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
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First published: Sep 2010
Baker v. Bay Terrace Co-op Section XIIAs we have previously discussed, specific contract language is important and must be reviewed when determining the rights of a co-op and its shareholders. The occupancy agreement required the co-op to maintain the premises in good repair, except under certain circumstances. Those exceptions did not include the situation here – where the co-op required access in order to perform exploratory work to locate a building wide leak. The court did not directly address that portion of the memo attached to the co-op’s rules and regulations which stated that painting was decorative and the responsibility of the shareholder. Because the court awarded Baker the full $850 he spent to paint and wallpaper, it is implicit that the co-op was responsible for the cost of restoring what Baker had in place prior to the exploratory work. This is an important consideration where a shareholder installs expensive finishings. Accordingly, we recommend that boards review all their governing documents concerning responsibility for repairs and decorations if repairs need to be made through no fault of the apartment owner. If it is the building’s responsibility, it is important that the board understands the cost of restoring the decorations.
Read full articleFirst published: Jul 2010
Ismael-Aguirre v. Wharton and Hiralion Real Estate Inc v. 225 5th LLCThese cases address when and if a prospective purchaser is entitled to a refund of the down payment. In Ismael-Aguirre, it determined that the terms of the contract were unambiguous and that, based on the board’s failure to act, the contract was terminated. As to Hiralion, the court was faced with a different issue: whether the sponsor of the conversion misrepresented that the 12th-floor terrace would have views, as opposed to an eight-foot wall which enclosed the space. Based on the ambiguity between the written words of the offering plan and the floor plans, the court was willing to consider oral representations made by the sponsor, even though they would not normally be used when interpreting a contract.
Read full articleFirst published: Jun 2010
2229-13 Apt. Corp. v. PortnovThis case reminds us that the pet law, which is applicable to cooperatives (and to condominiums under certain circumstances), must be strictly followed so that any action to evict the owner of a pet that is being harbored without permission, has to be started within 90 days of the date on which the co-op, its employees, or agents first knew about the pet. In a co-op, it is imperative that the co-op act very quickly and give the shareholder no respite. This is because, before starting an action to evict a shareholder for a violation of the proprietary lease, most leases require that the co-op first serve a 30-day notice to cure and a 5-day notice of termination. When one adds in time allowances for service, correspondence, discussions, negotiations, and the like, the 90-day deadline is a very short time period. We recommend that, even where a shareholder claims the pet is temporary, these notices be promptly served. The co-op can always decide to withdraw them at a later date. We note that the court provided another alternative to immediate service of notices and the start of an action: entry into an agreement with a date by which the pet must be removed from the premises. While we are in favor of settlement agreements, again, a co-op must watch its time periods so that, if no agreement is signed despite a shareholder’s promises, the co-op has enough time to serve a notice to cure, notice of termination, and notice of petition and petition (or summons and complaint) to meet the stringent requirements of the pet law. As to attorneys’ fees, the court decided not to reward the shareholders for misleading the co-op. While the court believed it was constrained under the pet law to allow the dog to remain in the apartment, it concluded that there was no determination “on the merits” so that there was no “prevailing party.” In this way, it was able to decline to award legal fees to the shareholders.
Read full articleFirst published: May 2010
Beudert-Richard v. RichardThis case presents an excellent example of what may happen when there is a change in the law not addressed by property owners. The majority decided to allow the case to proceed, taking into consideration the apparent intent of Adam and Pamela, even though neither ever formally altered the way in which they held title to the co-op shares. The dissenting judge would have adhered strictly to the long-standing rules concerning ownership of shares and would have dismissed the complaint, as the lower court did. While we question whether there are many apartments that were purchased by couples as joint tenants prior to 1996 who have since divorced, we offer this case as a cautionary tale and a reminder that it is important that you communicate with your attorney about any changes in the law or your marital status which may affect ownership of property.
Read full articleFirst published: Apr 2010
Warner v. KaplanThis case raises issues concerning the rights and obligations of an estate when a person dies while a contract is pending. The court first explained that, where a contract – even if merely in its printed form – provides that it shall be binding on the parties’ heirs, that means that if a person dies before the contract is consummated, their estate must complete the contract. The court was very clear that if the parties wanted a different result, they should have negotiated and amended the form contract. The other aspect concerns the purchaser’s obligations to the co-op under the contract. The court explained that, where an estate is responsible to complete the contract, it must comply with the terms of the contract and submit its own application to the board for approval. Because the estate here did not submit the application, the court did not consider what would have happened in the event that the board – which had approved the purchaser – refused to approve the estate. While we cannot be certain (particularly because we are neither familiar with the specific terms of the contract nor the assets held by the estate), we believe that if the board did not approve the estate, the estate would have been able to recover the down payment. However, the estate did not submit an application and, as a result, lost the down payment without any opinion as to whether it would have been an acceptable shareholder.
