Cooperatives & Condominiums

House Rule May Impose Penalty on Delinquent Unit Owner

Board of Managers v. Wozencraft

NYLJ 9/19/12

Supreme Ct., N.Y. Cty.

(Mills, J.)

In an action by a condominium board to recover common charges, both the condominium association and the unit owner sought summary judgment. The court denied both motions, holding that the unit owner had raised questions of fact about whether the condominium board had overreacted to his failure to pay common charges.

In 2007, unit owner's mortgage lender brought a foreclosure action against him for failure to make payments. In 2009, unit owner filed a petition for bankruptcy relief, which was dismissed in 2010 based on his failure to appear at a creditor's meeting. The condo board then brought this action to recover common charges that have allegedly not been paid for several years. The board moved for summary judgment on liability, noting that the unit owner has not denied nonpayment. Unit owner, however, contends that he has not received accurate monthly bills, that the charges are inflated, and that the condominium board has breached its fiduciary duties by applying a house rule withholding nonessential services from delinquent unit owners.

In denying the condominium board's summary judgment motion, the court first held that the business judgment rule requires upholding the condominium's house rule withholding nonessential services from delinquent tenants, so long as the rule is applied reasonably. Because nonessential services are defined in the rule, and the services are promptly restored upon payment of outstanding charges, the court held that the rule is not, by its nature, unfair or discriminatory. But the court then went on to allege that the board had denied other services, including access to deliveries and repair, and that the board had failed to deliver important mortgage notices to the unit owner. The court concluded that these claims raised sufficient issues of fact to preclude summary judgment. The court then denied unit owner's motion to dismiss based on laches, noting that he had not shown any prejudice as a result of delay, and that the board had offered a number of reasons for the delay in bringing suit, including the pendency of the mortgage foreclosure action against the unit owner, and unit owner's bankruptcy proceeding.

Board Had Authority to Impose Fines

Cave v. Riverbend Homeowners Assn, Inc.

NYLJ 10/15/12, p. 37, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by condominium unit owner for a declaration that fines and fees imposed by the association are invalid, unit owner appealed from Supreme Court's grant of summary judgment to the association. The Appellate Division affirmed, holding that unit owner had failed to raise a question of fact regarding the legitimacy of the board's actions.

The association's bylaws give the condominium board broad authority to collect common charges and expenses from the unit owners, to adopt and amend rules and regulations concerning use of the units, and to levy fines for violations of the rules and regulations. When the board levied fees and charges against delinquent unit owner, the owner brought this action challenging the fines and fees. Supreme Court granted summary judgment to the board on the complaint, and also awarded summary judgment to the board on its counterclaim to recover unpaid common charges, fines, and fees. Unit owner appealed.

In affirming, the Appellate Division invoked the business judgment rule and emphasized that the unit owner did not raise triable issues about the board's fraud, self-dealing, or misconduct. Similarly, unit owner raised no issues of fact about the board's authority to impose the fines or fees. As a result, the association was entitled to recover on its counterclaim.

House Rule May Impose Penalty on Delinquent Unit Owner

Board of Managers v. Wozencraft

NYLJ 9/19/12

Supreme Ct., N.Y. Cty.

(Mills, J.)

In an action by a condominium board to recover common charges, both the condominium association and the unit owner sought summary judgment. The court denied both motions, holding that the unit owner had raised questions of fact about whether the condominium board had overreacted to his failure to pay common charges.

In 2007, unit owner's mortgage lender brought a foreclosure action against him for failure to make payments. In 2009, unit owner filed a petition for bankruptcy relief, which was dismissed in 2010 based on his failure to appear at a creditor's meeting. The condo board then brought this action to recover common charges that have allegedly not been paid for several years. The board moved for summary judgment on liability, noting that the unit owner has not denied nonpayment. Unit owner, however, contends that he has not received accurate monthly bills, that the charges are inflated, and that the condominium board has breached its fiduciary duties by applying a house rule withholding nonessential services from delinquent unit owners.

In denying the condominium board's summary judgment motion, the court first held that the business judgment rule requires upholding the condominium's house rule withholding nonessential services from delinquent tenants, so long as the rule is applied reasonably. Because nonessential services are defined in the rule, and the services are promptly restored upon payment of outstanding charges, the court held that the rule is not, by its nature, unfair or discriminatory. But the court then went on to allege that the board had denied other services, including access to deliveries and repair, and that the board had failed to deliver important mortgage notices to the unit owner. The court concluded that these claims raised sufficient issues of fact to preclude summary judgment. The court then denied unit owner's motion to dismiss based on laches, noting that he had not shown any prejudice as a result of delay, and that the board had offered a number of reasons for the delay in bringing suit, including the pendency of the mortgage foreclosure action against the unit owner, and unit owner's bankruptcy proceeding.

Board Had Authority to Impose Fines

Cave v. Riverbend Homeowners Assn, Inc.

NYLJ 10/15/12, p. 37, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by condominium unit owner for a declaration that fines and fees imposed by the association are invalid, unit owner appealed from Supreme Court's grant of summary judgment to the association. The Appellate Division affirmed, holding that unit owner had failed to raise a question of fact regarding the legitimacy of the board's actions.

The association's bylaws give the condominium board broad authority to collect common charges and expenses from the unit owners, to adopt and amend rules and regulations concerning use of the units, and to levy fines for violations of the rules and regulations. When the board levied fees and charges against delinquent unit owner, the owner brought this action challenging the fines and fees. Supreme Court granted summary judgment to the board on the complaint, and also awarded summary judgment to the board on its counterclaim to recover unpaid common charges, fines, and fees. Unit owner appealed.

In affirming, the Appellate Division invoked the business judgment rule and emphasized that the unit owner did not raise triable issues about the board's fraud, self-dealing, or misconduct. Similarly, unit owner raised no issues of fact about the board's authority to impose the fines or fees. As a result, the association was entitled to recover on its counterclaim.