COMMUNITY ASSOCIATION SEMINAR
CASE LAW UPDATE
Significant Legal Decisions of 2017
April 10, 2018 – Villa Lombardi’s, Holbrook, N.Y.
- DISCRIMINATION
Matter of Steinberg-Fisher v. North Shore Towers Apts., Inc. – Appellate Division, Second Department
The petitioner filed a complaint with the New York State Division of Human Rights (DHR) against North Shore Towers Apartments, Inc. (North Shore), a cooperative apartment building in which she leases an apartment as a shareholder. She alleged that North Shore discriminated against her by not granting her an accommodation from its rule requiring that before any alterations to an apartment could be made, a shareholder must execute an alteration agreement, providing, among other things, that all alterations had to be completed within 90 days from the start date, or the shareholder would be subjected to financial penalties ($100 per day).
Before filing her complaint with the DHR, the petitioner presented North Shore with a detailed letter from her doctor stating that she suffers from attention deficit hyperactivity disorder and a sleep disorder, which prevent her from being able to complete tasks within strict time constraints.
No one disputed that the petitioner suffers from a disability within the meaning of Executive Law §296(18)(2). Nevertheless, the DHR dismissed the complaint, finding no probable cause to believe that North Shore engaged in an unlawful discriminatory practice based on the petitioner’s disability.
With respect to whether the accommodation sought was reasonable, the Court found that North Shore’s purported justifications for refusing to accommodate the petitioner in any manner are entirely conclusory. North Shore offered no evidence which tended to rebut the petitioner’s contention that the remaining work to be performed was nonstructural and would not disturb other residents in the building. Under the circumstances, the petitioner satisfied her burden of establishing that there was probable cause to believe that North Shore engaged in an unlawful discriminatory practice.
Takeaway: Take requests for accommodations seriously, investigate and review the facts, and make sound, reasonable decisions under the prevailing law; demonstrating an open dialogue and meaningful attempt to resolve things may enable a Board to avoid litigation, or may go a long way in the event the matter goes to litigation.
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- DISCRIMINATION
Gutierrez v. McGrath Management Services, Inc. – Appellate Division, Second Department
Glenda Gutierrez was a unit owner at Vista on the Lake Condominiums and brought an action against the Board, the Vice President, and the Board’s management company for battery and housing discrimination in violation of the Federal Fair Housing Act. Gutierrez claimed that while she was at the Condominium’s pool with her family, the Vice President physically grabbed her and stated that Gutierrez was not allowed in the pool area since she was in arrears with her common charges. Gutierrez also claimed that the Condominium discriminated against her and her family in an effort to prevent them from using the community’s amenities because they were of Hispanic descent. On both claims, the Court denied the Condominium’s motion to dismiss and stated that giving Gutierrez the benefit of every possible favorable inference, the complaint adequately stated a cause of action. Accordingly, the Court allowed the lawsuit to proceed.
Takeaway: Don’t take the law into your own hands.
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- SECOND HAND SMOKE
Board of Managers of 400 Central Park West Condominium v. Henriquez-Berman – Supreme Court, New York County
The Board Managers of the condominium brought an action against a unit owner and her son to stop them from smoking marijuana in their unit, and from allowing smoke to permeate into the common areas and other surrounding units. While smoking was not expressly prohibited in the condominium’s By-Laws, the Board alleged that the smoking violated the nuisance and use provisions of the By-Laws. The By-Laws stated that no “nuisances” were allowed on the property, and prohibited “immoral, improper and offensive or unlawful use.”
In support of its claim that the owners’ behavior constituted a nuisance, the Board submitted an affidavit from the property manager stating that the unit owner had been given cease and desist letters and was fined at least 10 times for her violations, and that there were dozens of complaints made over a 3 year period, showing that the smoke spread into other areas of the building.
The court granted the Board’s request for a preliminary injunction prohibiting the owners from smoking marijuana, finding that the smoke was a breach of the by-laws and qualified as a nuisance. It found that the exposure to second hand smoke could cause irreparable injury, meaning that money damages would have been inadequate to address the complaints. It also found that the harm to the board and other residents far outweighed any loss the mother and son might suffer if they were prevented from smoking in their apartment. As to the criminal aspect of marijuana, a civil court cannot enforce criminal laws, but still had the power to enjoin harmful behavior.
Takeaway: If your governing documents do not prohibit smoking out-right, the court may still prohibit the behavior if it amounts to a nuisance. Documentation and supporting evidence is essential.
