Litigation

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.