Case Notes by
Richard Siegler & Dale Degenshein, Stroock & Stroock & Lavan
Category
- Access
- Alterations
- Appeals
- Arbitration
- Assessment
- Attorney Fees
- Attorney-Client
- Authority to Sue
- Balcony/Terrace Rights
- Bike Lane
- Board of Directors
- Books and Records
- Breach of Lease
- Business Judgment Rule
- Bylaws
- Bylaws/House Rules
- Certificate of Occupancy
- Charges/Fees
- Commercial Unit
- Common Element
- Common Elements
- Companion Animal
- Constitutionality
- Construction Defects
- Contracts
- Conversion
- Defamation
- Discovery
- Discrimination
- Due Diligence
- Easement
- Elections
- Estate
- Eviction
- Eviction/Termination
- Fiduciary Duty
- Fines
- Foreclosure
- Fraud
- Governance
- Gym
- House Rules
- Indemnification
- Indemnification/Subrogation
- Injunction
- Insurance
- Labor Law
- Liability of Directors
- Licenses
- Liens
- Maintenance
- Malpractice
- Management
- Mechanic's Lien
- Misrepresentations
- Motion Practice
- Motion Practive
- Negligence
- Notice of Pendency
- Nuisance
- Occupancy Agreement
- Ownership
- Parking
- Partnership
- Personal Injury
- Pets
- Property Damage
- Proprietary Lease
- Reasonableness
- Receivership
- Release
- Repairs
- Representations
- Sales
- Sponsor
- Statute of Limitations
- Stock/Shares
- Stocks/Shares
- Sublets
- Succession Rights
- Tax
- Third-Party Liability
- Transfers
- Trespassing
- Trial Practice
- Violations
- Warranty of Habitability
- Yellowstone Injunction
- Zoning
First published: Dec 2016
Singh v. Turtle Bay Towers Corp.; Graham v. 420 East 72nd Tenants Corp.The Business Judgment Rule is an important tool. It allows boards to operate their cooperatives or condominiums without excessive interference – unless there are acts of wrongdoing or self-dealing, or if there is a contractual obligation to the contrary. But courts will question a board’s actions if those actions defy common sense. It appears that this board offered nothing to explain how it could assert that the purchase price was too low while at the same time offering substantially less money to purchase the apartment itself. The question of whether boards can require a floor price to enhance apartment values in the building has been controversial. The most obvious reason is that some apartments may be newly renovated while others are not. One hopes that in those situations, boards will use their judgment and, where warranted, make exceptions to their own rules. The decision in this case does not address whether this was the first time this board had rejected an application because the sale price was too low, or whether it had adopted a formula to determine acceptable prices. Nor does it address why the board was apparently not influenced by the appraisal. The board in this case may genuinely believe that the purchase price is too low. However, if that were the case, it would have been bound to offer more when it sought to purchase the apartment. Boards can’t have it two ways.
Read full articleFirst published: Sep 2016
Citimortgage Inc. v. Abdou Salam Gueye and Plotch v. CitibankThe first of these cases is very important for condominiums. Most of the cases we have seen that preclude a lender from collecting interest (or a portion of interest) are because the court found the lender was acting in bad faith. In this case, however, the court was very clear that the lender’s failure to diligently pursue the case warranted a reduction of interest. As to the second case, the Court of Appeals has now clarified that consolidated mortgages, at least so long as they are consolidated prior to the filing of a common-charge lien, become a first mortgage so that the condominium’s lien is behind the total loan. Until the Condominium Act is changed, we suspect that condominiums will continue to have problems collecting their common charges during foreclosures.
Read full articleFirst published: Jun 2016
Board of Managers, Soundings Condominium v. FoersterIt’s unusual for a co-op or condo board to initiate a legal action based on misrepresentations in the purchase application. The case merely denied Foerster’s motion for summary judgment. Accordingly, there remain many issues and unanswered questions. In this case, the misrepresentations were plain and undeniable. But what happens when the misrepresentation is less obvious? And how long can a person be held to a representation made in a purchase application? Clearly, no one believes that a representation made 20 years earlier should be binding. Another question is whether the Social Services Law requires a condo or co-op to allow a group home to be in place even if the governing documents require that apartments be used only for residential purposes. And what rights – or obligations – will the initial sellers have? We don’t have the answers to all of these questions, but the board’s decision to sue here – and the court’s refusal to dismiss the claim for rescinding the sale – should be taken into account by any purchaser seeking to “put one over” on a board.
