The NY Times recently tackled a hot-button issue: Can co-op shareholders challenge a major assessment? Key takeaway: Boards have broad financial power, but communication is crucial for avoiding costly disputes.
Read the full Q&A:
In the case of 360 E. 72nd St. Owners Inc. v. Wolkoff, a New York State Court in Manhattan handed down a decision regarding pets in cooperative buildings that co-op boards and property managers should beware. The outcome underscores the importance for co-ops to take prompt legal actions when dealing with residents who violate pet-related house rules and the risks of delaying enforcement. Time is of the essence.
The defendant, a co-op resident, owned a mixed-breed dog that included American Staffordshire Terrier, a breed prohibited by the building’s House Rules. The co-op board was aware of the dog but failed to start a legal action seeking the dog’s removal within three months, as required under New York City Administrative Code §27-2009.1.
Because the co-op didn’t act quick enough, its only hope was to prove in a full-blown hearing with witnesses and other evidence that “the harboring of a household pet causes damage to the subject premise, creates a nuisance or interferes substantially with the health, safety or welfare of other tenants or occupants of the same or adjacent building or structure” (NY Code § 27-2009.1 (d)). The court held for the pet owner, upholding a strict application of the Pet Law.
Key Takeaways for Coop Boards and Their Property Managers
This court decision highlights the challenges faced by co-op boards when enforcing pet policies. It reinforces the importance of proactive measures, clear communication, and timely legal action to protect the interests of their co-op community.
Read the decision here.
Condominium boards embroiled in construction defect lawsuits against developers (sponsors) often see a further complication arise: the sponsor bringing in the project architects as third-party defendants. Sometimes the condo can sue the project architect directly but many times the focus is on the developer and its members and they point the finger at the architect. This tactic can introduce additional complexities into the condo board’s case against the sponsor. A recent New York case sheds light on this dynamic.
In the case of Board of Managers of the 15 Union Square West Condominium v. BCRE 15 Union Square West LLC, the condo board sued the building’s sponsor. The sponsor, in turn, filed claims against various third-party defendants, including the project architects, Perkins Eastman Architects P.C. Perkins Eastman argued that the sponsor’s claims against them were time-barred under their contract and that certain claims were duplicative and should be dismissed.
Key Points for Condo Boards
In view of this, condo boards should be aware that sponsors may try to deflect blame and responsibility by bringing architects into the lawsuit. This additional layer of complexity can delay the condo’s suit and make it more complicated because of the additional parties and issues involved, but in the end, if there are more parties available to pay for the damages sought. However, it could end up being a good thing provided experienced counsel is leading the charge and stays focused on pushing the condo’s claims full speed ahead.
Here’s the case.
In Board of Managers of the Brighton Tower II Condominium v. Brighton Builder, LLC, the Second Department which overseas Brooklyn and Long Island lower courts, issued a decision which clarifies what condo boards and owners have to establish in order to succeed against sponsors and their principals in construction defect cases. The court offered important clarifications on when condo boards can sue sponsors and their principals, as well as time limits for doing so. Here’s what condo boards and their management need to know at least in the Second Department:
1. Limited Liability for Sponsor’s Principals:
2. Piercing the Corporate Veil: What Boards Need to Prove
3. Breach of Fiduciary Duty: Timing Matters
4. Conversion Claims: Be Aware of the Clock
It’s a good idea to thoroughly document any suspected wrongdoing, including control exercised by a principal, financial discrepancies, and communications indicating a breach of duty. While you’re doing that keep an eye on the statute of limitations clock and get early legal advice from experienced counsel.
Read the Court’s Decision here.
Property managers, take heed! A recent court case highlights the power you have to protect your associations when a neighboring building owner does not cooperate in giving a license for protection on their property so that the association can perform its work . In this case, the court awarded a license fee and mandated typical insurance, but did not reimburse the unneighborly neighbor for any additional professional fees or costs and did not grant any other consideration for the license.
The Case of the Unneighborly Neighbor
The specifics of the case may vary, but the core situation is this: Building A requires repairs to its facade, and in order to do so, Building A has to install protection on Building B’s property to protect Building B. Here’s where the trouble begins.