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- HOUSE RULES
In the Matter of Olszewski v. Cannon Point Association, Inc. – Appellate Division, Third Department
The Board of Directors decided that it was necessary to enact new rules with regard to the rental and leasing of units. Condominium owner Olszewski brought an Article 78 proceeding against the HOA, challenging and seeking to enjoin the new house rules enacted by the Board of Directors. Olszewski claimed that the rules were in direct contravention of the Bylaws which provide an owner could convey or lease free of any restrictions, provided the common charges and assessments were paid.
The Court agreed with Olszewski, finding that the Declaration and Bylaws are a contract between the community and the owners, to be read as a whole and that although there were provisions allowing the Board to make reasonable rules, they could not make any rules that conflict with provisions granting express rights to an owner. The Court suggested that if the Board believed the new rules were necessary, it was their task to convince the community of the need to properly amend the Declaration and or Bylaws.
The Court also found that unauthorized actions by the Board are not protected by the business judgment rule.
Takeaway: Proper amendments are a Board’s best friend.
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- CONFIDENTIALITY
Board of Directors of Windsor Owners Corp. v. Platt – Appellate Division, First Department
The cooperative corporation’s Board of Directors brought a law suit seeking to enjoin board member Platt from disclosing privileged discussions between the Board and its attorney. In response to criticism directed at Platt by a non-board member regarding board actions, defendant Platt disclosed that a lawsuit commenced by the Board was withdrawn because the Board was advised by its attorney the case was fatally flawed. The Board in turn created an executive committee to discuss all lawsuits involving the Corporation and barred Platt from participating or attending any of these committee meetings.
The lower court held that communications given in the course of a professional relationship for the purpose of rendering legal advice, where such advice is predominantly of a legal character, is protected from discovery as an attorney-client privileged communication. The lower court found Platt had breached the attorney-client privilege by disclosing communications from the Board’s attorney to a non-board member. Accordingly, the court granted the injunction.
Platt disregarded the order enjoining her from disclosing confidential matters and was found in contempt of court. Platt appealed the contempt of court order, fully admitted to violating the literal terms of the order but arguing the violation was not willful and did not cause any monetary harm to the Corporation.
The Appellate Court found there is no excuse for violating a court order and that there was already proof in the record that her disclosures strengthened lawsuits pending against the Corporation, causing the Board to incur additional legal fees.
Take away: Violating the attorney-client privilege is serious business.
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- LACHES AND WAIVER
Coliseum Tenants Corp. v. Benmark – Civil Court, NY County, Housing Part
The co-op corporation brought a lease termination action against Benmark for having an illegal wall in his apartment. At trial, it was revealed that the wall had been installed over 20 years ago by the shareholder prior to the prior owner. It also became apparent that the Board knew or should have known of the wall on numerous occasions over the years. There was also a question of whether the wall had been approved when it was built. The Court found that the Board had waited too long to bring the action, thus waiving its rights. The Court decision notes that the eviction action was commenced when a Board member noticed that Benmark had advertised his unit on Airbnb. Could this have been what was actually driving the Board’s actions?
Takeaway: If there is a problem, address the problem. Set aside any personal animosities.
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- VERBAL V. WRITTEN CONSENT
Moltisanti v. East River Housing Corp. – Appellate Division, First Department
Moltisanti commences construction of an enclosure of his deck after obtaining verbal approval from the Board, as other co-op shareholders had done in the past. When the enclosure was partly completed, the Board demanded removal of the enclosure, relying on the proprietary lease requirement that prior written consent of the Board was required and never obtained. In a non-final decision, the Court found that the requirement of written consent may be avoided where the owner relied on representations of the Board.
Takeaway: Changing policy midstream has its perils. And whatever you do, get it in writing.
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- REPAIRS
Guarino v. Woods II Condominium Association – Appellate Term, Second Department
A unit owner sued the Board of Managers of a condominium in small claims court seeking reimbursement for the cost of the services of a plumber the owner hired to clean out a clog of the common main sewer pipe, to which his unit, and several other units, were connected.
The court noted that the condominium’s bylaws provide that repairs to common areas are common expenses unless the need for the repairs is caused by an individual owner. Here, the Board failed to meet its burden of establishing that the clog was caused by the owner, as the clog could have been created by any one of four units sharing the main sewer pipe.
The court ultimately awarded a money judgment for the cost of the repair to the owner in the amount of $700.
