Cooperatives & Condominiums

Pet Rule Inconsistent with Condo Bylaws

Yusin v. Saddle Lakes Home Owners Association, Inc.

NYLJ 6/1/10, p. 35, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In unit owners' action for a permanent injunction and for a judgment declaring invalid a rule promulgated by the condominium board, the board appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified, after searching the record, to grant summary judgment to the unit owners declaring the rule invalid as inconsistent with the condominium bylaws.

The subject property is an over-55 condominium located in Riverhead. The condominium's bylaws indicate that owners are permitted to walk with their pets over the common areas. In 2008, the board promulgated a rule requiring owners to curb their pets and prohibiting owners from walking pets on the condominium's common areas. Unit owners then brought his action to enjoin enforcement of the rule, and for a declaration that the rule was invalid. The board moved for summary judgment, invoking the business judgment rule. Supreme Court denied the motion, and the board appealed.

The Appellate Division started by noting that the board's bylaws require approval by 2/3 of the home owners for an amendment to the bylaws, and also require approval from 51% of the homes subject to first mortgages for any “material” change in the bylaws. The court then concluded that the rule promulgated in this case was unauthorized by the bylaws, and was therefore not covered by the business judgment rule. As a result, the court concluded that unit owners were entitled to summary judgment declaring the rule invalid, enjoining its enforcement, and establishing the board's liability for damages related to fines imposed for violation of the rule.

No Preliminary Injunction Requiring Removal of
Terrace Alterations

Board of Managers of Wharfside Condominium v. Nehrich

NYLJ 5/19/10, p. 39, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action by a condominium board to compel unit owners to remove alterations made to the terrace of their unit, the board appealed from Supreme Court's denial of its motion for a preliminary injunction. The Appellate Division affirmed, holding that to award a preliminary injunction would be to give the board all of the relief it sought in the action without establishing the extraordinary circumstances generally required for preliminary injunctive relief.

Unit owners converted the terrace adjacent to their apartment into additional living space by installing wood paneling, a drop ceiling, carpeting, and an electric ceiling fan, and by removing the sliding glass doors to the terrace, all without the approval of the board. The board then requested that unit owners restore the unit to its original condition, contending that the terrace was a common element and that board approval was necessary for alterations to common elements. Unit owners contended that the terrace was no a common element, and refused to comply. Later, in conjunction with a building-wide project, the board sought to replace windows and the sliding glass door in unit owner's apartment, but the board's contractors were unable to do so because of inability to obtain access, and because the alterations made installation of the doors impossible. The board then brought this action to require unit owners to restore the terrace to its original condition, and sought a preliminary injunction requesting the same relief. When Supreme Court denied the preliminary injunction, the board appealed.

In affirming, the Appellate Division concluded that the circumstances facing the board were not so extraordinary to warrant mandatory injunctive relief pending resolution of the litigation. The court also emphasized that the board had not established a likelihood of success on the merits, because the governing documents did not establish that the terrace was a common element or an exterior portion of the subject uni. As a result, the board did not establish a violation of the governing documents.

Claim Against Sponsor Dismissed

Board of Managers of the Chelsea 19 Condominium v. Chelsea 19 Associates

NYLJ 5/24/10, p. 27, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by condominium and several unit owners against the condominium's sponsor for breach of contract, fraud, negligent performance of a contract, and other alleged wrongs, condominium and unit owner appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, relying on disclaimer provisions in the offering plan and purchase agreements.

The condominium association's complaints are based on the architect's description of the building in the offering plan and purchase agreements. In upholding Supreme Court's dismissal of the complaint, however, the court noted that the same documents include an “as is” clause and related disclaimer provisions. The court also emphasized that purchasers had undertaken to conduct their own investigation. In dismissing the fraud claims, the court relied on the principle that fraud claims may not be predicated on omissions from the offering plan. Finally, the court concluded that negligent performance of a contract is not a cognizable claim.

ILSA Exemption Held Inapplicable

Cruz v. Leviev Fulton Club LLC

NYLJ 5/24/10, p. 24, col. 1

U.S. Dist. Ct., S.D.N.Y.

(Gorenstein, M.J.)

In an action by condominium purchaser for rescission of the purchase contract and return of the down payment, sponsor moved for summary judgment. The court denied the motion, holding that sponsor had not established an exemption from the provisions of the Interstate Land Sale Full Disclosure Act (ILSA).

ILSA requires a developer to provide a statement of record or a printed property report to the purchaser of a lot before the purchaser signs the sale contract. If the developer does not comply, the purchaser has a right to rescind. The act, however, exempts sales or leases “under a contract obligated the seller or lessor to erect ' a building ' within a period of two years.” In this case, sponsor filed an offering plan for a condominium project located at 111 Fulton Street. The plan provided that the sponsor anticipated the first closing on April 1, 2008, and also provided that if the project commencement date was 12 months or later than the anticipated date, sponsor would offer all purchasers a right to rescind. Purchaser contracted to purchase a unit for $555,000 on June 22, 2007. Purchaser paid a $50,000 deposit. When sponsor attempted to schedule a closing for Dec. 17, 2008, purchaser was not ready, willing, or able to close. Sponsor canceled the purchaser agreement and informed purchaser that it would retain the down payment. Purchaser then brought this action alleging a violation of ILSA. Sponsor moved for summary judgment, relying on the statutory exemption.

In denying the summary judgment motion, the court held that the contract language giving the purchaser a right to rescission if the building were not completed by April 1, 2009 did not constitute an obligation by sponsor to build the building by that date. The court noted that if the sponsor had wanted to bind itself to build within two years, it could have done so by using mandatory language, but held that in this case, the absence of such language precluded sponsor from relying on the exemption.

