Case Notes
Case Notes provides insight on one particularly relevant co-op or condo case—clearly explaining what happened, why it’s important, and what lessons can be learned within.
Category
- Access
- Alterations
- Appeals
- Arbitration
- Assessment
- Attorney Fees
- Attorney-Client
- Authority to Sue
- Balcony/Terrace Rights
- Bike Lane
- Board of Directors
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- Business Judgment Rule
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- Motion Practice
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- Negligence
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- Nuisance
- Occupancy Agreement
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- Parking
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- Proprietary Lease
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- Yellowstone Injunction
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First published: Jan 2012
Hubshman v. 1010 Tenants Corp. and Carroll v. RadoniqiThese two cases discuss, among other things, a board’s duties to its apartment owners and, we believe, turn in part on procedural issues. The court in both of these actions (the same judge decided both within a month of each other) considered the procedural posture of the motions. Where a motion to dismiss is made, every favorable inference in the pleadings must be given to the plaintiff; when a motion for summary judgment is made, the court has the right to look beyond the pleadings and determine if there are any triable issues of fact that would preclude a grant of judgment. A motion to dismiss is a more difficult standard for a defendant, whereby a motion for summary judgment allows the court to search the record. In addition, the court dismissed the derivative claims brought by the plaintiffs in both actions “on behalf of” their respective co-op and condominium, acknowledging the deference that must be provided to the board under the Business Judgment Rule and, in the Carroll case, the condominium’s bylaws. The court made what we believe is an interesting distinction concerning the breach of fiduciary duty claims in the Hubshman case. There, the court determined (as have other, recent cases) that the cooperative housing corporation owes no fiduciary obligation to its shareholders. Further, the individual board members could not be found to have breached their fiduciary obligations absent allegations that they engaged in inappropriate conduct separate and independent from their actions as members of the board. Yet the court sustained an action against the cooperative “board,” having found that a board owes a duty to the shareholders, which we believe is a novel holding in the cooperative corporation field. We are not certain how this claim will ultimately be determined.
Read full articleFirst published: Dec 2011
Shapiro v. 350 E. 78th Street Tenants Corp.In this situation, the co-op apparently attempted to solve its problem of a leaking and deteriorating roof by prohibiting the shareholder from using the area. The court stated that such a position violated the proprietary lease, which clearly gave the shareholder exclusive use of the area. In sum, the court found that – where a shareholder has use of an area of the building that the co-op has an obligation to maintain – the co-op must take steps to make sure that the area is available for its intended use. As the court noted, the plaintiffs paid for the right to use the area when they purchased, and paid for that right in their monthly maintenance charges. The question of what can be placed on the terrace was subject to the co-op’s standard alteration procedures, and the shareholders could not simply install what they wanted on the roof. As is typical, the co-op had the right to have its board and professional advisers review and approve any proposed plan to make sure, among other things, that the building envelope would not be damaged by any installation. We found the motion court’s reliance on the offering plan interesting. An offering plan is typically a “contract” between a sponsor/developer who converts the building to cooperative ownership and the shareholder who purchases from the sponsor. The plan may, in certain circumstances, be used for the purpose of clarifying an issue if it is ambiguous in the proprietary lease. We do not know why details of the offering plan were reviewed by the court in this case, although we suspect it was raised by one of the parties.
Read full articleFirst published: Dec 2011
Shapiro v. 350 E. 78th Street Tenants Corp.In this situation, the co-op apparently attempted to solve its problem of a leaking and deteriorating roof by prohibiting the shareholder from using the area. The court stated that such a position violated the proprietary lease, which clearly gave the shareholder exclusive use of the area. In sum, the court found that – where a shareholder has use of an area of the building that the co-op has an obligation to maintain – the co-op must take steps to make sure that the area is available for its intended use. As the court noted, the plaintiffs paid for the right to use the area when they purchased, and paid for that right in their monthly maintenance charges. The question of what can be placed on the terrace was subject to the co-op’s standard alteration procedures, and the shareholders could not simply install what they wanted on the roof. As is typical, the co-op had the right to have its board and professional advisers review and approve any proposed plan to make sure, among other things, that the building envelope would not be damaged by any installation. We found the motion court’s reliance on the offering plan interesting. An offering plan is typically a “contract” between a sponsor/developer who converts the building to cooperative ownership and the shareholder who purchases from the sponsor. The plan may, in certain circumstances, be used for the purpose of clarifying an issue if it is ambiguous in the proprietary lease. We do not know why details of the offering plan were reviewed by the court in this case, although we suspect it was raised by one of the parties.
