Published: Spring 2008

CNYC president Marc J. Luxemburg, Esq. is an attorney specializing in cooperative and condominium law. In each issue of the CNYC Newsletter he reviews recent court cases that have the potential to answer questions commonly faced by boards, and at CNYC's annual Housing Conference each fall, he reviews the significant court cases of the preceding year in a class that qualifies for continuing legal education credit. The highlighted cases of his presentation at CNYC's 27th annual Housing Conference in November, 2007 follow. To review previous decisions that Mr. Luxemburg has discussed, please visit CNYC's website at www.CNYC.coop. At CNYC's 28th annual Housing Conference on Sunday, November 16, 2008, Mr. Luxemburg will again offer this popular class. Conference brochures and registration information will be available in August.

THE BURDEN OF EXCESSIVE LITIGATION
In the case of 1050 Tenants Corp. v. Lapidus, 835 NYS2d 68 (1st Dept. 4/24/07), a shareholder has repeatedly caused disruptions and engaged in litigation against the board and the corporation over a period of 12 years. Mr. Lapidus' objectionable conduct caused the board to pursue five actions against him - four actions of non-payment and one to compel the removal of an air conditioner. It was ultimately determined by the Court that the conduct of this shareholder was legitimate grounds for his removal from the building.

The court pointed to the shareholder's repeated withholding of maintenance, his failure to abide by court orders, and the five actions against him. It ruled that all fall under the definition of "objectionable and undesirable conduct," and were therefore grounds for removal.

STAIRWELL LIGHTING
Cases are still arising out of the infamous area-wide black out of 2004. In Kopsachilis v. 130 East 18 Owners Corp., 841 NYS2d 449 (1st Dept. 9/20/07), the court dealt with lighting in windowless stairwells.

During the time of the blackout, Mrs. Kopsachilis stepped into a pitch-black stairwell and injured herself. As the Multiple Dwelling Law 37 (3) requires that every light in a windowless fire stair shall be kept burning continuously and therefore. she sued the cooperative.

There was a triable issue of fact over whether the cooperative had taken appropriate measures to light the stairwell, even though there was a blackout. The court ruled in a 3-2 decision, that the co-op was liable for the lighting at all times. Dissent however would have dismissed the action.

MAKING A TIMELY INSURANCE CLAIM
In a somewhat unusual set of circumstances, arising in 426-428 West 46th St. Owners, Inc. v. Greater New York Mutual Ins. Co., 2007 WL 2127341 (Sup. Ct. NY Co. 7/25/07), the Court dealt with an insurance company's obligation to defend the cooperative in a personal injury action.
It began when the superintendent found one of the tenants lying face down and naked on the floor of her apartment, stating she was unable to move and calling for help. She was rushed to the hospital, though she never stated what had caused the accident (nor did anyone know). The unusual twist occurred 10 months later, when she sued the co-op and the apartment owner, claiming she had fallen down a staircase that did not have a banister railing on it. It was after the suit was filed that the insurance company was notified of the incident.

The court stated that if there is reasonable ground to believe an accident has occurred, the co-op has an obligation to notify the insurance company immediately. New York Mutual denied liability based on the grounds of failure to give notice.

New York Mutual then called for summary judgment, but was denied. The Court found that since no reason was ever given for the tenant's injury, it was not unreasonable for the co-op to assume that there was no basis for the tenant to file a claim.

WHOSE SIDEWALK?
Changes in City laws paved the way for this sidewalk case. In September 2003, the City Administrative Code was amended, placing full responsibility for maintaining all sidewalks upon the owners of the buildings, thus transferring "trip and fall" liability from the City to building owners.

The first case to be tried under the changed law, Goss v. Park Briar Owners, Inc., 2007 WL 686504 (Sup. Ct. Q. Co. 3/6/07), dealt with an accident allegedly caused by an uneven sidewalk adjacent to the cooperative. The plaintiff tripped on the sidewalk and pursued action against the City - after the effective date of the statute.

New York City was granted summary judgment, so liability fell solely to the cooperative. The cooperative raised several defenses, such as poor maintenance/ repairs, and the presence of a tree root that actually would be the responsibility of the Department of Parks. The defense did not hold up and the cooperative was held liable.

REAL ESTATE TAX ESCALATION
The issue of calculating real estate tax escalations arose in Barnan Assocs. LLC v. 196 Owners Corp., 2007 WL 1352805 (Sup. Ct. NY Co. 5/9/07). A commercial tenant claimed that its escalation should have been based only on the net amount paid to the city, not the assessed amount.

