First published: Jun 2023
Good Faith
So long as the Board of Managers acts in good faith and within its authority under the by-laws, the court will not second-guess the decisions of the board and its decisions are protected by the Business Judgment Rule. Unpopular decisions can be challenged in the courts, and every decision can be appealed (which is the case here). However, if residents of a condominium or co-op are that unhappy with the current board’s governance, they should seriously consider campaigning to elect a board that shares the same values as they do.
BRICKER ET AL V. THE BOARD OF MANAGERS OF THE VAUX CONDOMINIUM
WHAT HAPPENED The Vaux Condominium is a 19-story post-war building located at 372 Central Park West in Park West Village. Over the past few years, the board has undertaken a number of projects, including an elevator cab modernization, a cogeneration project, renovation of a basement hallway and installation of a HVAC system in the building’s laundry room. All of these projects required significant funds and unit-owner approval, because the condo’s bylaws said that if any additions, alterations or improvements cost more than $25,000 the board must get approval from at least 50 percent of the unit-owners. However, the condo’s next project brought these bylaw provisions into focus and resulted in a lawsuit. Of the building’s 413 units, 216 have balconies, and the balcony railings needed work. The board sought unit-owner approval for a $6 million dollar loan for facade work and balcony railing replacement, but it was rejected. Not to be deterred, the board moved forward with the railing project, increasing an on-going capital assessment to fund it. While the board and unit-owners have many areas of disagreement with this project, the board contends the balcony railing replacement project is a “repair” and therefore doesn’t need unit-owner approval. The unit-owners disagree.
IN THE COURT The court found that the by-laws granted the board the authority to repair and maintain the building, the common elements, and the balconies. The engineer retained by the board advised it that the replacement of the railings would protect the concrete balconies from further deterioration. As such, the court found that the board acted in good faith and within its authority under the by-laws; therefore, the board’s decision to replace the balcony railings was protected by the Business Judgment Rule and could not be second-guessed by the court.
COUNSEL: For Bricker and other unit-owners: Maria Beltrani, Matthew Ulmann SCHWARTZ SLADKUS REICH GREENBERG ATLAS; For Vaux board: Angela Objaystenroos, Joseph Dimitrov LITCHFIELD CAVO; JUDGE: Lyle E. Frank
