Condo Coop HOA

Coronavirus – What can condo, coop and HOA Boards and Management Do?

On March 11, 2020, the World Health Organization declared the coronavirus outbreak (“COVID-19”) a pandemic. The Centers for Disease Control has detailed recommendations for individual preparation and response to the outbreak of COVID-19. The President just declared a National State of Emergency and many states including New York declared a State of Emergency. This is a scary time throughout the world and we have to take action now to help our associations.

This is especially true for condominiums, cooperatives and homeowners associations. Unlike the schools, sporting events or other large gatherings, owners in these communities live amongst each other sharing common area. When quarantined or told to stay home from the office or to work from home, they are still a part of a mass of people who are stuck living amongst each other. So what can management and boards do to protect their community associations?

Consider whether your House Rules are Sufficient. You are a quasi government with your own house rules. For the most part you are allowed to make your own rules provided that they do so within the confines of the law. The board should review their house rules and determine whether new rules are needed. Rule changes can be done by a board vote. With residents home from work and children out of school, there are going to be a lot more people in the common areas during the day for the unforeseeable future. The rules may have to change. There is usually a rule concerning not creating a nuisance condition. Is having a fever and using the common areas like the laundry, rooftop recreational area, gym, playrooms, pool, etc., a nuisance? Perhaps spell it out in a rule change. You should confer with counsel to make sure the rule is within the confines of the law, doesn’t discriminate and is evenly applied. Otherwise, your good intentions, could turn into a discrimination claim or a lawsuit. Be careful and considerate. But, rule making that protects all owners and residents and that is in the best interest of the whole community will likely help.

Keep Everyone Informed. The media is saturated with national and local information and misinformation but what about information on your particular association. Let your owners and residents know that the board and management are at the helm, steering the ship with confidence and all of their interests in mind. If your association has a website, post regular information on the rules, rule changes, places that you’ve installed hand sanitizer, cleaning processes that are being employed in the common areas and anything else that you are doing as a board or management to protect your associations during this unsettled time.

Take Charge of the Common Areas. The board is charged with governing the community and the common areas. If the common areas are not particularly cleaned on more of a regularly basis, one could see owners and residents who contract the virus, complaining that the board or managment was negligent in performing their obligations to the community and/or breached their fiduciary or contractual duty to the community. Review what is being done re the common areas.

For example, the board and management might review the frequency of the cleaning of any shared community areas such as a clubhouse, pool, gym, etc. In addition, the Board should review how well the shared areas are actually being cleaned. Further, the association may want to assess whether additional hand sanitizers, automated soap dispensers or disinfectant wipes need to be added to common areas. A board may even consider shuttering common areas or amenities on a temporary basis.

If an individual suspected or confirmed to have COVID-19 has been in the common area, it is recommended by the CDC to close off those areas and wait up to 24 hours before beginning to clean and disinfect.

Consider Alternative to In-Person Board Meetings. It may be a good idea to put off in person board meetings for the time being. Board meetings in New York can be done telephonically as long as everyone can hear each other. Online board meetings are a possibility as well. Some products like Office of the Board (www.officeoftheboard.com), allow boards to meet online, or even make board decisions without a meeting provided that everyone is unanimous. Decisions that are unanimous can be done by unanimous written consent and don’t require a board meeting. Where a meeting is required consider having management or the board members coordinate a telephone call or a video-conference for the board to get together and make decisions. Staying outside a meeting room or each others apartments for the time being is probably a good idea until we learn more about the virus and how it is transmitted.

Postpone Annual Meetings. If your association’s annual meeting is coming up, postpone it for now unless a prompt unit owner decision is absolutely necessary. There are electronic voting applications which allow for owners to vote electronically from wherever they are. Like in person board meetings, annuals should be postponed or an alternative way of having electronic voting should be explored. Your counsel should be consulted about whether the new laws in New York on electronic voting applies to your association or whether you need a bylaw change to allow electronic voting. If your association can electronic vote now, it should be explored as congregation of owners is not necessary.