Read full articleFirst published: Oct 2011
61 West 62 Owners Corp. v. CGM LLC, CGM EMP RTP LLC, West 63 Empire Associates, LLC and The Chetrit Group, LLC.This is an important case because it addresses what happens when there is a claim that a party is in violation of a city noise ordinance, yet the agency charged with enforcing the ordinance does not issue a violation. The state’s highest court made very clear in its decision that an injunction may be issued to stop the noise, even if a violation was not issued. While the lower court appreciated the situation of the residents, the judge did not believe that the co-op demonstrated that it was likely to succeed on the merits, i.e., that it would be able to show that Empire’s actions constituted a private nuisance. The appeals court disagreed, in part because of its finding that it was immaterial that a violation of city law had not been issued – even though representatives of the police and fire departments had visited the bar. Finally, this case confirms the long-standing principle that a co-op corporation can pursue an action on behalf of its shareholders.
Read full articleFirst published: Oct 2011
61 West 62 Owners Corp. v. CGM LLC, CGM EMP RTP LLC, West 63 Empire Associates, LLC and The Chetrit Group, LLC.This is an important case because it addresses what happens when there is a claim that a party is in violation of a city noise ordinance, yet the agency charged with enforcing the ordinance does not issue a violation. The state’s highest court made very clear in its decision that an injunction may be issued to stop the noise, even if a violation was not issued. While the lower court appreciated the situation of the residents, the judge did not believe that the co-op demonstrated that it was likely to succeed on the merits, i.e., that it would be able to show that Empire’s actions constituted a private nuisance. The appeals court disagreed, in part because of its finding that it was immaterial that a violation of city law had not been issued – even though representatives of the police and fire departments had visited the bar. Finally, this case confirms the long-standing principle that a co-op corporation can pursue an action on behalf of its shareholders.
Read full articleFirst published: Sep 2011
Siegler v. 875 Tenant Corp. and Himmelberger v. 40-50 Brighton First Road Apartments Corp.There have been a number of cases that have addressed the parties’ entitlement to fees under co-op documents, including the proprietary lease and alteration agreements. Courts will interpret agreements as contracts, according to their terms. The court concluded that, as there was no default in Siegler, there was no basis upon which to award fees. Similarly, in Himmelberger, it appears as if the co-op was required to retain security to protect its residents, yet at the same time had no vehicle through which to charge the cost to the shareholder, Henderson. We believe that most proprietary leases are insufficient to cover the myriad circumstances we see time and again, where co-ops are called upon to perform services or address issues as a result of the action of a single shareholder. Unless the reimbursement or indemnification provisions of a lease are revised in accordance with current best practices, it is likely that all shareholders will be required to pay costs incurred by the co-op because of the acts of a single shareholder.
Read full articleFirst published: Sep 2011
Siegler v. 875 Tenant Corp. and Himmelberger v. 40-50 Brighton First Road Apartments Corp.There have been a number of cases that have addressed the parties’ entitlement to fees under co-op documents, including the proprietary lease and alteration agreements. Courts will interpret agreements as contracts, according to their terms. The court concluded that, as there was no default in Siegler, there was no basis upon which to award fees. Similarly, in Himmelberger, it appears as if the co-op was required to retain security to protect its residents, yet at the same time had no vehicle through which to charge the cost to the shareholder, Henderson. We believe that most proprietary leases are insufficient to cover the myriad circumstances we see time and again, where co-ops are called upon to perform services or address issues as a result of the action of a single shareholder. Unless the reimbursement or indemnification provisions of a lease are revised in accordance with current best practices, it is likely that all shareholders will be required to pay costs incurred by the co-op because of the acts of a single shareholder.
