obtain a court order that they appear for a deposition to answer questions about their assets or employment. We can subpoena documents from them or others related to their assets.

Navigating the above is tricky and should be done methodically by experienced counsel. What’s nice about condos is that the condo governing documents generally contain a provision allowing the condo to collect attorneys’ fees and costs of collection. So the time and effort needed to collect ends up being charged back by the condo to the unit owner and is collectible as provided in the governing documents. Once unit owners realize this, they often want to cut their losses and resolve in some way that is favorable to the condominium.

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Access agreements are routine in New York City construction. If the agreement is drafted properly with important provisions in the event of default including nonpayment is important. Escrows and upfront payment provisions are helpful as suggested in this article but a well crafted attorney fee provision in favor of the non-breaching party, and other provisions can be the difference between a difficult enforcement and an easy one. Properly crafting these access agreements so that these types of provisions are contained therein is imperative.