Read full articleFirst published: Jun 2016
Board of Managers, Soundings Condominium v. FoersterIt’s unusual for a co-op or condo board to initiate a legal action based on misrepresentations in the purchase application. The case merely denied Foerster’s motion for summary judgment. Accordingly, there remain many issues and unanswered questions. In this case, the misrepresentations were plain and undeniable. But what happens when the misrepresentation is less obvious? And how long can a person be held to a representation made in a purchase application? Clearly, no one believes that a representation made 20 years earlier should be binding. Another question is whether the Social Services Law requires a condo or co-op to allow a group home to be in place even if the governing documents require that apartments be used only for residential purposes. And what rights – or obligations – will the initial sellers have? We don’t have the answers to all of these questions, but the board’s decision to sue here – and the court’s refusal to dismiss the claim for rescinding the sale – should be taken into account by any purchaser seeking to “put one over” on a board.
Read full articleFirst published: Apr 2016
Osberger v. 18 Mercer Equity Inc.Although incidental to the issue of legal fees, this case raises a point we have seen many times. When a city agency issues a violation, it is often (if not always) issued against the building and not the offending apartment owner. In some situations, an administrative law judge will allow an apartment owner to intervene or to take over the defense; in some instances he or she will not. It is important for a building, upon receipt of a violation, to be clear that the responsibility both for defense and to cure a violation and pay fines or penalties rests with the apartment owner. The court’s analysis of the Osbergers’ claim for attorneys’ fees under the co-op proprietary lease is noteworthy. The cooperative would not have been able to assert a claim for fees since the Osbergers were not in default, and a default was required under the lease. Our experience has been that, in situations like this, most boards would in fact demand its fees be paid by the shareholder.
Read full articleFirst published: Apr 2016
Osberger v. 18 Mercer Equity Inc.Although incidental to the issue of legal fees, this case raises a point we have seen many times. When a city agency issues a violation, it is often (if not always) issued against the building and not the offending apartment owner. In some situations, an administrative law judge will allow an apartment owner to intervene or to take over the defense; in some instances he or she will not. It is important for a building, upon receipt of a violation, to be clear that the responsibility both for defense and to cure a violation and pay fines or penalties rests with the apartment owner. The court’s analysis of the Osbergers’ claim for attorneys’ fees under the co-op proprietary lease is noteworthy. The cooperative would not have been able to assert a claim for fees since the Osbergers were not in default, and a default was required under the lease. Our experience has been that, in situations like this, most boards would in fact demand its fees be paid by the shareholder.
Read full articleFirst published: Mar 2016
OA Manhattan LLC v Condo Board of Managers of Cassa NY Condominium and Residential Board of Managers of Cassa NY CondominiumMany condominiums are governed by a single board of managers. Many others, however, have “sections” and each section typically has its own board. So, for example, a residential section will have its board manage all residential issues; a commercial section board will operate and oversee commercial common elements; perhaps there is a parking board, a rental board, an office board. Depending on the structure of your condominium’s declaration and bylaws, there are many possible ways for sections to be divided. When separate boards are given power and authority for their respective sections, there is typically an “over board” – a supervising entity – that determines issues that affect the entire condominium. More often than not, the commercial board doesn’t care what the residential board does and vice versa, in which case there is no reason for a supervising board to be involved. In fact, in some buildings, this over board never actually has to meet, the intent being that each sectional board be permitted to operate its section with as little interference as possible. But what happens when the boards have competing interests, or simply don’t believe the other board is doing the right thing for the building?
