Cooperatives & Condominiums

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In a condominium board's action against unit owner for breach of contract and injunctive relief, the board sought a preliminary injunction preventing unit owner from renting out her unit for less than 30 days, and from permitting visitors to stay in the unit, whether or not the visitor pays, so long as unit owner does not reside in the unit. The court granted the preliminary injunction.

Unit owner acquired her unit in the condominium in March 2011. New York's multiple dwelling law and the condominium bylaws each prohibit transient occupancy of the unit, even by non-paying visitors, so long as unit owner does not use the unit as a residence. Nevertheless, unit owner asked the condominium's front-desk staff to provide access and keys to an average of four visitors per month, each of whom stayed in the unit for several days at a time. When the condominium board learned of unit owner's practices, the board sent a formal notice to all unit owners reminding them that the practice of using units as hotel apartments were in violation of the condominium bylaws. The board then demanded that unit owner desist her short-term rentals or face a fine of $1,000 for each violation. After a series of exchanges, unit owner stopped paying common charges and the board brought this action.

In awarding the board a preliminary injunction, the court noted that it was undisputed that unit owner had advertised the apartment on craigslist.org as a short-term rental. Moreover, the court noted that unit owner had not adequately explained the presence of more than 30 visitors who were provided keys to her unit. As a result, the condominium board had demonstrated a likelihood of success on the merits. The court also noted that the potential threat to resident safety from use of the apartment by strangers who have not undergone background checks established the irreparable injury necessary to sustain a preliminary injunction.

Because Condominium Unit Owner Is Not a Tenant, Unit Owner May Not Bring Claim for Breach of Covenant

Pedalino v. Woodhill Green Condominium, Inc.

NYLJ 3/26/13, p. 21, col. 5

Supreme Ct., Dutchess Cty.

(Pagones, J.)

In unit owner's action against the condominium board for water damages to the unit, the condominium moved for summary judgment. The court granted the board's motion on unit owner's claims for gross negligence, breach of fiduciary duty, breach or the covenant of quiet enjoyment, and nuisance, but denied the motion with respect to unit owner's negligence claim.

Unit owner alleges that a pipe below her unit in the common-area crawl space had leaked and burst, causing water and mold damage to her unit. When they learned of this, board employees attempted to fix the problem and offered to replace the subfloor in unit owner's kitchen. The condominium hired an architect to inspect the building, and the architect concluded that the original construction of the building resulted in improper ventilation in the crawl space, which led to the damage of the plywood sub-floor in unit owner's apartment. When unit owner brought this action against the condominium, the condominium moved for summary judgment.

In denying the motion with respect to unit owner's negligence claim, the court noted that the condominium association had submitted no evidence as to when the condominium's employees discovered the leak, or how often they inspected the crawl space. The court also noted that the condominium's architect had offered no opinion to explain the alleged mold damage in the unit. The court, however, granted the condominium's summary judgment motion with respect to the other claims. In particular, the court held that a unit owner has no claim for breach of the covenant of quiet enjoyment against a condominium board because such a claim requires constructive or actual eviction.

The court indicated that a condominium unit owner is an owner of real property, not a tenant, and is not therefore subject to eviction, which negates any claim for breach of the covenant of quiet enjoyment. The court held that the business judgment rule, combined with the condominium's offer to repair the floor in the unit, precluded a claim for breach of fiduciary duty, while the prompt repairs to the pipe and common areas were sufficient to overcome unit owner's unsubstantiated allegations in the nuisance complaint.

COMMENT

Courts have consistently held that condominium unit owners have no cognizable claim against the condominium association or individual board members for breach of the warranty of habitability. In Frisch v. Bellmarc Mgt., Inc., 190 A.D.2d 383, an action by a unit owner for breach of the warranty of habitability, the court held that the condominium board was entitled to summary judgment on its counterclaim for unpaid common charges, holding that Real Property Law section 235-b, the statute creating the warranty, does not apply to condominiums. Tenant had based his complaint on water damage in his apartment, apparently resulting from leakage, but the court rejected tenant's analogy to co-operative apartments, where courts had previously held the warranty applicable (see Suarez v. Rivercross Tenants' Corp., 107 Misc.2d 135.) In Linden v. Lloyd's Planning Service, Inc., 299 A.D.2d 217, 218, the court held that a unit owner may not prevail on a breach of warranty claim against individual board members, dismissing unit owner's claim for damages sustained as a result of the foreclosure on her condominium unit for failure to pay common charges. Unit owner had allegedly withheld the common charges because the condominium association had failed to repair water damage to the condominium.

