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Case Notes by

Richard Siegler & Dale Degenshein, Stroock & Stroock & Lavan

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First published: Oct 2015
Natalie and Geoffrey Richstone v. the Board of Managers of Leighton House Condominium

Outdoor space – terraces – are a very valuable amenity, especially in an urban setting. We all know that New Yorkers lucky enough to have terraces are not happy when their board requires access to perform alterations, particularly if access is required during the summer months. Or when there are delays – so that a request for two months of access becomes three months, then five months, and so on. And let’s face it, boards probably aren’t happy about having to use an apartment owner’s terrace as a staging area. But under the bylaws of many condominiums, the board has the right to use the terrace for building-wide repairs and, assuming that the work is being performed in an appropriate and timely manner, there is little a unit-owner can do about it. This means that, while it has the right to install a rig blocking a terrace, a board shouldn’t simply leave it up for a year while nothing is done. In this case, although the court does not go into the background leading to the litigation, it appears that the board and plaintiffs agreed that the equipment would be removed by March 31, but that the board’s construction professionals required use of the rig beyond that date. It is not clear why the board would have agreed to an end-date (if in fact it did agree to one), and in that regard this may serve as a reminder. If an apartment owner wants a final date by which equipment must be moved from a terrace, boards and owners must know that there may be construction delays, because of • weather • unforeseen circumstances (contractors find something they didn’t expect when they open a wall or floor) • government agency delays • lack of diligence by a contractor The board must look at each of these issues carefully if they arise but there should be an acknowledgement between a board and a unit-owner that delays may occur, no matter how frustrating it may be for board and unit-owner alike. As for the wood terrace, plaintiffs brought this action even though they knew, or should have known, that the wood terrace was not approved by the board or the DOB. We do not know whether the board would have challenged installation of the wood terrace had it not been for the lawsuit. Once the plaintiffs sued, however, the board raised the issue so the court could presumably make a decision on all issues concerning the terrace. Regarding the attorney fees, the court awarded them to the board noting it “is entitled to costs and attorney fees associated in curing plaintiffs’ breach of the” bylaws. Presumably, then, the board can recover fees to the extent incurred to abate or remove any violation or default by the plaintiffs – for costs incurred to cause plaintiffs to remove the wood terrace and otherwise comply with the bylaws. This provision is fairly typical in condominium bylaws and – depending on the specific language and circumstances – may not provide for attorney fees when a condominium merely defends an action started by a unit-owner.

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First published: Sep 2015
Newman v. 911 Alwyn Owners Corp.

The board’s actions here raise questions that the court never addresses. The decision refers to the board’s conclusion – after the second round of bids were received – that the co-op would be better off financially if it leased, rather than sold, the areas. However, there can be no question that the board considered these issues prior to its announcement that bids would be solicited; indeed, it even had the spaces appraised. The court never discusses the board’s stated reason for this change of heart (if it stated a reason). This was a motion to dismiss – early in the proceeding, before any discovery took place. The court’s decision, however, indicates that even given this seeming lack of explanation, the plaintiffs simply could not demonstrate the elements necessary to sustain a breach of fiduciary duty or breach of contract cause of action. In a situation like this – where a board acted within the bounds of the law but, perhaps, in a manner disagreeable to certain apartment owners – the owners may be best served by seeking relief not from the courts but by running for the board or campaigning against the reelection of the board members to cause a change to the lease/sale policy.

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First published: Jul 2015
Pastor v. DeGaetano

We cannot stress enough how important it is to know what you are buying. And to make sure the board agrees! In a condo, one can – and should – always look to the tax lot drawings, which are filed with the Department of Finance (many are available on the Automated City Register Information System). In modern condominiums, the tax lot drawings will show the boundaries of what you are about to purchase, although we have found that there is often less information on older drawings. In a co-op, however, this information is not recorded and not always readily available. The proprietary lease (which will be available) may refer to the offering plan, or one of the amendments to the plan. If the co-op was created before 1962, there may never have been an offering plan as there was no filing requirement. And if the co-op is more than ten years old, the plan and amendments may no longer be available. The attorney general’s office has an official retention policy of only 12 years. Even worse than referring back to the plan, the lease may refer to a drawing, or even a separate agreement, of which no one has a copy (or perhaps no one has an executed copy). While it may be easy to blame the managing agent – it is, after all, the agent’s responsibility to maintain documents – the reality is that when a building changes from one agent to the next, all the records often do not necessarily get transferred, and no one realizes it until years later. The takeaway, of course, is to make sure the seller, buyer, and board all agree on what exactly is being purchased.

