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: May 2003
Feld v. 710 Park Avenue Corp.This foiled attempt to bar Feld from board service for being at odds with the current board must be viewed as outrageous. The case illustrates the difficulties a co-op or condo board faces when it seeks to bar a dissident from service, especially where cumulative voting is provided in the entity's bylaws.
Read full articleFirst published: Apr 2003
Gramercy Park Residence Corp. v. EllmanThis was a victory for the co-op, which obtained all the relief it sought in light of the shareholder's intransigence to allow needed repairs. One must wonder what impelled this shareholder to resist legitimate board action. Perhaps poor legal advice?
Read full articleFirst published: Mar 2003
Barbour v. KnechtA lower court decision that board consent was not required for this transfer was reversed. The co-op documents and the history of prior transfers, all of which mandated board approval, were the controlling factors, despite a shareholders' agreement and the fact that the purchaser was already a shareholder. This decision reinforces the standard co-op requirement of the need for board approval of apartment transfers.
Read full articleFirst published: Jan 2003
Amato v. HirdReal estate contracts in the New York metropolitan area including co-op purchase and sale agreements normally provide for a 10 percent deposit on account of the purchase price. Invariably, this deposit is held in escrow until the closing when it is paid to the seller. If the sale fails to take place because some contingency in the contract does not occur, the purchaser would normally have his deposit returned. If the sale fails to occur because of the seller's breach, the normal remedy is an action for specific performance to compel the conveyance of a unique piece of real estate. If the sale fails to occur because of the purchaser's breach, the deposit is virtually always retained by the seller as liquidated damages. This case holds that a 10 percent deposit qualified as liquidated damages and not a penalty. If, in another contract for the purchase and sale of a co-op, there was a provision for a 20 percent deposit, could this also serve as liquidated damages and not a penalty if so specified in the contract? The answer is maybe, as the decision would depend on all of the facts and circumstances that justified an increase in the standard deposit from 10 to 20 percent.
Read full articleFirst published: Dec 2002
Teitelbaum v. Woodbury Village Condo-minium IIThe result in this case is somewhat surprising. The "irrevocably restricted" common element is normally called a "limited" common element meaning that its use is restricted to a single unit, although traditionally the cost of maintenance of the space is a common expense. Here, the cost of maintenance was held to be the responsibility of the unit owner. The result suggests the importance of reading the condominium documents carefully and realizing that specific provisions govern which may produce a result at odds with expectations.
Read full articleFirst published: Nov 2002
Mariaux v. Turtle Bay Towers Corp.As is customary in most New York metropolitan area co-op proprietary leases, responsibility for terrace repairs is specified either to belong to the co-op or the shareholder of the apartment that enjoys exclusive use of the terrace. In this case, the lease was quite clear that responsibility for such repairs was assigned to the shareholders. An effort to challenge this result failed here and the board's right to enforce the lease provisions was reinforced by the landmark 1990 Levandusky case, which requires courts to give broad deference to board decisions when adhering to the Business Judgment Rule.
Read full articleFirst published: Oct 2002
Steele v. 400 East 77th Street Corp.This is the latest illustration of what a co-op board can face when it rejects an apartment purchaser who is a member of a protected class, who then claims that such rejection was based on improper discrimination. In this case, where the board set forth permissible grounds to justify the rejection, the court was unwilling to accept such grounds to dismiss the discrimination claim. Instead, the court ordered pretrial discovery to afford the plaintiffs an opportunity to refute the co-op's position. Thus, the claim remains and the co-op is forced to incur further defense costs.
Read full articleFirst published: Oct 2002
Young v. Total Community Management Corp.By Richard Siegler, Stroock & Stroock & Lavan The result in this case was not surprising. There was no bailment. The condominium-owner merely parked his car in the common parking area. Neither the condominium association nor its managing agent was given specific custody of the unit-owner's car. It was left unattended in the association's parking lot. This is not enough to make the condominium association or its managing agent an insurer of the automobile's condition. There was no delivery of custody which would impose a bailee's liability on the condominium or its managing agent.
Read full articleFirst published: Sep 2002
Matter of Fort Hamilton Development Corp. v. Bay Ridge Towers Inc.In the court's view, the petitioners' attempt to distinguish Visutton from their case was unavailing. The restrictive provision at issue in Visutton was virtually the same as the one in the present case. The court also dealt with the petitioners' argument that Flagg was distinguishable from the case at bar merely because the restrictive provision therein stated that the sponsor shall have the right to elect three of seven directors and did not specifically refer to the number of directors Fort Hamilton may elect. It said it was without merit. The offering plan in Flagg stated that the sponsor or holder of unsold shares "will not elect a majority of the Board of Directors" and, here, Article II, Section 2, of BRT's bylaws similarly stated that a shareholder of more than 50 percent of BRT's shares (i.e., the sponsor and holder of unsold shares) cannot "elect a majority of the Board of Directors." Thus, the court concluded that such provisions were indistinguishable. Petitioners also argued that the inspectors exceeded their authority and violated BCL Section 612(a). BCL Section 612(a) provides that "[e]very shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders, unless otherwise provided in the certificate of incorporation." They contended that under this section, the subject restriction in Article II, Section 2, of BRT's bylaws was unenforceable since it was not contained in BRT's certificate of incorporation. The court rejected this argument. While a restriction depriving a shareholder of the right to vote all of his/her shares can only be accomplished through a provision in the certificate of incorporation, the appellate division, second department, in Visutton, held that a provision restricting a sponsor from voting its unsold shares for more than one less than the majority of directors to be elected is not required to be set forth in the certificate of incorporation. This is because such a provision "do[es] not prohibit the sponsor from voting all its shares; [it] merely bar[s] the sponsor from obtaining control of the board under certain circumstances." . Petitioners further contended that the inspectors' refusal to count the ballots cast by Fort Hamilton while counting the ballot cast by Marine Properties LLC, which was also a holder of unsold shares, was arbitrary, capricious, and unlawful. The court said that such contention was devoid of merit. While it is undisputed that Fort Hamilton owns greater than 50 percent of the shares of BRT, Marine Properties LLC owns only 4.39 percent of the shares of BRT, and has never held 50 percent or more of the shares of BRT. Therefore, since the subject bylaw only applied to any "shareholder who owns greater than 50 percent of the shares of [BRT]," it was plainly inapplicable to Marine Properties LLC.
Read full articleFirst published: Sep 2002
Dorsey v. Hawthorne Garden Owners Corp.Contrary to popular belief, neither an existing co-op nor a condo is required to incur unreasonable expenditures to make its building handicapped-accessible. Case law reveals that accommodations for handicapped persons are not required if they impose undue financial burdens or require fundamental alterations. Of course, newly constructed buildings are required to provide handicapped accessible facilities since such facilities can easily be accommodated within a new construction budget.
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