Litigation

A brand new Appellate Court decision underscores condo boards’ duty to act in good faith when residents report violations of building rules and regulations. In the case of Bacharach v. Board of Managers of the Brooks-Van Horn Condominium, the board faced legal action after years of alleged inaction regarding excessive noise complaints. The New York Court which oversees the trial courts in Manhattan and the Bronx, refused to dismiss the case against the board and clarified that property managers and condo boards cannot merely leave it to owners to address their own owner-to-owner complaints and the board has to act in good faith when receiving a complaint that an owner if violating the rules.

Case Summary

• Residents complained about unreasonable noise from a neighboring unit due to unapproved flooring installation.
• Despite repeated requests over several years, the board didn’t adequately investigate or enforce the Condo’s noise rules.
• Frustrated residents sued the board for breach of duty and sought an injunction to address the noise issue.

Court Ruling

• The court denied the board’s motion to dismiss, determining:
  • The Condo’s bylaws are ambiguous as to whether the board has discretion to refrain from acting upon complaints of rule violations.
  • The board’s inaction may not be covered by the well-established business judgment rule, which requires actions in good faith for the benefit of the community.
  • “The alleged multiyear gap between plaintiffs’ first complaint and the board’s first action in response to the complaints suggests that the board may not have acted in good faith.”

Takeaways for Condo Boards & Property Managers

1. “Discretion” Doesn’t Mean Inaction: While boards have flexibility in enforcement, ignoring legitimate complaints can be seen as a breach of duty.
2. Document Clarity Matters: Review your bylaws and rules to ensure they clearly define the board’s authority and enforcement responsibilities.
3. Good Faith Response Is KEY: Taking complaints seriously, even if your ultimate ruling favors the accused party, shows you’re fulfilling your role.
4. Timely Action Builds Trust: Promptly addressing potential violations can prevent issues from escalating and damaging resident relations.

Proactive Steps

• Establish and Follow Complaint Procedures: Have a clear process for documenting, investigating, and responding to complaints.
• Regular Bylaw Review: Ensure your rules remain enforceable and fair.
• Seek Legal Guidance Early: Advice from an attorney specializing in condo law can help you navigate complex disputes.

Here is the decision.

Could your condo bylaws save you from a costly lawsuit? A recent Brooklyn court decision highlights the critical role bylaws play when unit owners and their Board of Managers clash.

Case Background

• Plaintiffs (unit owners) alleged negligence by the Condominium Board and individual members in addressing water damage within their unit.
• The Board argued that the condo’s bylaws provide personal liability protection to board members.

Key Legal Principles

• Business Judgment Rule: Courts generally defer to condo board decisions made within their authority and in good faith. Plaintiff must demonstrate fraud or self-dealing to overcome this protection.
• Condominium Bylaws: These form a contract between the board and unit owners. Bylaws often include provisions specifically limiting individual liability of board members for actions taken in their official capacity.

Court’s Ruling

• Negligence claims against individual board members were dismissed due to protections under the condominium bylaws.
• Board-level claims (breach of duty, negligence) remain pending.
• Additional rulings denied summary judgment for both sides, highlighting the factual issues still in dispute.

Takeaways for Boards & Property Managers

1. Bylaws as Safeguards: Well-drafted bylaws offer substantial protection in lawsuits alleging negligence or breach of duty, provided board members acted within their authority and in good faith. Periodic review of bylaws is essential.
2. Fiduciary Responsibility: The board still maintains a duty of care towards the condominium property and unit owners. Neglect or willful disregard of this duty may expose the board as a whole to liability.
3. Proactive Maintenance: Address potential issues (e.g., water leaks) promptly to minimize damage and mitigate the risk of disputes escalating to legal action.
4. Thorough Documentation: Maintain meticulous records of board actions, maintenance, and owner communications. This serves as evidence of responsible decision-making.
5. Discovery Compliance: Non-compliance with discovery procedures can hinder your defense. Understand the obligations from counsel regarding the preservation and sharing of case-relevant information.

Here is the decision (Szymczyk v. Board of Managers of 363 16th Street Condominium).

The recent case of Board of Managers of the 48-54 West 138th Street Condominium v. Flora Burdock highlights the complexities that arise when an individual unit owner’s behavior impacts the health, safety, and well-being of a condominium community. In this case, the condominium board sought legal intervention to address a severe hoarding situation within Ms. Burdock’s apartment.

The Case at a Glance

The plaintiff, the condominium’s board of managers, alleged that the defendant, Ms. Burdock, had created a hoarding situation so severe that it posed safety risks and generated complaints from other residents. The board presented evidence of potential fire hazards, health code violations, and unpleasant odors emanating from the unit. After repeated attempts to work with Ms. Burdock failed, the board sought and received a court order compelling the defendant to grant access for cleanup.