Read full articleFirst published: Feb 2016
Berkowitz v. 29 Woodmere Blvd. Owners Inc.This case can be used as a teaching tool – because many of the issues and arguments involve practical, real-world acts that boards come across regularly. First, it is important to remember that, in the context of discrimination, there are two ways people may sue. The person who was allegedly the victim of discrimination may assert a claim against a board directly. Or the shareholder could have claims for breach of contract against the corporation or breach of duty against the individual board members, or even charges of discrimination. In its ruling, the court spends very little time discussing the action Lax brought against the co-op; however, it does note that Berkowitz was a party to the action. We are not certain why the board agreed to settle with Lax, yet there was no settlement at that time with Berkowitz. While it is true that boards do not need to set forth their reasons for rejecting a proposed purchaser, this does not mean that boards have carte blanche. Once a person raises an arguable basis for rejection that, if proven, would be actionable, the board cannot simply rely on the Business Judgment Rule to say that the person was rejected and that’s that. Boards, on occasion, believe they are safe from legal harm when rejecting a purchaser, particularly if there has been no interview – the theory being that board members would not know the rejected applicant was of a protected class because they had not met. That, of course, was not the case here, and the board’s apparent reliance on the fact that Lax had not been interviewed was irrelevant. The court’s decision to dismiss Manginelli’s claims is consistent with general court principles. If there is an objective reason to reject a purchaser, then there will be no viable claim. However, the rationale is suspect when an applicant is a member of a protected class, and the board rejects, citing a lowball price – then allows the sale to go forward for 20 percent less. In such a situation, the court will not simply dismiss the decision as a legitimate exercise of business judgment. Finally, boards must remember that even though the attorney-fees lease provision says the co-op can recover fees, the provision is reciprocal but not precisely parallel. Therefore, while a default by the shareholder is required to allow the corporation to recover fees, a default by the corporation is not necessary for a shareholder to seek fees against the corporation. As a best practice, if a board is going to reject a prospective purchaser – particularly if it is not for obvious financial reasons – it may be prudent for the board members to step back, take a breath, and call the board’s lawyer to ascertain what courts will consider when deciding whether the board and its individual members acted within their rights.
Read full articleFirst published: Jan 2016
John Oriogun v. Board of Managers of Hampton House Condominium and Hampton House CondominiumWhen a building wants to offer health club facilities to its apartment owners, it is important to consult insurance professionals, have them review maintenance contracts for equipment, and draft waivers, releases, and see that documents generally comply with the building’s governing documents and with applicable law. The GOL provision at issue here specifically provides that any waiver of liability as a result of the negligence of the operator of the gym – whether the condominium or a third-party operator – is void. We have seen cases where a failure to carve out negligent acts of the operator – or in the case of other GOL provisions, the owner of a premises – renders the entire provision void, so that even if the owner/operator was not negligent, there will be no enforceable waiver of liability. It is thus important that these provisions be drafted carefully. We note that the GOL provision, however, requires that some payment be made in consideration for using the gym facility. We presume Hampton House requires a payment, but do not know how the court would address the issue if maintenance or payment to the gym were merely a budget item in common charge calculations. Further, it appears as if the court in this case determined that the hold harmless provision be removed. We do not know what would happen if the provision were merely redrafted to comply with the GOL by carving out the negligence of the operator.
Read full articleFirst published: Dec 2015
Trump Village Section 4 and Igor Oberman v. Yuliya Bezvoleva Aka Julia Bezvoleva, Inna Yeselson, Josef Stalin, Aborigen, www.tv4news.orgAs the appeals court told us in Levandusky v. One Fifth Avenue Apartment Corp. 25 years ago, cooperatives and condominiums are quasi-governments – “a little democratic sub-society of necessity.” The board makes decisions for the building and, thus, the apartment owners. And if an owner does not like the way the building is being run, there are things he or she can do, all within the dictates of a democracy, such as run for the board or propose a slate or complain to management and the board. Depending on the nature and severity of the alleged issue, he or she can call a governmental agency to complain about building conditions or even start a lawsuit. If owners want to solicit information and support from other apartment owners, they can write letters, and even if the owners’ statements are questionably defamatory, they may be protected by the common-interest privilege if the complaining owners keep it “all in the family.” In other words, the common-interest privilege may apply if the information is communicated only to those within the community who have an interest in those same common issues. What a complaining apartment owner cannot do, however, is make (arguably defamatory) assertions on the internet or in a publication for all to see. The defendants in this case raised just about every possible defense to the publication (and alleged authorship) of the statements on the website, and the court analyzed, and disposed of, every argument. On a final parenthetical note (although perhaps not really beside the point), we do not know why an apartment owner would want to make public some of the claims the defendants are alleged to have made here. Even if the statements are patently true and accurate in all respects, those kinds of statements might be expected to have a negative effect on resale prices. It’s something to consider before an apartment owner gets up on a soapbox.
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