Pet Rule Inconsistent with Condo Bylaws

Yusin v. Saddle Lakes Home Owners Association, Inc.

NYLJ 6/1/10, p. 35, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In unit owners' action for a permanent injunction and for a judgment declaring invalid a rule promulgated by the condominium board, the board appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified, after searching the record, to grant summary judgment to the unit owners declaring the rule invalid as inconsistent with the condominium bylaws.

The subject property is an over-55 condominium located in Riverhead. The condominium's bylaws indicate that owners are permitted to walk with their pets over the common areas. In 2008, the board promulgated a rule requiring owners to curb their pets and prohibiting owners from walking pets on the condominium's common areas. Unit owners then brought his action to enjoin enforcement of the rule, and for a declaration that the rule was invalid. The board moved for summary judgment, invoking the business judgment rule. Supreme Court denied the motion, and the board appealed.

The Appellate Division started by noting that the board's bylaws require approval by 2/3 of the home owners for an amendment to the bylaws, and also require approval from 51% of the homes subject to first mortgages for any “material” change in the bylaws. The court then concluded that the rule promulgated in this case was unauthorized by the bylaws, and was therefore not covered by the business judgment rule. As a result, the court concluded that unit owners were entitled to summary judgment declaring the rule invalid, enjoining its enforcement, and establishing the board's liability for damages related to fines imposed for violation of the rule.

No Preliminary Injunction Requiring Removal of
Terrace Alterations

Board of Managers of Wharfside Condominium v. Nehrich

NYLJ 5/19/10, p. 39, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action by a condominium board to compel unit owners to remove alterations made to the terrace of their unit, the board appealed from Supreme Court's denial of its motion for a preliminary injunction. The Appellate Division affirmed, holding that to award a preliminary injunction would be to give the board all of the relief it sought in the action without establishing the extraordinary circumstances generally required for preliminary injunctive relief.

Unit owners converted the terrace adjacent to their apartment into additional living space by installing wood paneling, a drop ceiling, carpeting, and an electric ceiling fan, and by removing the sliding glass doors to the terrace, all without the approval of the board. The board then requested that unit owners restore the unit to its original condition, contending that the terrace was a common element and that board approval was necessary for alterations to common elements. Unit owners contended that the terrace was no a common element, and refused to comply. Later, in conjunction with a building-wide project, the board sought to replace windows and the sliding glass door in unit owner's apartment, but the board's contractors were unable to do so because of inability to obtain access, and because the alterations made installation of the doors impossible. The board then brought this action to require unit owners to restore the terrace to its original condition, and sought a preliminary injunction requesting the same relief. When Supreme Court denied the preliminary injunction, the board appealed.

In affirming, the Appellate Division concluded that the circumstances facing the board were not so extraordinary to warrant mandatory injunctive relief pending resolution of the litigation. The court also emphasized that the board had not established a likelihood of success on the merits, because the governing documents did not establish that the terrace was a common element or an exterior portion of the subject uni. As a result, the board did not establish a violation of the governing documents.

Claim Against Sponsor Dismissed

Board of Managers of the Chelsea 19 Condominium v. Chelsea 19 Associates

NYLJ 5/24/10, p. 27, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by condominium and several unit owners against the condominium's sponsor for breach of contract, fraud, negligent performance of a contract, and other alleged wrongs, condominium and unit owner appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, relying on disclaimer provisions in the offering plan and purchase agreements.

The condominium association's complaints are based on the architect's description of the building in the offering plan and purchase agreements. In upholding Supreme Court's dismissal of the complaint, however, the court noted that the same documents include an “as is” clause and related disclaimer provisions. The court also emphasized that purchasers had undertaken to conduct their own investigation. In dismissing the fraud claims, the court relied on the principle that fraud claims may not be predicated on omissions from the offering plan. Finally, the court concluded that negligent performance of a contract is not a cognizable claim.

ILSA Exemption Held Inapplicable

Cruz v. Leviev Fulton Club LLC

NYLJ 5/24/10, p. 24, col. 1

U.S. Dist. Ct., S.D.N.Y.

(Gorenstein, M.J.)

In an action by condominium purchaser for rescission of the purchase contract and return of the down payment, sponsor moved for summary judgment. The court denied the motion, holding that sponsor had not established an exemption from the provisions of the Interstate Land Sale Full Disclosure Act (ILSA).

ILSA requires a developer to provide a statement of record or a printed property report to the purchaser of a lot before the purchaser signs the sale contract. If the developer does not comply, the purchaser has a right to rescind. The act, however, exempts sales or leases “under a contract obligated the seller or lessor to erect ' a building ' within a period of two years.” In this case, sponsor filed an offering plan for a condominium project located at 111 Fulton Street. The plan provided that the sponsor anticipated the first closing on April 1, 2008, and also provided that if the project commencement date was 12 months or later than the anticipated date, sponsor would offer all purchasers a right to rescind. Purchaser contracted to purchase a unit for $555,000 on June 22, 2007. Purchaser paid a $50,000 deposit. When sponsor attempted to schedule a closing for Dec. 17, 2008, purchaser was not ready, willing, or able to close. Sponsor canceled the purchaser agreement and informed purchaser that it would retain the down payment. Purchaser then brought this action alleging a violation of ILSA. Sponsor moved for summary judgment, relying on the statutory exemption.

In denying the summary judgment motion, the court held that the contract language giving the purchaser a right to rescission if the building were not completed by April 1, 2009 did not constitute an obligation by sponsor to build the building by that date. The court noted that if the sponsor had wanted to bind itself to build within two years, it could have done so by using mandatory language, but held that in this case, the absence of such language precluded sponsor from relying on the exemption.