The Court found that the tenant's lease required payment based on the full assessed amount, and any vagueness of the lease should be resolved based on prior conduct of the parties. Even though the tenant claimed it had been overpaying for six years, the Court upheld that the statute of limitations had expired on the claim. The co-op was granted summary judgment, dismissing the commercial tenant's claim for a refund.

HOLDER OF UNSOLD SHARES
In 515 Avenue I Corp. v. 515 Avenue I Tenants Corp., 2997 WL 2955747 (2nd Dept. 10/9/07), a shareholder sought to renew a motion for a preliminary injunction in an action to declare it a holder of unsold shares.

The earlier motion was denied prior to the decision in Kralick, v. 239 East 79th Street Owners Corp., 53D 54(2005) which changed the law and ruled that the status of holder of unsold shares was a matter of contract law, and that the regulations of the Attorney General were not relevant. The law change did not affect the original decision in this case, however, because the controlling documents failed to demonstrate the plaintiff had been designated as a holder of unsold shares, which only the original sponsor can designate. The shareholder's motion was denied.

ACCOMMODATING HANDICAPPED RESIDENTS
There is a growing body of case law developing around the nuances of complying with the various Federal, State and City laws relating to disabilities. These issues can take various forms. Three interesting cases were decided in 2007.

REVOCATION OF CONSENT
In Hirschmann v. Hassapoyannes [20166 Tenants Corp.], 2007 WL 2108462 (Sup. Ct. NY Co. 6/11/07), the court upheld the rights of a purchaser against a board which had rescinded its consent to the purchase. At the closing, this purchaser asked to install a washing machine in the unit although the building did not allow these machines in apartments. The purchaser claimed that it was needed to accommodate a disability. This complication caused the closing to be aborted and the board to rescind its consent to the purchase.

When a legal challenge ensued, the court took the position that it constitutes a violation of the Fair Housing Act and New York State Law for a Board to inquire about a resident's disability. Therefore, concluded the court, the prospective shareholder has no responsibility to mention the handicap prior to the closing, Not mentioning the handicap, said the court, did not render him untruthful or dishonest, as the board had determined as its basis for recision of its consent.

The court may have acted hastily in its decision, since there could be circumstances where the managing agent may legitimately inquire about a handicap - for instance, if the requested work could be detrimental to other tenants, or to the building structure or systems.

REASONABLE ACCOMMODATION
A condo board placed a speed bump at one of two entrances to the parking lot, intended to help slow down traffic due to a nearby tennis court. This resulted in the case of Resnick v. 392 Central Park West Condominium, 2007 WL 2375750 (USDC SDNY 8/14/07) and 2007 WL 2815606 (USDC SDNY 9/20/07), in which the court was asked to determine the limit of what is considered reasonable accommodation.

Ms. Resnick claimed that the bump caused damage to her modified minivan. She sued for lack of reasonable accommodation, claiming that she was now limited to using one of the two parking lot entrances with her motorized scooter or her modified minivan. Her claim was dismissed by the court on the notion that: 1) reasonable accommodation require only meaningful (but not perfect) access, and; 2) "there is no requirement to take into account the disabled person's preferences in choosing the means of accommodation, so long as the means were reasonable."

PERSONAL LIABILITY OF BOARD MEMBERS
Treatment of a resident with a disability occasioned the case of Pelton v. 77 Park Ave. Condominium, 825 NYS2d 28 (1st Dept. 11/21/06) which evolved into issues of personal liability of the board members and the managing agent.

While residing in a building constructed during the 1920's, Mr. Pelton became disabled. When he found the board reluctant to undertake structural changes to the building that he had requested to accommodate his condition, he hired an attorney to press is request.

Because of the age of the building, the requested changes would have been difficult and costly to implement. One example was his request to change the floor level of the lobby to match the outside.

The board offered Mr. Pelton some alternative accommodations, such as allowing him to install a washing machine in his unit, so that he would not have to access the laundry room; his storage locker was exchanged for one in a more accessible location; and a lift was installed in the building entrance. Mr. Pelton was not satisfied with the idea of a lift. He wanted the building to be reconstructed and sued the board and all of the members individually for $23.5 million in punitive damages. Mr. Pelton was not successful in this suit.

The court specifically criticized the defendant's attorney for the outrageous $23 million demand. It pointed to the Business Judgment Rule, which states that 1) there must be specific independent tortuous acts by each individual board member in violation of the business judgment rule in order to find personal liability, and 2) the acts must be other than in their capacity as board members.