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First published: Jun 2015
Mishaan v 1035 Fifth Ave. Corp.

There is little question that most elections are uncontested. Even when contested, very few end in litigation. But for many people, an apartment is a very large asset and owners want to do what they believe is necessary to protect that asset. There can be huge disparity in how individuals believe their boards should act – how the building should be managed both financially and in terms of its physical plant. There can often be a situation where someone runs and he or she obtains one percent of the vote. But when it is clear there is going to be a closely contested election, boards and shareholders should try to come to some creative solution – if they can – to address one another’s issues. If that cannot be done – and sometimes the disagreements are too fundamental to come to agreement – the shareholders must be able to decide. When an election is close, from a practical standpoint, it is often good practice to have more than one inspector of elections. Another practice may be to close the polls at the end of the meeting so that no additional votes can be issued, and to allow the inspectors to place all the ballots in an envelope, seal it, and have someone sign his or her name across the flap – that way, they can open and count the ballots the next day at the office of the inspectors (often two members of the managing agent). If done this way, inspectors can check and double-check their work. There is one final point that, for some reason, was not addressed by the court. When an election is uncontested (and thus there is a successful candidate or slate by acclimation), proxies and ballots are not an issue. But when there is a contest, we want to remind people that a proxy is just that – a proxy. It is not a ballot and, indeed, New York does not use absentee ballots in these types of elections, even if the one giving the proxy identifies whom the proxy-holder must vote for. When a person or board is a proxy-holder, a ballot must be completed and submitted with the proxy. Without that procedure, no matter how duplicative it seems to be, the vote by proxy alone should not be counted.

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First published: May 2015
Jasinski v. Hudson Pointe Homeowners Association

Although this case ultimately turned on ownership of a road that ran through an HOA, it raises a broader issue that we regularly see in co-ops, condos, and HOAs. Often, the board and management may think that a rule exists, in part, because it has been followed for years. However, when the rule is broken and an apartment owner challenges it, the board may discover that the rule doesn’t actually say what everyone thought it said. Or, in some instances, a rule that has been enforced may never have been actually formally adopted. This case is yet another example of why boards and management should review their governing documents and rules to make sure the documents say what is intended and, if not, to take steps to bring them up to date so they reflect current building practice (and the current state of the often-changing law). Although it may not be practical to adopt some amendments (if a vote of a super-majority of apartment owners is required to make the change), review of the documents may still be a worthwhile, and informative, exercise.

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First published: Mar 2015
Green v. Board of Directors of 880 Fifth Avenue Corporation and Francis L. Mitterhoff

This is a situation that managers and practitioners see every day. A “transfer” or some formal or informal agreement was reached years earlier and the paperwork, if it ever existed, is nowhere to be found. What can a board (and an affected shareholder) do? The defendants here were able to show historic use and prior agreements through the testimony of Schneider and his daughter. The information they were able to provide was important in this instance because Mitterhoff needed to be able to demonstrate that the Schneiders used the area for a period of years – at the very least for more than a decade. Presumably, they asked the board to review its records and confirm, in a resolution, that Schneider had the right to use the rooms. Although Green tried to use the resolution as a “starting point” for the statute of limitations, the court was able to rely on the language of the resolution, which stated that the board “confirmed” Schneider’s rights. If a shareholder has the right to use space that is not within the four walls of that shareholder’s apartment, the shareholder may want to confirm with the managing agent what paperwork is on file with the building. Better yet, the shareholder may want to give to the managing agent a copy of any documentation regarding the space so that it can be retained in two places.

