Case Notes by

Andrew Brucker, Armstrong Teasdale

First published: May 2022
Timing is Everything

If you are dissatisfied with the action of the cooperative or the board, and you believe that the court should review it under Article 78, bring an action immediately, as the statute of limitation is quite short.

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First published: May 2022
Baker V. 16 Sutton Place Apts. Corp.

If you are dissatisfied with the action of the cooperative or the board, and you believe that the court should review it under Article 78, bring an action immediately, as the statute of limitation is quite short.

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First published: Apr 2022
Heywood Condominium v. Steven Wozencraft

Governance of a condominium can be difficult, as the board does not have the same remedies as in a cooperative. This being the case, every condo board should review the house rules and bylaws to ensure that it has all of the possible remedies that might be available. Careful review of the provisions in regard to the non-payment of common charges is very important, and it should be clear in the governing documents that if a unit-owner is in arrears, nonessential services, including the use of amenities (such as a gym or pool or rooftop garden), will not be available to that unit-owner. It is best to review all remedies in the governing documents, including those involving other day-to-day violations of the house rules and bylaws, such as smoking, noise and odor complaints.

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First published: Jan 2022
Elango Medical PLLC v. Trump Palace Condominium and Trump Corp.

Though the decision of the appeals court did not address whether there was discrimination by Trump — the case is still pending — the decision here points out three very important points every co-op and condo board should be aware of. First, courts will often look at past acts of a board, and inconsistency is frowned upon. The board’s decision to allow other units to be used as medical offices could only lead a court to conclude that there must be another reason for a rejection of the current applicant. A mantra of all boards should be: “Be reasonable, and be consistent.” This golden rule will alleviate much pain — and avoid many lawsuits. The second point is a simple piece of advice for avoiding charges of discrimination: Do not ask questions (or require things of an applicant) if it would elicit information that would lead you to know that they belong to a protected class. For example, do not ask an applicant’s age, since that may result in a claim that there was a rejection because the applicant was too old or too young. Do not ask if they will need any accommodations, because this is akin to asking: “Do you have a disability?” Do not ask the applicant’s religion or where they were born. None of these questions are relevant to whether they will be a good neighbor and pay their maintenance on time, and none of these questions can be asked on an application or at an interview. Likewise, requiring a photograph is wrong because it can elicit information that is inappropriate (and illegal) when making the admittance decision. The final important point involves the Trump Corp.’s role. In asking the court to dismiss the claim, Trump took the position that it was only the agent of the condo board, and the board made the decision. The court seemed to be warning managers that if there is discrimination, they may be held culpable if they took an active role. We do not know how the court will rule in this matter. However, given the two most important factors (the photo of the applicant and the prior use of the unit), it would be safe to say that the position of the condo board and Trump seems weak. The decisions of the court so far have taught a valuable lesson to boards that are wise enough to learn from the mistakes of others.

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First published: Oct 2021
Siwana Green v. Al Cristancho

Often we hear that a court’s decision is based on a technicality and that form is as important as substance. In this decision, the court has made it clear that the will of the people will prevail, even if there may have been a technical mistake or two. Substance, in this case, was more important than form.

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First published: Jul 2021
Weinstein v. Board of Directors of 12282 Owners' Corp.

As stated decades ago, without a showing of a breach of fiduciary duty, judicial inquiry into the action of directors is prohibited – even if the board’s decision was unwise or inexpedient. Broad statements accusing a board wrongdoing will not suffice; the plaintiff must state with particularity that the actions of the board were taken in bad faith, showed self-dealing, discrimination or misconduct, or otherwise fell outside the scope of the business judgment rule. Weinstein failed to show any of the above, and thus the court dismissed his case. Management contended that its actions were also shielded by the business judgment rule. The court disagreed. However, bringing an action against management was a decision for the board to make, and the board’s decision not to bring such an action was also protected by the business judgment rule. Therefore, the derivative claims against management were also dismissed. This case is a useful reminder that the decisions of co-op and condo boards will be respected by the courts – provided there is no bad faith or self-dealing and provided the decisions are made within the scope of the board’s authority. The business judgment rule is alive and well. But the lesson to be learned is that no matter how often the courts uphold this rule, shareholders will continue to attack their boards’ decisions. Therefore, every board should be forewarned to always make educated and well-documented decisions and to always act within the scope of its authority.