Avoid Liability. As mentioned, it is inevitable that a resident will contract the virus. It is also likely that a resident could infect another resident with the virus or that an association employee may have the virus and infect a resident or be infected by the resident. The virus situation should be no different than a unit owner to unit owner issue about noise or leaking, or a staff-resident or resident-staff issue. Illness and safety is always concerning and heightens the stakes. However, in the end, the board is charged with operating the association, maintaining the common elements and doing its best to be reasonable and act for the best interest of the association. In rule making or taking action, be considerate yet protective of the entire community for which you represent. Exercise your business judgment as a board collectively. Do not make self interested decisions and when in doubt consult your professionals.

In sum, when faced with a health crisis like COVID-19, the association’s board and management should be proactive in thinking about upcoming annual meetings, board meetings, community events, etc. We recommend keeping everyone informed about what the board and management is doing to protect the community from the virus. Community associations should also review their rules and may wish to consult with legal counsel regarding the association’s options under the law and governing documents of the association.

Coronavirus – Condo and Coop Boards Must Prepare

Property managers have been huddling, considering what to advise their condo and coop boards. Disinfecting wipes and Purell dispensers in the lobby, a great idea but is that enough for a board to protect its residents and avoid liability. What happens when a unit owner or shareholder contracts the Coronavirus and is quarantined in their apartment. The government has asked residents to stay home, but that home in New York City may be shared by hundreds of other condo or coop residents who live in close proximity and share the same common areas. What’s a board to do to protect its residents from each other.

Being proactive and taking precautions is definitely recommended. Boards have to be reasonable in trying to protect their owners and residents. If someone was complaining of second-hand smoke in an apartment, the board may require that openings in the offending apartment be sealed in order to try to prevent the smoke from escaping into other apartments. If a shareholder or owner has mold in their apartment and the board finds out, the board would require the the mold be treated and condition resolved. If a registered sex offender moves into the building, notifying residents generally that there is a sex offender living in the building would be alright; however, pointing to the particular apartment might bring a harassment or other claim against the cooperative or condominium (as well as deter people from buying into the building in the future).

If a board finds out that one of its residents has tested positive for Coronavirus, it needs to be really careful to act reasonably and not cause a panic. First, is it really true. Rumors can lead to defamation claims. There is no registry of Coronavirus victims so unless the resident reports that they have Coronavirus, in all likelihood the board will not know for sure. The board could notify residents that it believes that a neighbor in the building has contracted the Coronavirus but it shouldn’t identify the suspected apartment or residents else it could be inviting a lawsuit, especially if it turns out to be wrong.

If a board is sure that a resident has the coronavirus, it should take reasonable precautions to protect neighbors. Perhaps communicating with the person who contracted the virus and asking them to seal all opening into other apartments, would be reasonable. Asking them not to use the common areas of the building would also be reasonable. How about asking them not to use the building’s elevators where close proximity with other elevator users is almost guaranteed. Or, maybe asking them to where face masks if venturing out of their apartment in the building?

A board could consider making a house rule that persons who contract the Coronavirus cannot use the common areas of the building and if they are traversing the building, they need to wear a face mask. This is a new area for condos and coops so there is little court guidance. Consulting with counsel before enacting rules is recommended. The board should be as reasonable as possible without violating the persons rights. Encoring the rule is an entirely different challenge. Fining the person for violating the rule or bringing a court action to enjoin the person are enforcement mechanisms but will they really be effective or will it be too late where infections in the rest of the building may result in the meantime.

Consider this – CNN has reported that in Hong Kong, experts are investigating whether Coronavirus can be spread through bathroom pipes. In a high-rise tower a 62-year-old woman was diagnosed with the virus about a week-and-a-half after a 75-year-old man in the same building became infected. Then three more residents became infected. “The possibility of the virus being transmitted through pipes immediately drew comparisons to the 2003 SARS outbreak, when this method became a major source of transmission. At the Amoy Gardens housing estate, there were more than 300 infections and 42 deaths after defective plumbing allowed the virus to spread through the building.” Perhaps having building professionals review your building’s plumbing, heating, air conditioning and other systems to assure or at least minimize the risk that the virus can travel from apartment to apartment through those systems would be a good idea. At the very least, it would give the board cover in the event that it were challenged or criticized for not doing enough to protect its residents.