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First published: Feb 2015
Ho Foong Shiu Realty Corp. v. Pullman

While this case addresses a landlord–tenant relationship in a rental building, it serves as a cautionary tale for cooperatives and condominiums as well. If a co-op or condo elects to bring an action against an apartment owner as a result of a barking dog, it should make sure it has more than one occupant backing it up. The board should also know up front whether there are any unrelated harsh feelings among the involved parties. For practical purposes, a managing agent and/or resident manager will typically save all e-mails and letters concerning complaints about a building resident. If a resident calls the door staff to complain, notes are typically made and maintained in the building log, and copies of those pages should be kept with the file for that apartment owner. Before a board makes the decision to begin an action, its counsel may want to speak with those who have complained about the noise. Among other things, counsel will want to know that the people complaining are prepared to participate in any legal action. We have seen several situations where occupants have complained about noise, yet, when asked to participate in a lawsuit (or even when asked to allow the board to identify them in correspondence), they have refused, apparently because they do not want to be put in an adversarial position with their neighbors. Under these circumstances, there is often little a board can do to resolve the problem.

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First published: Sep 2014
Board of Mgrs. of the Clermont Greene Condominium v Vanderbilt Mansions

A condominium acts through its board of managers. But the board must act as a body. A group of board members cannot make a decision like the one made here. Boards have rules and procedures and must follow them. Although this case involved a condo, the principle is equally applicable in a cooperative. In an unrelated case, co-op board members were sued for making certain decisions, but their actions were taken at properly called board meetings and minutes reflected what took place at the meetings. It was irrelevant that the vote may have been divided along sponsor/non-sponsor lines. The board called meetings, acted, and, even though one “faction” may have been outvoted, the acts were acts of the “board” and were upheld. What we don’t know here is whether the board’s failure to act properly created other problems. It certainly created delay, but one wonders whether the delay was such that any applicable statute of limitations expired. In the end, when the board takes an action, it must be the board – and not just some of its members – that acts.

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First published: Jul 2014
Goldhirsch v. St. George Tower & Grill Owners Corp.

There have been a number of cases where courts have refused to award damages or abate maintenance charges to an apartment owner because the owner has been unable to use the terrace in connection with repairs, even for an extended period of time. Without performing an exhaustive analysis, the courts have generally held that a co-op has the right to perform building repairs and has the concomitant right to use a terrace to do so. This is provided, of course, that the work is warranted and diligently performed. The court here engaged in an interesting interpretation of the interplay between the BJR and the apartment owner’s breach-of-lease claim. Although the court quoted certain provisions of the proprietary lease concerning damages from general use of a terrace, it did not state whether there are provisions that specifically allow a co-op the right to use a terrace for building repairs, a provision found in many leases. Regardless, the result – that the co-op is not required to abate maintenance charges for its use of the terrace for building repairs –appears to be consistent with other decisions. We note that in a condominium, access rules and use of a terrace would be guided by the particular condominium’s bylaws. The warranty of habitability, codified in the Real Property Law, does not apply.

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First published: Jun 2014
1855 7th Ave. Housing Dev. Fund v. Wigfall

By Richard Siegler and Dale Degenshein, Stroock & Stroock & Lavan After analyzing a number of post-Pullman decisions, the court laid out the procedure courts should use when there is an issue of fact that eliminates the possibility of summary judgment. The court was given a copy of the co-op’s proprietary lease and house rules; there was testimony about the procedure put in place by the board in order to record the misconduct (including entry into a log book and review of security footage); and Wigfall had received earlier notices telling her that the behavior had to stop. With this information, the court did not need to satisfy itself that the conduct was objectionable, but instead found that the Business Judgment Rule applied so that the court was bound to defer to the board’s decision. As always, it is important to remember that one of the key factors of the Business Judgment Rule is that it is the one challenging the board’s decision who has the burden of showing that what the board did was improper. Here, Wigfall was unable to successfully challenge the procedure the board used to evict her.

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