The Suffolk County Supreme Court in Williams v. Leisure Knoll Ass'n, Inc., 2012 N.Y. Slip Op. 31216(U), held the same rule applicable with respect to breach of the covenant of quiet enjoyment, granting summary judgment dismissing a condominium unit owner's causes of action for both breach of the covenant of quiet enjoyment and breach of the covenant of habitability. The same rule bars tenants leasing condominium units from from bringing action for breach of warranty or breach of covenant actions against the condominium association or condominium board members. McCarthy v. Board of Managers of Bromley Condominium, 271 A.D.2d 247.

A condominium unit owner may, however, bring an action to enforce City housing codes against a condominium association as long as the violations fall within the common maintenance and control of the association. In Pershad v. Parkchester South Condominium, 174 Misc.2d 92, the court held the condominium unit owner's action for the enforcement of the New York City Housing Maintenance Code (HMC) against the condominium for premises under the condominium's control stated a valid cause of action. The condominium unit owner sought an order for the removal and correction of water leaks due to faulty drainage pipes. The court held that if the defective pipes were part of the common area and control of the condominium, the condominium had to take the necessary steps to rectify the condition in compliance with the Housing Maintenance Code. In finding that the condominium unit owner had stated a valid cause of action, the court stated that under MDL Section 78, an owner's duty to maintain the premises in good repair was non-delegable. The unit owner, however, is responsible for correcting any violation of the State and City housing codes if those violations are present inside an individual condominium unit. In Gazdo Properties Corp. v. Lava, 149 Misc.2d 828, the court dismissed unit owner's action seeking an order directing the condominium's board to correct code violations existing inside individual units owned by other unit owners. The court held that the board was not liable for maintenance issues arising within the individual units.'

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Co-op Has Authority to Impose 10% Sublet Fee on Shareholder Who Holds Commerical Unit

Campaniello v. Greene Street Holding Corp.

NYLJ 3/20/13

Supreme Ct., N.Y. Cty.

(Wooten, J.)

In an action by commercial tenant-shareholder for declaratory and injunctive relief, tenant-shareholder sought a Yellowstone injunction and the co-op corporation cross-moved for summary judgment dismissing the complaint. The court granted the co-op corporation's motion, holding that the corporation had the authority to impose a 10% sublet fee on tenant-shareholders.

Tenant-shareholder entered into a lease agreement with the co-op in 2006. In 2010, he sought permission from the co-op to sublet the premises at a monthly rental of $60,000. The co-op refused to grant consent unless tenant-shareholder paid a sublet fee of 10% pursuant to a provision in the co-op's bylaws. Tenant-shareholder agreed to pay the fee in order to avoid losing the subtenant, but then withheld the sublet fee payments, citing both leaks at the premises and the co-op's lack of authority to impose the sublet fee. Tenant then brought this action for a declaration that neither the certificate of incorporation nor the proprietary lease authorized the sublet fee. Tenant sought a Yellowstone injunction to prevent termination of the lease pending an adjudication of tenant's claims.

In awarding summary judgment to the co-op corporation, the court started by citing the lease itself, which provides that any consent to subletting “may be subject to such conditions as the Directors or lessees, as the case may be, shall impose.” The court then turned to the bylaws, which had been amended in 1979 to authorize imposition of a sublet fee. Although tenant-shareholder argued that shareholder approval was necessary to amend the bylaws, the court rejected the argument, relying on Business Corporation Law section 601(a), which authorizes a corporation's board to amend bylaws if such amendment is permitted either by the corporation's certificate of incorporation or by a by-law adopted by the shareholders.

This co-operative's bylaws include a provision authorizing amendment of the bylaws by a vote of the Directors. As a result, the court concluded that tenant-shareholder's claim lacked merit, and, because the court dismissed the claim on the merits, the court concluded that the demand for Yellowstone relief was moot.