Building A ideally seeks a license agreement with Building B, allowing the repairs to proceed with clear terms for access and consideration if the access is really intrusive. However, if Building B proves uncooperative and refuses such an agreement, Building A is forced to go to court to obtain a court-ordered license.
The Burden of Proof Lies with the Repairing Building A
It’s crucial to understand that the burden of proof lies with Building A, the entity seeking the license. In order to obtain the court-ordered license, Building A must demonstrate:
The Unforeseen Costs of Uncooperativeness
Building B’s refusal to cooperate may backfire. While they avoid granting explicit permission for the protection, they also forfeit the opportunity to negotiate a potentially favorable consideration package. It’s generally better for the parties to negotiate an out-of-court license than to leave it to a Judge to make a decision on the license terms and consideration. The court, in its decision, may not consider reimbursing Building B for its signifiant attorneys fees incurred regarding the matter. In the case, Building B was looking for up to a $10,000 reimbursement during negotiations which was dwarfed once litigation started. Building B walked away with no reimbursement by the Court.
The Takeaway: Cooperation is Key
This case serves as a cautionary tale for both parties involved. For property managers, it underscores the importance of pursuing clear agreements with neighboring property owners before embarking on facade repairs. For uncooperative neighbors, it demonstrates the potential financial burden of refusing a reasonable license agreement.
By fostering open communication and seeking mutually beneficial solutions, property managers can avoid the hassle and expense of litigation, ensuring a smoother and more cost-effective repair process for everyone involved. It is critical to bring in experienced counsel early on in the license process in order to facilitate negotiations and if necessary, bring the neighbor to Court. The Matter of Board of Managers of Ariel Condominium v. Broadway Metro Association, L.P. case gives, associations that require a license from their uncooperative neighbors, another tool in their arsenal for compelling the neighbor to be neighborly. Read the decision here.
Condominiums have a contractual duty to maintain common elements. While the business judgment rule normally protects condo board members from personal liability if their choices seem unwise, it won’t shield the condo if the board breaches its contractual obligations to owners. Boards who neglect these responsibilities could open the condominium up to significant liability.
The Case: 580 Llorrac St. Corp. v. Board of Managers of 580 Carroll Condo.
In this case, a condo unit owner suffered water damage to its unit for several years due to the board’s failure to promptly repair a common element – the building’s facade. The owner repeatedly alerted the board to the ongoing water infiltration. Expert reports confirmed that the damage was directly caused by the degraded facade.
Despite this, the board took over a year to even investigate the source of the leaks and delayed repairs for yet another seven months. The court ultimately ruled this was a breach of the condo’s bylaws, which contractually obligated the board to maintain common elements.
Key Takeaways for Property Managers & Boards
How to Protect Yourself as a Board or Property Manager
Here is the 580 Carroll Condo Court decision by the Supreme Court in Brooklyn, New York.
A recent case decided by the New York Supreme Court (390 Riverside Owners Corp. v. Stout) underscores the importance of shareholders granting access to their apartments for necessary repairs, and actions that property managers and coop boards can take when shareholder-proprietary tenants do not do so.
The Issue:
The Court’s Ruling:
Lessons for Property Managers and Co-op Boards:
Why Shareholders Should Grant Access
Read the case here.
The recent case of Alford v. 72nd Tenants Corp. offers a stark reminder for property managers in the cooperative housing sector: Disputes over terraces and other potentially shared spaces can lead to costly lawsuits. Even when your client board operates in good faith, detailed records play a vital role in successfully defending their actions.
Case Background: “Terrace” or Tenant Trouble?
A tenant-shareholder claimed that a rooftop area adjacent to her apartment qualified as a “terrace” under her proprietary lease. When the cooperative performed extensive repairs to the roof, the tenant alleged a breach of contract, and a kitchen sink of claims, due to delays and inconveniences.
The court, however, ruled in favor of the cooperative. The key factor was counsel’s ability to demonstrate through good record keeping that the board’s obligation was to protect the building’s structural integrity which outweighed the tenant’s claimed right to uninterrupted enjoyment of their own space, and that the board satisfied its obligation.