Takeaway: Damage to a common area may be the responsibility of a home owner if the board can establish that the damage was caused by a particular owner. Without such proof, the Board may bear responsibility for the repairs.
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- BUSINESS JUDGMENT RULE*
Curlin v. Clove Lane Homeowners Association, Inc. – Appellate Division, Second Department
Home owners brought an against the HOA to review decisions of the Board, that (1) denied the owners’ right to park in the parking space directly in front of their unit; (2) refused to treat, maintain and repair a termite infestation, and exterior damage to the premises; and (3) imposed restrictions on the placement and usage of the owners’ basketball hoop. The owners sought to enjoin the Board from unlawfully prohibiting them from using their assigned parking space, and from imposing any fines against them regarding the placement of the basketball hoop.
The court directed that the fines against the owners be vacated, and directed that the hoop be relocated from the owners’ assigned parking spot to the common area closest in proximity to their unit, (as basketball hoops have been allowed through the accepted practice of the HOA). The court reinstated the owners’ parking space at the closest location to their unit. The court also directed the owners to submit the incurred and projected costs for termite damage to their unit as a result of the HOA’s failure to remediate the situation, and that the costs would be reimbursed after a hearing before a court appointed referee.
The HOA appealed. The appellate court held that in reviewing Board actions, a court should apply the business judgment rule and limit its inquiry to whether the action was authorized and whether it was taken in good faith in furtherance of legitimate interests of the Association.
The court found that the owners established a claim that the Board was acting outside the scope of its authority or in bad faith when it rendered its decisions.
Takeaway: If a board is found to have acted without authority or in bad faith, courts will have little sympathy for the board’s claims.
*The business judgment rule provides that a court should defer to a board’s determination so long as the board acts for the purposes of the community, within the scope of its authority and in good faith. To trigger further judicial scrutiny, an aggrieved owner/shareholder must make a showing that the board acted (1) outside the scope of its authority; (2) in a way that did not legitimately further the corporate purpose; or (3) in bad faith.
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- BUSINESS JUDGMENT RULE
Minkin v. Board of Directors of the Cortlandt Ridge Homeowners Association, Inc. – Appellate Division, Second Department
Plaintiffs were the owners of a single-family home in Cortlandt Ridge HOA. The Board had hired a landscaping company to perform landscaping services for all of the properties within the community. The plaintiffs claimed that the Board did not have the authority to provide landscaping services for the single-family homes within the community and because the Board was acting without authority, plaintiffs were not required to pay for the landscaping services or the fines associated with these fees.
The Association’s Declaration allowed the Association to provide landscaping services on the front lawns of the single-family homes. The Court found that the Association was acting outside of the scope of its authority by performing landscaping services on the entirety of the property. Thus, the Association could not collect any fees or fines assessed against the plaintiffs which were related to landscaping services performed on the rear or side lawns of the single-family homes.
Takeaway: No good deed goes unpunished.
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- BUSINESS JUDGMENT RULE
Matter of Dicker v. Glen Oaks Village Owners, Inc. – Appellate Division, Second Department
Fred Dicker was a shareholder in Glen Oaks Village Owners, Inc. He owned eight units in the co-op but did not reside there. The Board had a rule that second-floor shareholders had to obtain the consent of first-floor shareholders in order to construct a terrace over a first-floor window. Anne Haffey owned a unit above one of Dicker’s units. When Haffey requested Dicker’s consent to construct a terrace, he refused. Haffey then went to the Board to request permission to build the terrace. The Board decided that when the shares of a first-floor unit were owned by an investor not residing in the unit, the consent requirement would not apply.
Dicker then brought an action to set aside the Board’s determination. The Court found that the Board’s decision to set aside the consent requirement and allow Haffey to construct the terrace was not protected by the Business Judgment Rule. The Court stated that the Board had deliberately singled out Dicker and other shareholders who did not reside in the co-op, and therefore, was acting in bad faith.
Takeaway: Boards should be careful not to be seen as showing favoritism towards certain owners in order to be entitled to deference under the business judgment rule.
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- COMMON AREAS
Choromanskis v. Chestnut Homeowners Assn., Inc. – Appellate Division, Fourth Department
Owners of a vacant lot, who were also members of the HOA, commenced a lawsuit against the HOA claiming breach of contract, breach of fiduciary duty, intentional damage of property, negligence, trespass and an accounting, and seeking monetary damages after the HOA made alterations to and/or performed work on a protective berm located in the community’s common area near plaintiffs’ lot. The lower court denied the HOA’s motion to dismiss the complaint, finding the owners had sufficiently pleaded damages in their claims against the HOA because the complaint alleged that alterations made by the HOA to a protective berm located in the complex’s common area near the owners’ lot resulted in a loss of seclusion and privacy for their lot, thus lowering its value.