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Condominium May Enforce Bylaw Prohibiting Short-Term Rentals

Board of Managers of The South Star v. Grishanova

NYLJ 3/21/13, p. 21, col. 1

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In a condominium board's action against unit owner for breach of contract and injunctive relief, the board sought a preliminary injunction preventing unit owner from renting out her unit for less than 30 days, and from permitting visitors to stay in the unit, whether or not the visitor pays, so long as unit owner does not reside in the unit. The court granted the preliminary injunction.

Unit owner acquired her unit in the condominium in March 2011. New York's multiple dwelling law and the condominium bylaws each prohibit transient occupancy of the unit, even by non-paying visitors, so long as unit owner does not use the unit as a residence. Nevertheless, unit owner asked the condominium's front-desk staff to provide access and keys to an average of four visitors per month, each of whom stayed in the unit for several days at a time. When the condominium board learned of unit owner's practices, the board sent a formal notice to all unit owners reminding them that the practice of using units as hotel apartments were in violation of the condominium bylaws. The board then demanded that unit owner desist her short-term rentals or face a fine of $1,000 for each violation. After a series of exchanges, unit owner stopped paying common charges and the board brought this action.

In awarding the board a preliminary injunction, the court noted that it was undisputed that unit owner had advertised the apartment on craigslist.org as a short-term rental. Moreover, the court noted that unit owner had not adequately explained the presence of more than 30 visitors who were provided keys to her unit. As a result, the condominium board had demonstrated a likelihood of success on the merits. The court also noted that the potential threat to resident safety from use of the apartment by strangers who have not undergone background checks established the irreparable injury necessary to sustain a preliminary injunction.

Because Condominium Unit Owner Is Not a Tenant, Unit Owner May Not Bring Claim for Breach of Covenant

Pedalino v. Woodhill Green Condominium, Inc.

NYLJ 3/26/13, p. 21, col. 5

Supreme Ct., Dutchess Cty.

(Pagones, J.)

In unit owner's action against the condominium board for water damages to the unit, the condominium moved for summary judgment. The court granted the board's motion on unit owner's claims for gross negligence, breach of fiduciary duty, breach or the covenant of quiet enjoyment, and nuisance, but denied the motion with respect to unit owner's negligence claim.

Unit owner alleges that a pipe below her unit in the common-area crawl space had leaked and burst, causing water and mold damage to her unit. When they learned of this, board employees attempted to fix the problem and offered to replace the subfloor in unit owner's kitchen. The condominium hired an architect to inspect the building, and the architect concluded that the original construction of the building resulted in improper ventilation in the crawl space, which led to the damage of the plywood sub-floor in unit owner's apartment. When unit owner brought this action against the condominium, the condominium moved for summary judgment.

In denying the motion with respect to unit owner's negligence claim, the court noted that the condominium association had submitted no evidence as to when the condominium's employees discovered the leak, or how often they inspected the crawl space. The court also noted that the condominium's architect had offered no opinion to explain the alleged mold damage in the unit. The court, however, granted the condominium's summary judgment motion with respect to the other claims. In particular, the court held that a unit owner has no claim for breach of the covenant of quiet enjoyment against a condominium board because such a claim requires constructive or actual eviction.

The court indicated that a condominium unit owner is an owner of real property, not a tenant, and is not therefore subject to eviction, which negates any claim for breach of the covenant of quiet enjoyment. The court held that the business judgment rule, combined with the condominium's offer to repair the floor in the unit, precluded a claim for breach of fiduciary duty, while the prompt repairs to the pipe and common areas were sufficient to overcome unit owner's unsubstantiated allegations in the nuisance complaint.

COMMENT

Courts have consistently held that condominium unit owners have no cognizable claim against the condominium association or individual board members for breach of the warranty of habitability. In Frisch v. Bellmarc Mgt., Inc., 190 A.D.2d 383, an action by a unit owner for breach of the warranty of habitability, the court held that the condominium board was entitled to summary judgment on its counterclaim for unpaid common charges, holding that Real Property Law section 235-b, the statute creating the warranty, does not apply to condominiums. Tenant had based his complaint on water damage in his apartment, apparently resulting from leakage, but the court rejected tenant's analogy to co-operative apartments, where courts had previously held the warranty applicable (see Suarez v. Rivercross Tenants' Corp., 107 Misc.2d 135. ) In Linden v. Lloyd's Planning Service, Inc., 299 A.D.2d 217, 218, the court held that a unit owner may not prevail on a breach of warranty claim against individual board members, dismissing unit owner's claim for damages sustained as a result of the foreclosure on her condominium unit for failure to pay common charges. Unit owner had allegedly withheld the common charges because the condominium association had failed to repair water damage to the condominium.