Now consider what will happen when a board does nothing or very little and one owner who has the virus, infects another resident in the building. The resident catching the virus from another resident, may bring a lawsuit against the board for breaching its duty and causing the resident injury. It is inevitable in the litigious society in which we live that this will happen and it is not clear how court’s will react. Boards should be proactive now in taking precautions. The more reasonable a board is, the less likely that a Court will find that it breached its duty to the injured resident. If a board does nothing, it runs the risk of being sued and held liable. And property managers should know by now, that they will be looked to by their boards for guidance and if the boards are sued, they may turn to their property managers. Property managers should review their management contracts and see what their indemnification provisions say. Are they indemnified and defended for all things, or is there an exclusion for negligence. Is it negligent for property managers not to have advised their boards to take certain precautions or actions in response to the Coronavirus? In the end if a party is injured, it is likely that the boards and property managers will both be blamed. So, taking precautions now is important for both boards and their property managers.

So, what should a board and property manager do. Before they learn that someone in the building has contracted the Coronavirus, they should clean more often and use disinfecting products in the common areas. They should keep abreast at what the government is suggesting be done. They should be monitoring the Centers for Disease Control and Prevention, and the New York City Department of Health. The Department of Health is developing more extensive guidance for property owners and managers, and once published, they should be employed.

Buildings can and should take steps to limit the possibility of transmission, not to mention make their residents and staff feel safer. They should be cleaning and disinfecting high-traffic surfaces like front-door handles and elevator buttons, as well as common rooms, like gyms and laundry rooms. They can also place hand-sanitizer around the building. They could also post signs encouraging residents to be vigilant about keeping their homes disinfected and to cover their mouths when they cough or sneeze and to wash their hands frequently.

Once a resident contracts the virus, the playing field changes as the risk of danger to other residents escalates. As stated, having professionals opine on whether building systems must be modified to minimize transmission risks from apartment-to-apartment is a good idea. Communicating with the person and asking them not to use the common areas would be a reasonable approach. Passing a house rule that anyone who has the Coronavirus should not use the common elements of the building, may be appropriate. Alerting staff that they should not enter the apartment of the infected person without safety equipment would be appropriate. What happens when staff refuses to enter the apartment or enters the apartment and contracts the disease? Another area of concern for a board, its residents, staff and others. This is a complicated situation and will probably get more complicated as time goes by and more and more people are infected with the virus. For the time being, boards should be as reasonable as possible to protect its residents without running afoul the legal rights of the infected residents.

Sidewalk Shed Trespass Claims Dismissed against Condo

In New York City, sidewalk sheds are typical. In many instances, buildings have to install them to perform facade work. If dangerous exterior conditions exist, a sidewalk shed might have to be installed on an emergency basis. That’s exactly what happened at the Icon Building located at 306 West 48th Street back in 2017.

The condo installed the sidewalk shed after there was breakage of the tempered glass on the building’s north facade and prior failures of its glass curtain wall. The Building Department got involved, issuing violations and ordering that the condo immediately install the sidewalk shed. The neighboring building at 300 West 48th Street didn’t like the shed in front of its building, and it sued for trespass and encroachment in 2018.

In most cases, condos and coops that are required to install sidewalk sheds which infringe upon their neighbors’ property, obtain licenses from the neighbors captured in agreements before installing the shed. However, in an emergency, there may not be time to reach such agreement. It’s not clear whether The 306 West 48th Street Condominium approached its neighbors before installing the shed. That would have been a good idea, irrespective as to whether 300 West 48th Street would have been agreeable.