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First published: Jun 2021
Dubin v. Glasser

The standard New York cooperative proprietary lease does not expressly state that a tenant-shareholder is a third-party beneficiary of another tenant-shareholder’s lease with the cooperative corporation. Therefore, if a board fails to take action against a shareholder for violation of the proprietary lease or house rules, another shareholder cannot independently bring his or her own action against a shareholder. In addition, the standard lease has a provision that states the co-op is not responsible to the lessee for the non-observance of the lease or house rules. Thus, to remedy a bad situation, the shareholder in a cooperative is dependent on the board to enforce the lease provisions and house rules. If the board refuses, based on the Ran v. Weiner decision, there is nothing for the injured shareholder to do. (Interestingly, the Condominium Act would allow an aggrieved condo unit-owner to bring an action if the condo board does not, but there is no such parallel provision in any laws applicable to cooperatives.) But perhaps the door has opened slightly by the decision in Dubin v. Glasser. Perhaps common practice in cooperatives will change. Stay tuned, as we may not have heard the last of this from the courts. A shareholder may indeed have the right to enforce the lease or house rules when the board refuses.

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First published: Jun 2021
Dubin v. Glasser

The standard New York cooperative proprietary lease does not expressly state that a tenant-shareholder is a third-party beneficiary of another tenant-shareholder’s lease with the cooperative corporation. Therefore, if a board fails to take action against a shareholder for violation of the proprietary lease or house rules, another shareholder cannot independently bring his or her own action against a shareholder. In addition, the standard lease has a provision that states the co-op is not responsible to the lessee for the non-observance of the lease or house rules. Thus, to remedy a bad situation, the shareholder in a cooperative is dependent on the board to enforce the lease provisions and house rules. If the board refuses, based on the Ran v. Weiner decision, there is nothing for the injured shareholder to do. (Interestingly, the Condominium Act would allow an aggrieved condo unit-owner to bring an action if the condo board does not, but there is no such parallel provision in any laws applicable to cooperatives.) But perhaps the door has opened slightly by the decision in Dubin v. Glasser. Perhaps common practice in cooperatives will change. Stay tuned, as we may not have heard the last of this from the courts. A shareholder may indeed have the right to enforce the lease or house rules when the board refuses.

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First published: May 2021
Village Mall at Hillcrest Condominium v. Banerjee

This case’s first lesson is simple: if written consent is granted, it’s best to keep it in a very safe place. You cannot trust that the management files are current and accurate. After all, boards often switch management companies, and it’s not safe to assume that all companies pass on complete files to their successors. Secondly, condo and co-op boards should be vigilant in enforcing their rules. If a board knows (or should have known) that there is a violation, it cannot wait to enforce such rules. Courts have been known to rule that waiting to enforce a rule prejudices the owner, and if nothing is done, the court may not allow enforcement years later. The Wong and Pasapula cases emphasize that this is especially true if there is a sale. Finally, there are not many courts that would refuse to allow a condominium or cooperative to do what is required under the law. The overriding fact is that certain laws are meant to protect the public, and FISP is one such law. It seems clear that a court will put the safety of the public over any rights a unit-owner or a shareholder may claim to have.

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First published: Apr 2021
Olcott v. 308 Owners Corp

There are two lessons in the story of the Olcotts. The first is that one must consider the precise language of the proprietary lease, and if a provision contains the word “reasonable,” the protection afforded by the business judgment rule is lost, and the courts will review the board’s decision and make its own decision based upon what it believes to be reasonable. The other lesson is more abstract. In this case, a man and his family had lived in a co-op apartment in his father’s name for many years, without incident and without a history of arrears. Suddenly, there is an issue about whether he would be worthy of being a shareholder. Is a judge really going to evict the family? Boards must consider all of the facts. What is legally correct and what is fair given all of the facts are often two different things. And if the matter lands in court, a judge, who is only human, may make a determination based on what’s reasonable rather than on what’s purely legal.

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