Is It A Repair or Improvement?

TAKEAWAY: Courts like to defer to the business judgment of boards. As long as a condominium board acts in good faith, within the scope of its authority under the bylaws, and to further a legitimate interest of the condominium, a court is not likely to meddle in board business.



WHAT HAPPENED The condo board at the Corinthian, a 57-story building at 330 East 38th St., has been dealing with elevator and amenity repair projects and at the same time several lawsuits about the board’s authority to implement them. Wendy Hazen, a residential owner, claims the board exceeded its authority, erred by not seeking resident owner approval, and wasted condominium funds on these projects. She points to the condominium's bylaws which state that any addition, alterations, or improvements to the building’s common areas that cost more than $100,000 has to be approved by at least 70 percent of the residential owners, both in numbers and common interest. The elevator modernization project is slated to cost $4 million, and the repairs to the building’s outdoor running track and playground amenities is projected at $200,000. The board responded to her legal challenges by saying their actions were protected by the business judgment rule.


IN COURT The board members’ motion to dismiss Hazen’s challenge was granted by the court. It said that the “$4.2 million project constituted repairs, rather than improvements.” In doing so, the court cited specific language in the elevator consultant’s report that described the elevators as being in fair condition based on their age and having multiple aspects that were either already obsolete or nearing the end of their life expectancy, and provided that spare parts for the elevators were becoming more and more difficult to obtain over time. The court went on to hold that the “board was fulfilling its fiduciary duty to ensure that the building does not fall into disrepair,” and that “to hold otherwise would effectively hamstring a board’s ability to maintain the building and prevent it from falling into a state of disrepair.” COUNSEL for Wendy Hazen JEFFREY NORTON, DAVID BAKER  Newman Ferrara / for the condo board directors ANDREW GEFELL, BARRY MARGOLIS Abrams Garfinkel Margolis Bergson JONATHAN WEG Nicoletti Hornig & Sweeney / Justice Lyle E. Frank