Whose Water Bills Are You Paying?

TAKEAWAY Boards should ensure strict compliance with bylaw provisions relating to sub-metering and billing practices, especially when commercial units are involved. Consider what typically happens: A board may assume that sub-meters are functioning properly, bills are allocated correctly, and that everyone understands their responsibilities. Then reality strikes. The commercial unit on the ground floor had been drawing extraordinary water usage for years without proper accounting, and the board came to the belated realization that the residential owners had been unwittingly subsidizing a business operation. Boards and managing agents should periodically walk the building, clipboard in hand, and verify that every required submeter isn't just installed but actually working. Additionally, any general releases that seem to resolve today's construction disputes could unexpectedly complicate tomorrow's billing disagreement, so it is a best practice to have those carefully reviewed by a professional to ensure clarity regarding future liabilities, and avoid unintended implications for unrelated or future claims.

BOARD OF MANAGERS OF GRACELINE COURT CONDOMINIUM V. MALCOLM SHABAZZ DEVELOPMENT CORPORATION

 

WHAT HAPPENED Built in 2006, the Graceline Court Condominium at 106 West 116th St. is a 32-unit building in Harlem. It has a commercial unit on the ground floor, now owned by Malcolm Shabazz Development Corp. In 2023 the condo board noted that its water charges and payments were unusually high, and upon investigation discovered two things: that the commercial unit had a defective water pump which was causing extreme water waste and that the commercial unit did not have a separate water sub-meter. The condo’s bylaws stipulated that the commercial unit owner was supposed to pay for its own water based on its sub-metered usage. When the board realized the problem, it sued the commercial unit owner, seeking recovery of six years of unpaid water charges (the maximum amount recoverable due to the statute of limitations) and costs related to installing the water sub-meter. The board alleged that, in addition to not having paid for sub-metered usage, the defects in the commercial unit’s water cooler compressor, caused a substantial waste of water and resulted in additional charges being improperly borne by the condominium. The complaint included claims for breach of contract and unjust enrichment.

IN COURT The board claimed the owner should pay for water usage and costs to install a water sub-meter. The commercial unit owner tried to get the case thrown out right away by claiming they weren't responsible for installing the water sub-meter and that the board had signed a release in 2013 that prevented them from making these claims. The Court rejected the owner's attempt to dismiss the case. In its decision, the Judge reasoned that the condo rules clearly state the owner must pay for their water usage, and just because the rules weren't perfectly clear about who is responsible for installing the sub-meter, that didn’t mean the case should be thrown out at this early stage. Furthermore, the 2013 release the owner mentioned was related to construction issues, not water billing, so it did not apply here. The Judge also noted that even if that release did apply, it only covered claims arising before April 2013, and the current case involves charges after that and within the allowable six-year timeframe. The Court acknowledged that one claim (unjust enrichment) was redundant but declined to dismiss it because there remained uncertainty about the amount of water charges properly allocable to the commercial unit owner from before the sub-meter was installed. As a result, the commercial unit owner must now respond to the original complaint. The commercial unit owner has since appealed the Court's decision.

COUNSEL for the board ERIC GOLDBERG Kahn & Goldberg ALEXANDER N. BLAKE Lasser Law Group; for Malcolm Shabazz Development Corporation GREGORY L. REID Reid Rodriguez & Rouse; Justice Kathleen Waterman-Marshall