Key Takeaways for Condominium Boards and Residents

This case underscores several important points:

• Condominium Bylaws: Condominium governing documents often contain provisions that give the board authority to enforce rules and regulations designed to protect residents’ safety and preserve the value of the property. These bylaws likely include clauses about maintaining units and common areas in a sanitary and safe condition.
• The Power of Legal Intervention: When communication and attempts at resolution fail, condominium boards have the right to pursue legal action to address problems like severe hoarding. Courts can intervene to protect the interests of the larger community.
• Balancing Rights: While individual residents have ownership rights, these rights must be balanced against the collective rights and well-being of the community. Creating unsafe conditions or significant disturbances violates the rights of other owners to reasonably enjoy their homes.

Preventive Measures

Ideally, issues like hoarding should be addressed before they escalate and require legal action. Proactive measures by condominium boards can include:

• Clear Policies: Establish clear rules and regulations regarding sanitation, noise, and the proper use of units and common areas.
• Early Intervention: Address potential problems early by communicating with residents showing signs of difficulty in maintaining their units. Offer support resources if needed.
• Education and Awareness: Provide residents with information on fire safety and the potential consequences of behavior that could endanger others or create unsanitary conditions.

The Importance of Legal Counsel

Addressing complex issues such as hoarding necessitates careful analysis and the guidance of an experienced attorney. Navigating the legal nuances is essential to ensure compliance with housing laws, protect the rights of all parties, and achieve outcomes that benefit the entire condominium community.

Read the Court’s decision awarding a reimbursement of legal fees, but declining other relief sought by the condo in order to prevent future occurrences.

Coop, Condo, and HOA boards and their management should pay close attention to insurance coverage when faced with lawsuits. It’s not always a guarantee that insurance will cover all damages. A recent case ( E. S. et al – v. – Windsor Owners Corp. et al; NY Sup Ct, NY Co., Index No. 159133/2017) found a coop liable for lead poisoning in an infant resident, and the case is now entering the damage phase. This is a stark reminder that having general counsel advise on legal matters early on can make all the difference. Don’t wait until it’s too late. Here is a link to the court decision (https://www.nycourts.gov/reporter/pdfs/2022/2022_34688.pdf) which was just upheld on appeal.

Condo Boards and their Property Management Companies play a crucial role in maintaining harmony within residential communities. A recent legal battle involving the Sky House Condominium sheds light on the importance of meticulous governance to avoid potential pitfalls.

Background:
The Sky House Condominium Board of Managers found themselves entangled in a lawsuit initiated by a dissatisfied former board member and unit owner. The individual alleged a breach of fiduciary duty, bad faith, and sought an injunction, monetary damages, and punitive damages due to delays in processing an alteration application, resulting in significant financial burdens.

While the court dismissed several claims against individual board members and clarified the lack of fiduciary duty owed by the property management company and manager to the unit owner, it allowed a breach of fiduciary duty claim against the Condo Board, and an aiding an abetting a breach of fiduciary duty claim against the property management company and individual property manager, to proceed. The court identified potential evidence of bad faith, including acrimonious dealings and vague rejection of the alteration plans.

The Lesson:
Clear documentation and minutes to support decision-making processes is critical. Board decisions lacking transparency may be susceptible to legal challenges. Condo Boards should proactively seek legal advice when facing contentious issues to mitigate the risk of legal repercussions.

The court’s decision to uphold the “Aiding and Abetting Breach of Fiduciary Duty” claim against the property management company and manager raises questions due to the earlier rejection of their fiduciary duty to the unit owner. This inconsistency underscores the need for precise legal arguments and challenges to ensure all relevant parties are appropriately addressed in legal proceedings.

The court rejected the application of the business judgment rule as a defense requiring dismissal at this early juncture, citing the persuasive nature of allegations of bad faith. Some boards think the business judgment rule will save them, and it is true where there is good governance that is well documented. In this case, it wasn’t according to the Court.

Takeaways for Condo Boards and Property Management Companies:

1. Document Decisions: Thoroughly document all decisions and maintain clear minutes of meetings to establish a transparent decision-making process.
2. Seek Legal Advice: Proactively consult legal counsel, especially when facing contentious issues, to mitigate potential legal risks.
3. Ensure Consistency: Ensure legal arguments and claims are consistent and aligned throughout legal proceedings to avoid potential loopholes.
4. Ethical Decision-Making: Adhere to ethical standards, as decisions lacking transparency or showing signs of bad faith may invite legal challenges.
5. Understand Legal Duties: Clarify and understand the legal duties of all parties involved, avoiding unnecessary complications in legal proceedings.

The recent legal dispute serves as a cautionary tale for Condo Boards and Property Management Companies, emphasizing the need for proactive governance, transparency, and ethical decision-making. By learning from this case, these entities can enhance their practices, ultimately avoiding lawsuits like this one.

Read the decision here.