The lawsuit started in 2018 and it took one year for the condo to obtain a dismissal of the neighbor’s case. The condo argued for dismissal because it was required by the Building Department to install the shed on an emergency basis and as such, the condo “was required, while making repairs to the facade of its building, to erect a sidewalk shed for public safety purposes.” Thus, the Court held that the neighbor’s claims “are without merit and do not fit within a cognizable theory of trespass and encroachment.” You can’t have a trespass or encroachment when you are legally required to do something the condo argued.

The result seems to be correct, but a year of legal fees had to be incurred to get to an end. The neighbor may still appeal which would mean more legal fees and costs. Prior to infringing on a neighbor’s property rights, it is always a good idea to try to reach an agreement and avoid lawsuits like this. Sometimes, and especially in emergency situations, doing so is not an option, but in most cases it is possible to consult with your neighbor in advance, try to reach an understanding and memorialize it in an agreement.

Read the decision.

Court gives Wiggle Room for Condo Declaration and Bylaw Amendments Done Incorrectly

Amending condominium declaration and bylaws can be difficult; particularly if boards are not guided properly. The original bylaws when the condo was conceived by the sponsor may be outdated, incorrect or need to be changed for a myriad of other reasons. If the board doesn’t do it correctly, the condo could get caught up in a litigation like the Towers on the Park Condominium in Manhattan. A pro se unit owner sued years ago and the appellate court in New York just put an end to the amendment challenge. In doing so, the Court absolved the condo from a few errors that it made in the amendment process. The better course however is to get it right the first time so that expensive litigation and acrimony in the condo because of challenges like this do not occur in the first place.

The first step is to determine what the board wants to change in the declaration and bylaws and whether it can obtain the required number of unit owners to vote for the amendment. Usually, such amendments require a super majority that can be difficult to obtain. There are way, however, to obtain the necessary vote, but it has to be done correctly or suffer a challenge.

In the Towers on the Park Condominium case the Court mentioned the process used in the vote where the board left the meeting open because it did not obtain the necessary 80% at the first meeting. This is a typical tactic employed by condo boards but it has to be done correctly at the meeting. If not, it could be fatal to a vote, but at least this Court saw the defect as technical and absolved the board. It helped though that the challenger overlooked and did not dispute this error in her litigation papers. This is an example of getting is right the first time and avoiding the chance that another court may not be so forgiving. Imagine if the Court threw out the amendments years later after the condo was governing under the amendments, possibly invalidating board actions under the improper amendments.

The other step that the Towers on the Park Condominium didn’t take correctly was recording the declaration and bylaw amendments with the City Register. Amendments to declarations and bylaws have to be recorded against each unit in the condominium after the amendments is properly approved by owners. This is another important step. The Towers on the Park Condominium board did not record the amendment right away but did do so before the lawsuit to challenge the amendment was filed with the Court. As so, the Court forgave the condo board again. The law in NY is that such amendments are not effective until recorded with the City Register against each unit. Thus, the recording should be planned in advance and done right after the necessary vote is obtained.

Realizing that amendments are difficult, it is important to get the language of the amendment correct. Once that is nailed down, as long as proper procedure is taken, the road should be smooth for a board. With Towers on the Park Condominium, the road was not so smooth tying it up in litigation for years. But, now that the clouds have passed, the changed declaration and bylaws should serve the condo well for years to come.

Read the Reynolds v. Towers on the Park Condominium decision.

Boards have to Be Aware of Fellow Board Member Bad Behavior

A classic example of board leaders acting badly because there is no oversight by other board members, just happened in New Jersey. A little league board President and Treasurer teamed up and took over $100k from the organization. How did they do it? None of the other board members were overseeing the organization’s finances and business.

There was no framework available for the board members to do so. The President and the Treasurer had all the organization’s bank and other records, so they took what they wanted without anyone looking. Some might say that the board was derelict in its duty to the organization by not putting a system in place to be able to do so. Now they shouldn’t wait.

