First published: Mar 2025
Condo Board Prevails in Transfer Fee Lawsuit Due to Plaintiff's Procedural Error
THE LESSON FOR BOARDS This case is a clear reminder that statute and case law require that a condominium be sued in the name of its president or treasurer, and that those individuals be served on behalf of the entity. Many times, condominiums are not properly named or served but do not move to dismiss on that basis; if there are no statute of limitations issues, boards often assume the plaintiff will just do it correctly at a later date. What is interesting here is that without any indication as to why, the court ordered that costs and disbursements be awarded to the condominium. While that is likely not a large sum, it makes one wonder if the court was disturbed by the failure of the plaintiff to comply with well-settled law.
When a condominium is sued, legal papers must name the board president or treasurer as the defendant. Spencer E. Sherman et al. v. The Watchcase Factory illustrates what happens when a plaintiff fails to do so — and how that works in a condo’s favor.
THE DETAILS
The Watchcase Factory Condominium, a condo and town house development in Sag Harbor built in 1881, was developed into a 64-unit condominium in 2014. The Shermans bought their unit in 2015 and sold it seven years later to Ms. Brookman for $3,350,000. Prior to the Brookman closing, the sales agent confirmed that a transfer fee of 1% of the purchase price, or $33,500, would be required, and that the fee was pursuant to an existing bylaw provision contained in the condominium’s declaration that had been previously adopted by the sponsor. At the closing, the Shermans objected to the transfer fee, declaring that two-thirds of the unit-owners hadn’t voted to adopt it. Despite their objection, the closing occurred and the flip tax was paid. The Shermans then filed suit against the condominium.
Both case law and statute require that a condominium — which is an unincorporated association — be sued by naming the board’s president or treasurer in a representative capacity. In the Watchcase Factory case, however, the Shermans filed suit against the condominium association, not the board president or treasurer. In its response to the Shermans’ suit, Watchcase declared that this detail should cause the suit to be dismissed.
IN COURT
Because General Associations Law Section 13 requires that a condominium’s president or treasurer should be properly served in a lawsuit, the court dismissed the Shermans’ suit for the failure to do so. The court also awarded costs and disbursements to the defendant.
Attorneys:
For the Watchcase Factory Condominium: Certilman Balin Adler & Hyman
For the Shermans: Michael A. Rosenberg Esq.