Read full articleFirst published: Mar 2010
Katz v. Board of Mgrs, One Union Square E. CondominiumThe court recognized the long-standing principle that a condominium board cannot be liable for breach of the warranty of habitability or constructive eviction because both require the existence of a landlord-tenant relationship, which is not present between a condominium and its unit-owners. The court also interpreted the bylaws, and the board’s actions thereunder, in the context of the Business Judgment Rule. The court explained the well-settled law that the bylaws form a contract between the condominium board and its unit-owners and determined that, because the board acted within its business judgment when carrying out its contractual obligations, it could not be liable for breach of the bylaws. Finally, the court considered a cause of action for breach of the covenant of good faith and fair dealing, which asserted that the board did not act fairly or in good faith when performing its obligations under the bylaws. Such a requirement – to act fairly and in good faith – is an implicit requirement in every contract. Although claims under this cause of action have been asserted for years in general contract matters, we are seeing them asserted more frequently in cases involving cooperatives and condominiums. As this court explained, however, once a determination has been made that the board acted in good faith so as to defeat a breach of the Business Judgment Rule, it is highly unlikely that a board will be found to have breached the covenant of good faith and fair dealing.
Read full articleFirst published: Feb 2010
Ewen v. MaccheroneOne of the issues which all condominiums (and cooperatives) face is whether to become involved in what is essentially a dispute between neighbors, whether it concerns smoke, other odors, decoration of a shared common space or noise complaints. The decision makes it clear that a unit-owner has the right to enforce a condominium’s bylaws and rules and regulations as against another unit-owner, even if the condominium (or its board of managers) is not a party to the action. The court did not discuss whether the plaintiffs had, prior to the action, complained to the board or the defendants, or whether anyone demanded that the sponsor correct what were apparently construction and design defects. Although we can anticipate that the defendants will seek to name the sponsor and possibly the board in a third-party action, this ruling stands for the proposition that a unit-owner can seek relief against another unit-owner directly without naming the board as a party. The court does not analyze the issue; however, the decision is clear that the condominium’s bylaws and rules and regulations form a contract not only between the condominium and its unit-owners, but also forms a contract between each unit-owner. Finally, the court confirmed that unit-owners may have causes of action for negligence and nuisance, independent of any claims concerning a violation of the condominium’s governing documents.
Read full articleFirst published: Jan 2010
First Avenue Owners Inc. v. Valentina Enterprises, LLC and J.A.V. Food Corp.Typically, there is no protected right to light, view, or air. An exception exists if there is a recorded easement, such as the one in this case. It is for this reason that we recommend that those who are purchasing apartments that overlook the roof of an adjacent building perform due diligence to determine whether there is a recorded easement for light and air. Without such an easement, the owner of the adjacent building may be able to install mechanical equipment, a roof deck, or even additional stories (in which case “lot line” windows may have to be closed), provided that all laws are obeyed. When there is a recorded easement for light and air, however, its terms must be strictly followed. Courts may allow a minimal variance (such as if the volume were 253 cubic feet rather than the permitted 250), but in this case, the defendants’ failures to comply with the easement were substantial. In addition, even though the last sound measurements were taken in 2005 and 2006, the court determined that the cooling tower violated the noise control code. We believe that this ruling was made in part because the defendants’ failed to demonstrate – through expert testing and affidavit – that decibel levels 20 points above those permitted had been reduced at any time since 2006. The court also concluded that there was a private nuisance because there was a substantial, intentional, and unreasonable interference with the co-op residents’ right to use and enjoy their apartments. In opposition to the co-op’s motion, the defendants attempted to exert “form over substance” by arguing that certain “key” words were not contained in the co-op’s complaint. However, the court relied upon what the co-op actually demonstrated in its motion papers.
Read full articleFirst published: Oct 2009
Leschins v. 3777 Independence Corp.It was undisputed that Goodman was the co-op’s managing agent. A managing agent working on behalf of a co-op could not be held liable unless there was clear and explicit evidence that it intended to make itself personally bound. There was no evidence that Goodman ever intended to be personally and separately bound for any action it took. The court noted that an agent would not be exempt from liability if it acted outside the scope of its authority; however, Leschins presented no factual support for this theory. This case reminds us that the law will not help a shareholder who fails to comply with his or her obligations under the proprietary lease. Plaintiff attempted to obtain money damages from the co-op because there was water damage in his apartment. However, it was clear that the co-op was willing to make the repairs, but that plaintiff would not grant it access. The court reviewed the parties’ rights and responsibilities under the proprietary lease and the Business Judgment Rule and determined that the co-op’s obligation to repair was contingent on plaintiff’s obligation to provide access. Importantly, the court held that the shareholder could not dictate the method or manner of repair. The co-op had the right to determine how the repairs were to be made, particularly since it retained experts and was relying on their advice. The case also reminds us that managing agents will not be liable for acts taken in their capacity as managing agent. A managing agent will only be liable if its actions evidence an intent to be separately responsible or if it acts outside the scope of its authority.
Read full articleFirst published: Sep 2009
Batsidis v. Wallack Management Co. Inc., et al.The shareholder and co-op entered into an alteration agreement that required the shareholder to pay all of the corporation’s costs associated with the shareholder’s proposed alteration. The appellate court recognized that the provision was intended to insure that other shareholders of the co-op were not required to pay charges directly attributable to a single shareholder’s renovations. Importantly, the court drew a distinction between the provisions of the alteration agreement and proprietary lease where the lease typically requires a shareholder to pay the co-op’s legal fees in the event of litigation between the co-op and a shareholder. In the case of the lease, the court explained, public policy considerations must be taken into account so that people are not dissuaded from seeking “judicial redress of wrongs.” This is not a concern when a shareholder and a co-op contract through an alteration agreement to require a shareholder to pay costs associated with issues directly related to a particular apartment. Query whether a proprietary lease should be amended to specifically permit a co-op to charge back shareholders for professional fees incurred in connection with a specific apartment in the absence of litigation.
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