Applications like Office of the Board can be up and running in minutes and cost as little as $360 a year. If the youth sport’s board had an Office of the Board, the President and Treasurer could have been deterred, spotted and/or stopped.

Whether you’re a member of a youth-sport’s board, booster board, homeowners’ association, condo, coop board, church board, nonprofit board, or any other board run by volunteers, do not make the same mistake that these other boards made. Oversight and transparency are really easy to have immediately. Read about the NJ little league board.

Condo Foreclosure Buyer Snoozes and Loses – Board gets to Keep Deposit

This is a classic story of “you snooze, you lose”. A Brooklyn condo board at 442 St. Marks Avenue Condominium fought hard to collect over $88,000 in arrears from a unit owner. In the end, after a long fight, the board gets to keep $49,000 in a good faith deposit by a purchaser at the foreclosure auction who bought without doing its due diligence (recognizing that there was a prior lien of record which would not be extinguished by the foreclosure; in other words, the buyer was buying the property with the bank’s first mortgage on the property – not a good deal), and then waiting over 6 months to challenge the sale because the condo’s representatives didn’t follow the foreclosure rules. At least the condo walked away with some money for all its efforts. The lesson from this case for condos is make sure you follow the rules and sometimes if you don’t, if your adversary snoozes, he may lose so that you win a little.

Under most condo bylaws, boards are vested with the obligation of collecting arrears. The foreclosure of the common charge lien for the arrears that condos in New York have the power to foreclose, is sometimes meaningless depending on the value of the unit. If there is a huge first, purchase money mortgage which has priority over the common charge lien then there may not be enough equity in the property to benefit the condo once the first mortgage (or any other prior liens of record) are paid out of the foreclosure proceeds. If there is a surplus then the condo can go after the surplus from the sale. It takes time but it can be worth the wait. If foreclosure of the condo’s common charge lien is not worth the effort because there isn’t enough equity in the property, boards sometimes still foreclose the lien (even if the mortgagee lender before the condo’s lien doesn’t act) because the condo wants to get a new owner in who will start paying common charges prospectively. Another approach is bringing an action for a money judgment against the unit owner who is not paying. All of these methods, as well as some others, can be employed by the condo board in order to try to collect the arrears; a job which the board is often required under the condo bylaws to do.

Back to the case of “you snooze, you lose” – Board of Managers of 442 St. Marks Avenue Condominium v. Marc C. Milord. The condo was owed tens of thousands of dollars in common charges, but so was the first mortgage bank that was owed over $300,000. The first bank forecloses and names the condo in the foreclosure action because it has the right to extinguish the condo’s common charge lien in the foreclosure. That bank transfers the first mortgage lien to another bank and then the foreclosure action is discontinued so the chain of title for the lien can be established by the lawyers. In the meantime, the condo is still not getting paid its common charges, which are mounting. The condo decides to start its own foreclosure action knowing that the value at the end to the purchaser at the foreclosure auction would be less because the condo’s foreclosure would not extinguish the first mortgage lien, so the purchaser would be buying the property subject to the first lien of over $300,000. However, the value of the property was over $700,000, so there would be enough value for the condo to get something out of the foreclosure proceeds, or at least, a new owner who would start paying common charges prospectively. So the condo continued with the collection effort.

The buyer however made a critical mistake and didn’t do his due diligence to discover the first lien by the bank on the property before he bought at the foreclosure sale, depositing $49,000 as a good faith deposit. The posting at the auction by the referee (prepared usually by the foreclosing lawyers) didn’t mention the first lien by the bank and when the buyer asked the referee about prior liens of record, with the condo lawyer in earshot, both skirted or ignored the question. The buyer bought anyway.

The buyer sat on his rights for over 6 months (another critical mistake) and then fought to vacate the sale and get his deposit back. The condo fought back and in the end, the Court split the proverbial baby. The court vacated the sale but also held that even though the rules were violated by the condo and its professional, the buyer should not have waited over 6 months to get its deposit back. So, in the end, the condo got to keep the $49,000 deposit and hopefully a new owner who will pay its common charges. Stay tuned for an appeal by the buyer.

