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How Strong Is Your Liability Shield? Understanding Bylaws & Board Actions

Home BoardsHow Strong Is Your Liability Shield? Understanding Bylaws & Board Actions
How Strong Is Your Liability Shield? Understanding Bylaws & Board Actions

How Strong Is Your Liability Shield? Understanding Bylaws & Board Actions

Posted by Joseph Colbert, Esq. Boards, Business, Condo Coop HOA, Litigation, Real Estate

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).

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About Joseph Colbert, Esq.

With offices in New York and Connecticut, we are ready to handle your legal needs. We have been representing condo, coop and HOA boards, businesses and individual clients for over twenty five years.

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