The Suffolk County Supreme Court in Williams v. Leisure Knoll Ass'n, Inc., 2012 N.Y. Slip Op. 31216(U), held the same rule applicable with respect to breach of the covenant of quiet enjoyment, granting summary judgment dismissing a condominium unit owner's causes of action for both breach of the covenant of quiet enjoyment and breach of the covenant of habitability. The same rule bars tenants leasing condominium units from from bringing action for breach of warranty or breach of covenant actions against the condominium association or condominium board members. McCarthy v. Board of Managers of Bromley Condominium, 271 A.D.2d 247.

A condominium unit owner may, however, bring an action to enforce City housing codes against a condominium association as long as the violations fall within the common maintenance and control of the association. In Pershad v. Parkchester South Condominium, 174 Misc.2d 92, the court held the condominium unit owner's action for the enforcement of the New York City Housing Maintenance Code (HMC) against the condominium for premises under the condominium's control stated a valid cause of action. The condominium unit owner sought an order for the removal and correction of water leaks due to faulty drainage pipes. The court held that if the defective pipes were part of the common area and control of the condominium, the condominium had to take the necessary steps to rectify the condition in compliance with the Housing Maintenance Code. In finding that the condominium unit owner had stated a valid cause of action, the court stated that under MDL Section 78, an owner's duty to maintain the premises in good repair was non-delegable. The unit owner, however, is responsible for correcting any violation of the State and City housing codes if those violations are present inside an individual condominium unit. In Gazdo Properties Corp. v. Lava, 149 Misc.2d 828, the court dismissed unit owner's action seeking an order directing the condominium's board to correct code violations existing inside individual units owned by other unit owners. The court held that the board was not liable for maintenance issues arising within the individual units.'

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Co-op Has Authority to Impose 10% Sublet Fee on Shareholder Who Holds Commerical Unit

Campaniello v. Greene Street Holding Corp.

NYLJ 3/20/13

Supreme Ct., N.Y. Cty.

(Wooten, J.)

In an action by commercial tenant-shareholder for declaratory and injunctive relief, tenant-shareholder sought a Yellowstone injunction and the co-op corporation cross-moved for summary judgment dismissing the complaint. The court granted the co-op corporation's motion, holding that the corporation had the authority to impose a 10% sublet fee on tenant-shareholders.

Tenant-shareholder entered into a lease agreement with the co-op in 2006. In 2010, he sought permission from the co-op to sublet the premises at a monthly rental of $60,000. The co-op refused to grant consent unless tenant-shareholder paid a sublet fee of 10% pursuant to a provision in the co-op's bylaws. Tenant-shareholder agreed to pay the fee in order to avoid losing the subtenant, but then withheld the sublet fee payments, citing both leaks at the premises and the co-op's lack of authority to impose the sublet fee. Tenant then brought this action for a declaration that neither the certificate of incorporation nor the proprietary lease authorized the sublet fee. Tenant sought a Yellowstone injunction to prevent termination of the lease pending an adjudication of tenant's claims.

In awarding summary judgment to the co-op corporation, the court started by citing the lease itself, which provides that any consent to subletting “may be subject to such conditions as the Directors or lessees, as the case may be, shall impose.” The court then turned to the bylaws, which had been amended in 1979 to authorize imposition of a sublet fee. Although tenant-shareholder argued that shareholder approval was necessary to amend the bylaws, the court rejected the argument, relying on Business Corporation Law section 601(a), which authorizes a corporation's board to amend bylaws if such amendment is permitted either by the corporation's certificate of incorporation or by a by-law adopted by the shareholders.

This co-operative's bylaws include a provision authorizing amendment of the bylaws by a vote of the Directors. As a result, the court concluded that tenant-shareholder's claim lacked merit, and, because the court dismissed the claim on the merits, the court concluded that the demand for Yellowstone relief was moot.

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