NY Coops and Business Corporations are Allowed Electronic Voting for Shareholders’ Meetings

New York has taken a tremendous leap forward in the digital age and changed the Business Corporation Law (BCL) Section 602 to allow for electronic voting by shareholders at meetings. This means that cooperatives and other corporations covered by the BCL can start using technology for their annual meetings, elections and other voting. This will take the pain out of annual meeting, allow quorums to be established easily and avoid voting challenges.

Unfortunately the NY Legislature did not amend the Real Property Law which covers condominiums so condos will be allowed to electronic vote for their owners only if they amend their bylaws to allow for electronic voting. Hopefully the Legislature will make that amendment next. We are also hoping for future changes where board members can vote electronically at board meetings. Changes to the BCL and other laws haven’t happened just yet in that regard but we expect them to be on the way. For now, boards can still poll members electronically and then ratify the electronic vote, for formality, at the next board meeting or use unanimous written consents for important decisions between board meetings.

So what to do next. The new law requires that the technology has to “(A) implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of electronic communication is a shareholder of record and (B) keep a record of any vote or other action taken by a shareholder participating and voting by means of electronic communications at a shareholders’ meeting.”

Applications like Office of the Board (www.officeoftheboard.com; 212.658.1912) are out of the box solutions that are easy to use and affordable. Boards have to be careful to use only solutions that meet the laws’ specific requirements and make it easy for their shareholders to use. Read the new law here.

Board Members Stuck in Lawsuit Individually – Business Judgment Rule Doesn’t get them out on Summary Judgment

Whenever cooperative, condominium or HOA board members are sued individually in a lawsuit, the first thing counsel will try to do is get the case dismissed against the individuals. The general principle is that if the board members did not commit tortious acts independent of their decision making as board members, then they shouldn’t be named in the lawsuit. If the board members self-served themselves, for example, then the court will likely not dismiss the case against the individuals.

The next thing counsel for the board members or the cooperative, condominium or HOA will try to do is get rid of certain claims based on the business judgment rule. If the board members and board acted within their authority, in good faith and in the best interest of the entity and all of the owners or shareholders then the business judgment rule is a great defense which can be used to end certain claims summarily on dismissal or summary judgment motions.

The First Department, Appellate Division, which oversees appeals in the Manhattan and Bronx Supreme Courts, just decided to leave cooperative board members individually in a lawsuit for trial, holding that the business judgment rule does not support dismissing claims against the board members and the cooperative, and that they should remain in the case through trial.

The Court in Nainan v. 715-723 Sixth Avenue Owners Corp. (read the decision by selecting it), issued a decision on November 19, 2019, explaining that “A board’s decision is not entitled to protection under the business judgment rule, however, when the action taken ‘has no legitimate relationship to the welfare of the cooperative, deliberately singles out individuals for harmful treatment, is taken without notice or consideration of the relevant facts, or is beyond the scope of the board’s authority’ (citation omitted)”.

The facts in the Nainan case made it difficult for the Court to side with the board members or cooperative. Indeed, Plaintiffs there “argued that the board ignored the coop’s bylaws by deciding to enter into a contract for the sale of the coop without obtaining shareholder approval and that the board members used scare tactics to force the shareholders into agreeing to sell the coop. Plaintiffs contend[ed] shareholders were prohibited from selling their apartments while two of the board members were permitted and proceeded to sell theirs. Plaintiffs claim[ed] that the board failed to negotiate the best possible price for the sale. Moreover, plaintiffs allege[d] that one director acted as the broker for the transaction, thereby obtaining an independent financial benefit from the transaction, a fact that was not disclosed to the shareholders.” These type of facts were enough for the Court to leave the individual board members in the case as well as most of the claims against the cooperative which are going to have to be decided at trial.