Why Your Records are Your Boards’ Legal Shield
This case highlights the importance of meticulous records for property managers. In Alford, the cooperative’s defense crucially relied on evidence documenting:
Lessons for Property Management Companies
This case illustrates crucial lessons for managing cooperative properties:
While strong proprietary lease language is the first line of defense, meticulous record-keeping is your best insurance against costly lawsuits. By prioritizing documentation, property managers can empower their cooperative clients to confidently defend their actions and protect the best interests of the community as a whole. The decision in Alford v. 72nd Tenants Corp. shows the myriad of claims that plaintiff lodged and the coop was able to get thrown out by stellar management of a difficult situation.
There are several reasons why property management companies in NY should want to have their condos equipped with electronic voting systems:
Overall, electronic voting systems offer numerous benefits for property management companies in NY, including increased efficiency, transparency, accessibility, cost-effectiveness, and data analysis capabilities. Take a look at www.ballotmanagement.com which was designed specifically for management companies and their boards.
The well established business judgment rule provides that a court should defer to a cooperative board’s determination “[s]o long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith”. Courts sometimes try to find ways around the rule in order to justify their decisions aimed at weakening the ability of coop boards to govern themselves without Court interference. Coop boards and management can battle against this loss of autonomy by considering proprietary lease, bylaw and rule amendments that address language issues that Courts and adversaries use against coops.
In the recent case of Christie v. Breezy Point Cooperative Inc. (Index No. 705938/23), a New York judge in Queens decided that a coop board could not require the shareholder/proprietary tenant to remove alterations to the apartment as a condition to the board’s consent to to a sale of the apartment. The tenant, Christie, made alterations to his coop unit in 2013 without obtaining consent from the coop board as required under the proprietary lease. Years later, when seeking to sell, the board demanded removal of these alterations as a condition of approval.
Christie sued for breach of contract, breach of fiduciary duty and reimbursement of his attorney fees.
The judge gave two reasons for allowing Christie to continue his suit and holding that the coop couldn’t condition its consent to assignment upon removal of the unauthorized alterations:
The Judge’s decision ignores years of case law in this area and should be a cause for concern for coop boards and management. If Courts move in this direction and require precise language in a proprietary lease to afford the coop the ability to exercise its business judgment and condition assignment of leases on something like this, an unauthorized alteration that is not in the best interest of the cooperative, then coops will have to take steps to amend their leases or suffer similar Court decisions whittling away at coop autonomy.
In addition to a proprietary lease review and amendment proposals, coop boards and management may consider taking action regarding unauthorized alterations earlier than when a shareholder/proprietary tenant is about to sell. This is a difficult task at times because people hide their unauthorized work. Regular inspections may expose these rule violators like Christie and not give him the upper hand in a lawsuit.
Consider that Christie performed an unauthorized alteration which the coop board and management has presumably determined is not in the best interest of the coop and needs to be removed. Christie is selling his apartment and getting away with his unauthorized alteration. The coop is left with the problem and the Court has placed the coop in a position of defending itself and possibly being responsible for Christie’s attorneys’ fees and costs which are claimed in the case.
None of this is right and just and the Court should have dismissed the case and allowed the coop board to exercise its business judgment staying out of the coop’s business. The Court ignored well stabled appellate authority that governing documents like the proprietary lease there placed no express limitation on the board’s authority, and thus the coop board should have had “the absolute right for any reason or no reason to withhold its approval” of a proposed transfer. Rossi v. Simms, 119 A.D.2d 137, 140 (1st Dep’t 1986) (holding that the coop was allowed to condition approval of a sale on purchaser’s “acquiesce[nce] to a surcharge for professional use of [an] apartment”); Young v. 101 Old Mamaroneck Rd. Owners Corp., 211 A.D.3d 771, 773, 775 (2d Dep’t 2022) (complaint didn’t allege “facts [to] support a finding that [cooperative] acted without authority” in conditioning a sale on obtaining authorization for such transfer from court-appointed representative of deceased shareholder’s estate); Black v. Alexander House Residences, Inc., 226 A.D.2d 186, 186 (1st Dep’t 1996) (coop board’s “decision to condition its approval of [shareholder’s] sale of” apartment upon the payment of certain attorneys’ fees was permissible and protected by the business judgment rule).
Considering that Courts like this are chipping away at coop autonomy, coop boards should protect themselves with reviews of their governing documents and appropriate amendments.
Here is the Court decision.
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