Read full articleFirst published: Jul 2011
Kikis v. 1045 Owners Corp.This case involved a situation where the board asserted that it had a policy in place concerning home equity loans, but the policy did not appear in the proprietary lease or bylaws. If a board resolution was passed, it was very recent. While it is difficult to determine from the decision, it appears as if the form purchase application distributed by the managing agent advised purchasers that HELOCs could not be secured by the shares. In any event, the case raises the question of whether a board can promulgate and enforce a policy even if it is not in the governing documents or house rules. Although the court did not cite or reference the proprietary lease or bylaws, we must presume that the policy did not violate any specific provisions of the documents. Accordingly, the court found that the policy – which was consistently applied to all shareholders – would be upheld in accordance with the Business Judgment Rule. This is consistent with a number of other post-Levandusky cases that have refused to interfere with decisions of boards provided the shareholder did not demonstrate that the board acted beyond its authority or in a way that did not further the co-op’s legitimate purpose or in bad faith. It is also consistent with a pre-Levandusky case reported in this column in the July/August 1985 edition of Habitat. There, we discussed Browne v. 930 Fifth Corporation, where a shareholder wanted to use his shares to secure a loan to purchase real estate in Westchester County. The board refused to sign a recognition agreement, and the shareholder sued. Consistent with the later decision in Kikis, the court dismissed Browne’s complaint as the co-op was not required to execute the recognition agreement. Kikis also reminds us that cases will not be sustained against individual board members absent a showing, with specific allegations, that they committed a tort separate and independent from any action they may have taken in their capacity as board members.
Read full articleFirst published: Jun 2011
Carpenter v. Churchville Greene Homeowners’ Association Inc.The court first made clear when discussing the concrete pad that, once an issue is resolved with no likelihood that it will recur, the matter is no longer actionable. We suspect that this is particularly the case in this instance as the matter was resolved within three weeks of plaintiffs’ request that they be permitted to install the concrete pad and that no ascertainable damages accrued during that period. With respect to the parking issue, the court noted in a footnote the plaintiffs’ burden – specifically that allowing disabled guests to park close to their home is “necessary for the equal use and enjoyment of their home in light of their own disabilities …” We question whether the plaintiffs will be able to meet this burden as it is their friends – and not the plaintiffs themselves – who apparently require a parking accommodation. Interestingly, although the HOA denied the request based on fire safety concerns, the decision does not indicate that the defendants presented any evidence that parking on the private road would constitute a violation of an applicable fire code. We question whether if this were the case, it would have affected the court’s determination. In sum, the court gave the plaintiffs an opportunity to prove their claims by allowing them to take the depositions of the individual board members and management company. The court also gave the defendants the right to make another motion for summary judgment at the conclusion of those depositions, i.e., after the plaintiffs had an opportunity to obtain the information they said they needed. Finally, while this case involved an HOA, the legal principles at issue here would apply if the property was either a co-op or a condominium.
Read full articleFirst published: Jun 2011
Carpenter v. Churchville Greene Homeowners’ Association Inc.The court first made clear when discussing the concrete pad that, once an issue is resolved with no likelihood that it will recur, the matter is no longer actionable. We suspect that this is particularly the case in this instance as the matter was resolved within three weeks of plaintiffs’ request that they be permitted to install the concrete pad and that no ascertainable damages accrued during that period. With respect to the parking issue, the court noted in a footnote the plaintiffs’ burden – specifically that allowing disabled guests to park close to their home is “necessary for the equal use and enjoyment of their home in light of their own disabilities …” We question whether the plaintiffs will be able to meet this burden as it is their friends – and not the plaintiffs themselves – who apparently require a parking accommodation. Interestingly, although the HOA denied the request based on fire safety concerns, the decision does not indicate that the defendants presented any evidence that parking on the private road would constitute a violation of an applicable fire code. We question whether if this were the case, it would have affected the court’s determination. In sum, the court gave the plaintiffs an opportunity to prove their claims by allowing them to take the depositions of the individual board members and management company. The court also gave the defendants the right to make another motion for summary judgment at the conclusion of those depositions, i.e., after the plaintiffs had an opportunity to obtain the information they said they needed. Finally, while this case involved an HOA, the legal principles at issue here would apply if the property was either a co-op or a condominium.
Read full article