The lesson from the case however is that board members can be subjected to individual liability and have to defend themselves in lawsuits particularly if they make decision or take actions that serve the board member’s own personal interest. Boards should be careful to make a record establishing that their decision making is covered by the business judgment rule and that they are acting in the best interest of all owners or shareholders and certainly not their own personal interest as seems to be the case with the Nainan board members.

NY’s First Department Walks Back Pomerance Condo Document Inspection Rights a Little Bit

New York’s Appellate Division, First Department (which covers the Manhattan and Bronx) just decided a case by a unit owner seeking to inspect certain condominium records. In Frankel v. Board of Managers of the Central Park West Condominium, the Court decided on November 14, 2019, that dismissal of the plaintiff unit owner’s claim seeking inspection of condominium books and records should not be dismissed. The Court held that “[f]actual disputes regarding whether plaintiff is acting in good faith and has a proper purpose for reviewing the books and records, as well as the scope of documents already provided, whether in electronic form or otherwise, cannot be resolved on a motion to dismiss.”

In sum, condo boards and managers need to be aware of condominium unit owner inspection rights and the differences in Manhattan and the Bronx where one standard applies now, and most of the rest of New York State like Brooklyn, Westchester, Long Island, Staten Island, etc., where a different standard applies.

An interesting part of the Frankel case is that the condominium provided the plaintiff unit owner with complete access to its financial records including a copy of its general ledger. The unit owner additionally wanted to inspect how unit owners voted in the last two elections and learn the names of unit owners who have parking spaces and which spaces they are assigned, but the condo said no.

One might argue that the First Department didn’t walk back its 2016 Pomerance v. McGrath decision (143 AD3d 443 (1st Dep’t 2016, lv denied, 32 NY3d 913 (2019)) which came out of nowhere and was criticized by the condominium community as being baseless and beyond the books and records that the law provides that condominium unit owners are allowed to inspect. Notably, the other Appellate Divisions including the Second Department which covers Queens, Brooklyn, Staten Island, Long Island and Dutchess, Orange, Putnam, Rockland and Westchester counties, have not yet spoken on this issue. Irrespective of the limitations in the NY Condominium Act regarding what documents condominium unit owners can review, the First Department in Pomerance, created, out of thin air, a right for unit owners to inspect (and copy) condominium books and records, well beyond the requirement of the Condominium Act. Perhaps, a factual distinction in Pomerance, was that the condominium’s by-laws at issue there allowed unit owners access to books and records for which typical condominium by-laws do not provide access. At least in the Pomerance case, the Court recognized that inspections and copying (which is not provided for in the Condominium Act or in the condominium there’s by-laws) should be subject to a confidentiality agreement. The Court never really explained why it held that unit owners were entitled to a list of names and addresses of unit owners when there is no such requirement in the Condominium Act or in the by-laws of the condominium there. The First Department created new law in the Pomerance decision which the other Appellate Divisions have not adopted (probably because the First Department was wrong).

In this new Frankel decision, the First Department did not just add on to its bad Pomerance decision. Instead, the Court sent the case back to the Supreme Court for discovery and decision making into the facts as to whether plaintiff was acting in good faith with a proper purpose. This however once again was a bad decision by the First Department in that unlike cooperative corporations which are governed by the Business Corporation Law in New York under which a different standard for record inspection rights is applicable (like whether the cooperative shareholder is seeking to inspect records in good faith for proper purposes), most condominiums are not covered by that law and that standard. The Condominium Act and likely the by-laws in the Frankel condominium, do not allow unit owners to obtain names and addresses of unit owners with parking spaces or to review records on how unit owners voted in elections. The First Department blew it again and should have dismissed the plaintiff’s claim in the Frankel case for inspection of the condominium’s books and records.

In sum, the First Department in Frankel walked back the Pomerance decision a bit by not just giving litigious unit owners access to whatever condominium books and records they want to inspect and copy. The Court got it wrong again, but at least they sent it back to the Supreme Court for further inquiry into whether the unit owner was acting in good faith with a proper purpose. Hopefully the other Appellate Divisions and maybe the New York Court of Appeals will set this straight and correctly hold that the Condominium Act and the by-laws of the condominium at issue must be examined and that condominium unit owner inspection rights are limited to the provisions of the law and the by-laws.

