COVID-19

The inevitable has started.  People are suing because of COVID-19 infections.  A Walmart employee died from COVID-19 and his family is blaming Walmart for not protecting him during his employment.  We warned coops, condos and HOAs that lawsuits will likely happen and that they should be mindful of that in making decisions.  

One concern was whether boards should notify residents when employees or residents contract COVID-19.  We understand that some boards are and others aren’t. Some are afraid of violating privacy rights and some are more concerned about protecting their residents.  This unfortunately is a no win situation for boards.  If you take action and notify residents, you may be charged with violating privacy rights.  If you don’t take action and someone is later infected, they may complain that you didn’t take sufficient action to protect them, knowing that a dangerous condition existed in the building. 

In one instance a condominium was already involved in a lawsuit with a unit owner.  Counsel for the unit owner advised the condominium’s attorney that his client contracted COVID-19.  The owner wanted management to know so that delivery rules for the owner could be relaxed.  The notification was more about what can the condo do for the ill resident rather than any worry about the residents in the 100 plus other units. The attorney specifically warned that they will take legal action if the condo advised residents of the name or apartment number of the ill resident. They were unclear as to whether they approved of a general notice to residents that someone in the building tested positive and was ill.  

So, what’s a board and management to do knowing all of that?  They definitely have to comply with the privacy laws and naming the unit owner or apartment number would likely be a problem.  In that particular instance, the unit owner expressly stated through counsel that the unit owner did not consent to being specifically identified.  Other owners in that position may not object to identification in order to protect their neighbors.  If there is an objection to specific identification, a general statement that a resident in the building has contracted COVID-19 and people should be more careful to adhere to CDC guidelines when using the common areas should be ok.  The trouble is that communications demanding specific information will likely happen.  Some managers report that they include in their general communications that specific information cannot be provided and please do not communicate with us asking for this information.  

If the condo board did not generally notify residents and someone contracts the disease in the building, one would expect the same type of lawsuit that Walmart is now facing.  The resident who catches the disease may argue the the condo, like Walmart, didn’t do enough to protect the best interest of their community.  

Coop, condo and HOA Boards and management will continue to face these difficult situations.  How about employees who tested positive for COVID-19 and have recuperated and want to return to work.  These are tough situations for boards and managment, especially because the medical advice has been so equivocal at times including when someone can return to work in an essential job.  The positions on these types of issues seems to change daily.

Now that we are starting to see lawsuits in COVID-19 situations, boards and management have to be more vigilant in doing what is most reasonable for their entire community within the confines of privacy and other laws.  This will have to continue on a case-by-case basis for now.  Getting professional advice as to what is legal and making the most reasonable decision for the entire community based on that advice, is probably the best course of action until we learn more from the Courts in the lawsuits.

Checking your insurance coverage now is also a prudent thing to do.  There may be coverage under your general liability or directors and officers insurance policies.  Your insurance professional should be able to guide you. If you learn that claims arising out of COVID-19 are likely not covered then you may want to consider improving your insurance.

Read a news report on the Walmart lawsuit here .

Cooperative and condominium boards often have inside information about real estate deals in their buildings.  Boards should tread carefully when they learn of Coronavirus “fire sales” by owners who are challenged economically or just want to escape to a perceived safer location.  With their approval rights or right of first refusal, coop and condo boards have to be careful to act in good faith if they have purchase aspirations in mind.

Boards don’t want to end up like the coop board at 420 East 72nd Tenants Corp. which just got hit with a substantial judgment against it for acting in bad faith, refusing to approve buyers in order to purchase the apartment for the coop to convert into a gym. The New York Supreme Court decided on March 30, 2020, after a trial, that the coop board’s actions were reprehensible and awarded $101,201 with 9% interest from 2017, plus attorneys’ fees and costs to be determined, against the board.

The Court didn’t award punitive damages, but it struggled with that decision because of the evidence of bad faith.  The Court explained that “[a]lthough plaintiff presented evidence that tangentially seemed that the defendant Board may have illegally required higher prices for other apartments, as well as plaintiff’s, the proof does not rise to the level of clear and convincing sufficient to support an award of punitive damages. For instance, no other shareholder testified about their experiences with the Board in relation to their sales price.” Had such evidence been introduced at trial, the Court may have slammed the coop board with punitive damages.

Here are some of the Board’s bad acts:

(1) the Board initially asked the seller to hold off marketing the apartment; 
(2) the Board made a lowball offer;
(3) the Board then refusal to consent to a proposed outside purchase for higher pricing and then tried to influence the parties regarding pricing;,
(4) the Board delayed for months and months to take official action on the outside purchase application;
(5) the Board refused to take action on the outside purchase application until forced by court order; and then 
(6) the Board rejected another offer well above the Board’s offer.

With Coronavirus impacting everything right now, boards have to be careful when faced with approval or waiver of right of first refusal decisions.  If your Board is considering injecting itself in a purchase it should definitely get professional advice concerning what it can and cannot do.  Fighting bad faith claims like the 420 East 72nd Tenants Corp. had to do for over five years, can make a hot deal become extremely expensive.

Read the decision here.