The appellate court dismissed one of the owner’s claims (alleging trespass), finding that the owners lacked standing to sue in their individual capacities on a trespass claim for damage to the community’s common areas itself, which was owned by the HOA.
However, the court rejected the HOA’s contention that they were entitled to dismissal of the remaining causes of action because they acted within the authority afforded to them pursuant to the By-Laws and the Declaration. To the contrary, the owners alleged that the Board had violated various provisions of the By-Laws and the Declaration, and those allegations were not flatly contradicted by the evidence in the record.
Takeaway: Board’s should always be well versed in the pertinent details of their governing documents, and make sure that references are made to enabling provisions when taking action that involves financial or construction-related issues, and/or those that may elicit a strong or negative reaction from the community.
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- FORECLOSURE
Board of Managers of W. Amherst Office Park Condominium v. RMFSG, LLC – Appellate Division, Fourth Department
The Condominium Board commenced this action to foreclose on common charge assessment liens filed with respect to certain units at the Condominium that are owned by RMFSG (defendant). In this case, the Board appealed from an order that denied its motion for summary judgment (foreclosing on the lien filed with respect to several of defendant’s units in the Condominium), and also seeking an order directing that the action be referred to a referee to compute the amount due to the Condominium.
The appellate court held that the trial court had properly denied the motion, because, even though the Board met its burden of establishing that, pursuant to the Condominium Declaration, the Board had the authority to collect common charges from the owners of units and, in the event of nonpayment, to add late fees, interest, attorneys’ fees and other costs of collection to the assessment – it failed to demonstrate the reliability of the amounts it claims were due.
In particular, the ledgers submitted by the Board were not self-explanatory, inasmuch as they consisted of only columns of dates, indecipherable codes, and dollar amounts, and its submissions were accordingly insufficient to establish its prima facie entitlement to summary judgment.
Moreover, the defendant disputed not only the amount of the common charges claimed due, it also disputed the legitimacy of those charges, including charges for attorneys’ fees and related costs of collection that were allegedly assessed when the defendant was current in its payments.
Takeaway: Board’s must always take and maintain clear, meaningful and complete minutes of all meetings, and keep accurate, detailed records as may be required under the circumstances; they will come in very handy later on – if and when you need them.
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- RECORD KEEPING
St. Denis v. Queensbury Baybridge Homeowners Association, Inc. – Appellate Division, Third Department
Homeowner Denis brought an action alleging that certain actions taken by the Board of Directors violated the Declaration and Bylaws. Specifically, it was alleged that the Board lacked the authority to use funds in the capital savings account to repair a building’s roof and that for four successive years the Board’s spending exceeded certain budgeted line-item expenditures.
The court noted that in the absence of claims of fraud, self-dealing, unconscionability or other misconduct, judicial review is limited to whether such actions were authorized and taken in good faith and in furtherance of the legitimate interests of the community (the “business judgment rule”).
After reviewing the governing documents, affidavits of Board members and the pertinent Board meeting minutes, the Court found that the Declaration and Bylaws permitted the expenditures for the roof to be made from the capital account. They also found that minutes of the Board meeting where the decision to make the expenditure was made reflected the Board’s discussion and vote, which was dispositive evidence showing a lack of bad faith.
As for the overspending, there were no provisions requiring the Board to gain approval from the owners to exceed the budget. However, the record evidence did not reflect the Board’s process or reasoning behind the overspending and so more evidence would be needed in order for the court to render a decision in that matter.
Takeaway: Keep good and consistent records.
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- FINES
Tucciarone v. Hamlet on Olde Oyster Bay HOA – Appellate Division, Second Department
Tucciarone planted bamboo in his backyard. The bamboo then spread to his neighbor’s property and onto common areas of the HOA. The Board issued fines against Tucciarone. Tucciarone claimed that the Board failed to take steps to remove the bamboo from the common area, allowing the bamboo to spread. The Court ruled that the Board was within its authority to issue fines rather than take remedial steps to remove the bamboo.
Takeaway: As long as a board acts within its authority, in good faith and in the interest of the association, the courts will not second guess the board, however suspect its judgment may be.
