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The key lesson from this new Second Department Appellate Court decision is that condominium boards, supported by their property management, must maintain detailed and objective records demonstrating a good faith effort to investigate, enforce, and balance the interests of all unit owners according to the governing documents. Boards can’t just say that it’s a unit owner-unit owner dispute and leave the owners to deal with their differences. A condominium board investigation and intervention, if deemed appropriate, should be undertaken.

The dispute in the case centers on a condominium unit owner’s complaints that a neighboring unit’s use was violating the building’s bylaws and house rules, specifically alleging a purported breach and resulting in unreasonable traffic and commotion in the common area hallway.

Key Board Obligations Under Scrutiny

The Appellate Division found that the plaintiffs raised issues of fact as to whether the defendant-Board of Managers breached its fiduciary duty by “permitting a purported breach of the bylaws and house rules to persist” over the plaintiffs’ repeated complaints.

• The court noted that the parties provided “sharply contrasting evidence” concerning the extent of the Board’s investigation into the complaints and whether it fulfilled its fiduciary obligation to enforce the condominium bylaws.
• Even though “persons living in organized communities must suffer some damage, annoyance and inconvenience from each other”, this principle does not eliminate a board’s duty to investigate alleged violations and “balance the unit owners’ rights fairly without favoring one over the other”.
• An issue of fact was raised as to whether the Board properly determined that the neighbor’s conduct did not create a nuisance under the bylaws and house rules.

Dismissed Claims and Allegations

The Appellate Court upheld the dismissal of the following allegations and claims:

• Retaliation/Disparate Treatment: The court agreed that the Board’s enforcement of a neutral rule—such as demanding the removal of the plaintiffs’ Ring camera—does not, on its own, establish disparate treatment or support a breach of fiduciary duty claim based on allegations of being singled out or retaliated against.
• Private Nuisance: The court properly dismissed the claim for private nuisance against the Board because the Board “was not responsible for the creation of the purported nuisance”.

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Takeaways for Boards and Management

This case provides critical guidance on a Board’s responsibilities when faced with unit owner complaints about a neighbor’s conduct:

• Due Diligence in Investigation: When a unit owner alleges a violation of bylaws or house rules, the Board has a fiduciary duty to thoroughly investigate the complaint. Simply making a determination without a provable, complete, and fair investigation may be challenged in court.
• Fair and Balanced Enforcement: The Board’s duty includes balancing the rights of all unit owners and acting fairly, “without favoring one over the other”. If the Board determines a neighbor’s conduct is not a violation, the record of the investigation should clearly support that decision.
• Board Liability for Nuisance is Limited: A board is generally not liable for a private nuisance unless it was responsible for creating the nuisance itself.

Here is the Court’s decision.

The First Circuit Court of Appeals today lifted the stay on compliance with the Corporate Transparency Act (CTA), delivering a significant victory for the government. The court found that the government has a strong likelihood of success in defending the CTA’s constitutionality against pending challenges.

While the appeals process is ongoing and a final decision has not yet been reached, the court’s decision signals that the CTA’s compliance deadline remains in effect. FinCEN just advised that the January 1, 2025 deadline for most entities has been moved a few days more to January 13, 2025. Entities required to comply with the CTA should therefore ensure they meet this deadline. Failure to do so could result in severe penalties, and it is unclear whether the government will offer any leniency to non-compliant entities.

If your board hasn’t complied, visit www.ballotmanagement.com to comply right away before the $591 a day fines start after January 13, 2025.

Here is the decision.

A condo owner who served 15 years on the board was arrested and accused of stealing millions of dollars of monthly maintenance fees and diverting them for personal use. The accused served as President for some years, and even President and Treasurer during other years. At one point, he was the only signer on the association’s bank account and the holder of the only checking card linked to another bank account for the condo. The second association account actually had the person’s name on it. He made almost $19,000 in ATM withdrawals on the account.

Where were the other board members? What were the owners thinking during the 15 years of thievery? Probably not much. The thief will obviously have to pay, likely in jail, but so will the other owners who may be unable to recover the stolen funds.

The trouble with many associations like this one, the Marquis Villas-II Condominium Association, is that there is no oversight in place. Not many people want to serve as board members because of the time commitment, and owners are sometimes just interested in common charges not increasing and enjoying their homes. While board members and owners sit complacent, without oversight, unscrupulous people insert themselves in positions of power and take advantage of their neighbors.

A tremendous red flag is the association’s bank accounts. One person should never be named on the bank accounts as a signer and certainly shouldn’t be able to withdraw from ATM’s without written authorization. Board members should have been looking at the bank statements on a monthly basis and if the association was professionally managed, the management company should have been on top of this, recommending and placing preventative measures in place. In this particular case, the accused was fraudulently creating business records, like invoices for $7,000 in light bulbs and fixtures that were never installed, or the painting, sidewalk replacement, and landscaping that never happened over the years. Annual accounting reports by an independent accountant might have shown the entries, but the accountant doesn’t typically audit those numbers. The owners, however, could have shown up at the board or at least the annual meeting and asked the right questions about the operational costs for operations that never happened.

There will be a lot of finger-pointing and lawyering in that condo association over the next year. Hopefully, there is some insurance that covers the losses, or the criminal still has some of the money that he stole for retribution, but their experience should serve as a lesson for other condo boards and owners that oversight is important in their own communities. Here is the article for more information.

The New York Department of State adopted NEW Regulations 182.2-182.11, which are standards relating to the performance of notarial acts. The regulations became effective as of January 25, 2023.

While the bulk of the regulations cover “electronic notarial acts,” there are provisions of the new regulations that pertain to all notaries, which everyone should be aware of.

All notaries are now required to maintain a “traditional” notary journal.

Some details:

· the journal must be maintained for at least 10 years

· it must be capable of being produced to the Secretary of State upon request

· transaction entries must be made contemporaneously with the notarial act and include the following:

1.     the date, approximate time, and type of notarial acts performed;

2.     the name and address of any individuals for whom a notarial act was performed;

3.     the number and type of notarial services provided;

4.     the type of credential used to identify the principal; and

5.     the verification procedures used for any personal appearance before the notary public.

There are other requirements that apply to all notaries but of special interest is Section 182.5 (reproduced below), which sets forth the standards of proof a notary must obtain to confirm the identity of the person appearing before the notary (assuming the person is not personally known to the notary).