The Tenant Protection Act Significantly Affects New York Cooperatives

The Housing Stability and Tenant Protection Act was enacted recently in New York State to protect millions of tenants in rental properties but it also affects coops because of the landlord-tenant relationship with owners. The Act imposes the following on all landlords, including coops:

Landlords can’t get fees and other charges including late fees and attorney’s fees in Housing Court (only maintenance) and have to start separate civil actions to recover those.
Security deposits are limited to one month’s rent/maintenance. Escrows of substantial maintenance as a condition to a coop board’s approval of a purchaser are not possible.
Late Fees cannot exceed $50 or 5 percent of monthly rent/maintenance, whichever is less. If coop’s governing documents provide for higher late fees, they will be uncollectible.
Purchase Application fees could be limited to $20. The New York Department of State issued a memorandum in September 2019 excluding coops regarding this provision but until the law is changed, it is risky to charge the typical application fee which is usually much more than $20.
An Extra 5-Days Certified-Mail Notice is Required after Nonpayment. So, if a tenant/shareholder does not pay rent/maintenance within five days of when it is due, the landlord/coop must send a notice by certified mail.
Tenant/Shareholder could argue “Extreme” hardship to get out of a non-payment judgment of possession for up to one year. So, if the tenant/shareholder stops paying and the landlord/coop sues and gets a judgment of possession, the tenant/shareholder can argue for up to a year more of possession.

Until the law is changed, coop boards must be aware of these new limitations and restrictions.

Coronavirus – What can condo, coop and HOA Boards and Management Do?

Coronavirus – Condo and Coop Boards Must Prepare

Sidewalk Shed Trespass Claims Dismissed against Condo

Court gives Wiggle Room for Condo Declaration and Bylaw Amendments Done Incorrectly

Boards have to Be Aware of Fellow Board Member Bad Behavior

Condo Foreclosure Buyer Snoozes and Loses – Board gets to Keep Deposit

NY Coops and Business Corporations are Allowed Electronic Voting for Shareholders’ Meetings

Board Members Stuck in Lawsuit Individually – Business Judgment Rule Doesn’t get them out on Summary Judgment

NY’s First Department Walks Back Pomerance Condo Document Inspection Rights a Little Bit

The Tenant Protection Act Significantly Affects New York Cooperatives

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OUR EXPERTISE

When Contractors Lack Licenses: Key Lessons for Condos, Co-ops, and HOAs

When Bankruptcy Won’t Stop Your Foreclosure Sale: What Condo Boards and Management Need to Know About Repeat Filers

When Repetitive Filings Cross the Line: Lessons from Fulton v. Yameogo

Condominium Boards: Why Being Aware of First Mortgage “Standing” Can Protect Your Community’s Bottom Line

Winning the Common Charge Battle: How Condo Boards Prevail Against Defiant Unit Owners

When the Neighbor Builds: What Condo and Co-Op Boards Need to Know

Succession Rights in Limited-Equity Co-ops: Practical Lessons from Mutual Redevelopment Houses v. Manyevitch

The Post-Settlement Trap: What Fiondella Teaches Co-op Boards About Stipulations and Continuing Habitability Claims

The Derivative Action Threat: Why “Limited Common Elements” Present Litigation Risks for Condominium Boards and Managers

Governance and Rule-Making in the Modern Condominium

Don’t Delay: Why Timely Enforcement of Common Charges is Critical for Condo Boards

RPAPL § 881 Licenses, and Why Fee Reimbursement Is a Core Deal Term

The 432 Park Decision: A Masterclass in Risk Management for New York Condo Boards

Protecting Your Building’s Integrity: Lessons from Board of Mgrs. of the 80th at Madison Condominium v. 1055 Madison Ave. Owners LLC