Cooperatives & Condominiums

Mortgagee Bank's Delay in Processing Foreclosure

Bank of America v. Brooks

NYLJ 6/25/14, p. 21, col. 3

Supreme Ct., Westchester Cty

(Connolly, J.)

In a bank's action to foreclose a mortgage on a residential condominium unit, the condominium board moved to compel the bank to pay accrued common charges on the condominium unit and, if it is the successful bidder at the foreclosure sale, to pay common charges from that point forward. The court denied the motion, holding that the bank's delay in processing its foreclosure action does not entitle the condominium board to require the bank to pay common charges.

The bank brought the foreclosure action on May 24, 2010. Little progress has been made since then. The board, which had originally waived notice of most proceedings, then sought for leave to file an answer and counterclaims, and also sought to compel the bank to pay common charges, alleging that the bank's delay in proceeding with the foreclosure action had resulted in the board's loss of common charges.

In denying the condominium board's motion, the court first held that the board's counterclaim for damages for delay in bringing the foreclosure action lacked merit because in effect, the board was attempting to transform a request for sanctions into a cause of action, and New York does not recognize a cause of actions to impose sanctions. The court then rejected the board's attempt to hold the bank liable for common charges, noting that the board had not identified any basis in law for recovering damages from a senior lienholder for failure to enforce its rights more promptly. The court indicated that to give the board the relief it requested would be to subordinate the bank's senior mortgage to the board's junior lien.

Action Against Sponsor Dismissed

Board of Managers of the Clermont Greene Condo. v. Vanderbilt Mansions, LLC

NYLJ 7/10/14, p. 21, col. 3

Supreme Ct., Kings Cty

(Demarest, J.)

In an action by condominium board against the condominium sponsor asserting various claims relating to alleged construction defects, sponsor moved to dismiss for lack of standing. The court granted the sponsor's motion, holding that the board had not followed necessary procedures for authorizing the action.

In 2007, sponsor submitted an offering plan for a building with 74 residential units. According to one of the amendments to the plan, the condominium board would include seven members, three of them affiliated with the sponsor. After the sponsor sold most of the units, the board retained an architectural firm to investigate construction defects and other material deviations from the offering plan. That report found a number of departures from industry standards and violations of the building code, including fire barriers, firestopping, and deficiencies in the electrical and HVAC systems. The condominium board then brought this action against sponsor, alleging breach of contract, breach of warranty, and breach of fiduciary duty. Sponsor moved to dismiss.

In granting sponsor's motion, the court emphasized that the condominium board had never held a meeting to authorize the action. The bylaws require notice of regular and special meetings to all board members, and authorize the board to act without a meeting if all members of the board consent. In this case, one of the sponsor-affiliated members of the board submitted an affidavit that he never received notice of any meeting authorizing an action, and it is undisputed that the board never adopted a resolution by unanimous consent of the board members. The court acknowledged that section 339-dd of the Real Property Law confers standing on a condominium board to bring claims on behalf of individual unit owners, but emphasized that the board was nevertheless obligated to act as a body within the constraints imposed by the bylaws. Here, because the board had not complied with the procedures specified in the bylaws, the court dismissed the action.

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Mortgagee Bank's Delay in Processing Foreclosure

Bank of America v. Brooks

NYLJ 6/25/14, p. 21, col. 3

Supreme Ct., Westchester Cty

(Connolly, J.)

In a bank's action to foreclose a mortgage on a residential condominium unit, the condominium board moved to compel the bank to pay accrued common charges on the condominium unit and, if it is the successful bidder at the foreclosure sale, to pay common charges from that point forward. The court denied the motion, holding that the bank's delay in processing its foreclosure action does not entitle the condominium board to require the bank to pay common charges.

The bank brought the foreclosure action on May 24, 2010. Little progress has been made since then. The board, which had originally waived notice of most proceedings, then sought for leave to file an answer and counterclaims, and also sought to compel the bank to pay common charges, alleging that the bank's delay in proceeding with the foreclosure action had resulted in the board's loss of common charges.

In denying the condominium board's motion, the court first held that the board's counterclaim for damages for delay in bringing the foreclosure action lacked merit because in effect, the board was attempting to transform a request for sanctions into a cause of action, and New York does not recognize a cause of actions to impose sanctions. The court then rejected the board's attempt to hold the bank liable for common charges, noting that the board had not identified any basis in law for recovering damages from a senior lienholder for failure to enforce its rights more promptly. The court indicated that to give the board the relief it requested would be to subordinate the bank's senior mortgage to the board's junior lien.

Action Against Sponsor Dismissed

Board of Managers of the Clermont Greene Condo. v. Vanderbilt Mansions, LLC

NYLJ 7/10/14, p. 21, col. 3

Supreme Ct., Kings Cty

(Demarest, J.)

In an action by condominium board against the condominium sponsor asserting various claims relating to alleged construction defects, sponsor moved to dismiss for lack of standing. The court granted the sponsor's motion, holding that the board had not followed necessary procedures for authorizing the action.

In 2007, sponsor submitted an offering plan for a building with 74 residential units. According to one of the amendments to the plan, the condominium board would include seven members, three of them affiliated with the sponsor. After the sponsor sold most of the units, the board retained an architectural firm to investigate construction defects and other material deviations from the offering plan. That report found a number of departures from industry standards and violations of the building code, including fire barriers, firestopping, and deficiencies in the electrical and HVAC systems. The condominium board then brought this action against sponsor, alleging breach of contract, breach of warranty, and breach of fiduciary duty. Sponsor moved to dismiss.

In granting sponsor's motion, the court emphasized that the condominium board had never held a meeting to authorize the action. The bylaws require notice of regular and special meetings to all board members, and authorize the board to act without a meeting if all members of the board consent. In this case, one of the sponsor-affiliated members of the board submitted an affidavit that he never received notice of any meeting authorizing an action, and it is undisputed that the board never adopted a resolution by unanimous consent of the board members. The court acknowledged that section 339-dd of the Real Property Law confers standing on a condominium board to bring claims on behalf of individual unit owners, but emphasized that the board was nevertheless obligated to act as a body within the constraints imposed by the bylaws. Here, because the board had not complied with the procedures specified in the bylaws, the court dismissed the action.

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