A recent decision of the Appellate Division, First Department,[1] Fletcher v. The Dakota, Inc.,[2] has significantly changed the circumstances in which tort claims may be asserted against board members of cooperatives and condominiums in their personal, rather than only corporate, capacities. We believe this decision is not the last word on this issue. However, board members should be aware that until or unless the apparent holding of the case is rejected by the New York Court of Appeals or narrowed by the Appellate Division itself, board members who are successfully sued personally and are not protected by sufficient insurance or… Read more
Cooperative and Condominium
Mold Revisited
Despite an earlier court decision that has been widely interpreted as holding that landlords in New York (including cooperatives and condominiums) had no liability for alleged bodily injury from mold, the Appellate Division of the New York State Supreme Court for the First Department has issued a decision making clear that the issue remains very much in play. In a memorandum in October of 2006 we advised our cooperative and condominium clients of a Supreme Court decision in the Fraser case[1] which found that then-current scientific evidence did not support a conclusion that mold or damp indoor environments cause illness. … Read more
Streamlined Sale of Common Space to Shareholders
On January 26, the New York State Attorney General’s Real Estate Finance Bureau announced new standards that will streamline the allocation of stock to, and the sale of, cooperative common areas, such as hallways, servants’ rooms and storage lockers, to existing shareholders. Previously, the Attorney General had taken the position that such sales required the issuance of “no action letters” by its office in order to comply with New York State’s securities laws. This position has now been abandoned. In the future, cooperatives may allocate stock to common areas and sell the stock to existing shareholders without involving the Attorney… Read more
Recent Legislation on Short-Term Leasing and Powers of Attorney
Two newly enacted laws in New York State affect cooperatives and condominiums: one prohibits the leasing of apartments for less than 30 days; the second involves the effectiveness of powers of attorney which are often used in cooperative and condominium transactions. Short-Term Leasing Chapter 225 of the Laws of 2010 prohibits the leasing of apartments in Class A multiple dwellings, which includes virtually all residential cooperatives and condominiums, for time periods of less than 30-days. This effectively eliminates the use of apartments as hotel rooms, “bed and breakfast” accommodations or other short-term rentals. There are some exceptions. Non-family members… Read more
Recent Legislation for Green Buildings
The New York City Council has recently enacted, at Mayor Bloomberg’s request, four laws[1] that are designed to increase the energy efficiency of buildings in New York City. The legislation is rather complex, with various “start” dates, but the basic provisions that apply to cooperatives and condominiums are as follows: Effective July 1, 2010, all alterations, including apartment alterations, that require building permits must comply with the new New York City Energy Conservation Code and must be certified accordingly. Commencing January 1, 2013, all owners of “covered buildings” (those over 50,000 gross square feet) must file an energy efficiency report… Read more
New Powers of Attorney
New Sections 5-1501, 5-1501A and 5-1501B of the New York General Obligations Law[1] will take effect on September 1, 2009 that will affect the validity of powers of attorney. Although currently valid powers of attorney will remain in effect, all new powers of attorney must be drafted on a new statutory form or must incorporate the new language required by the law. The statutory changes will affect many transactions, including those involving cooperatives and condominiums. Under the new law, the agent, as well as the principal, must now sign the form, and the power will survive the incapacity of the… Read more
Authority to Impose Fines
We have been asked from time to time by cooperative (“coop”) and condominium boards about their ability to impose fines to ensure compliance with house rules. While the fines that boards seek to impose are generally small, boards occasionally seek to charge considerable sums for repeated or continuing infractions. You should be aware, however, that regardless of the amount, the legality of fines or penalty fees may be subject to question. Courts have determined that the New York Condominium Act authorizes a condominium board to impose fines. See Sweetman v. Board of Managers of Plymouth Village Condominium, 1998 WL 112655… Read more
New Ruling on Exclusive Cable Contracts
On May 26, 2009, the United States Court of Appeals for the District of Columbia Circuit, in the case of National Cable & Telecommunications Ass’n v. Federal Communications Commission, 2009 WL 1444094 (D.C. Cir. 2009), upheld a rule and order of the Federal Communications Commission, 22 F.C.C.R. 20,235 (2007), that banned exclusivity provisions in contracts between cable companies and owners of apartment buildings. There is the possibility that this decision may be reviewed by the U.S. Supreme Court, but absent a reversal by the Supreme Court, the FCC rule governs. The decision by the Court of Appeals is an important… Read more
Security Deposits
A recent decision of the New York County Supreme Court[1] stressed that the statute governing the holding of security deposits[2] applies to cooperative apartments. Although, as a matter of practice, most cooperatives comply with the provisions of the statute, it is worth reviewing the statutory requirements. The statute requires all landlords (including cooperatives) that hold security deposits in connection with leases (including proprietary leases and subleases) to place such deposits into segregated bank accounts and not to commingle the deposits with any other funds. In addition, for buildings of six or more residential units, the segregated account must be interest-bearing,… Read more
Unit Owner Monetary Defaults
The current state of the national and local economy will likely lead to increased nonpayment of monthly charges by owners of cooperative and condominium apartments. The loss of income can affect the financial stability of a cooperative or condominium and, at least in the short run, the costs of unpaid maintenance or common charges must be borne by other owners. Therefore, it is important that boards have and enforce a clear policy as to payment arrears. The procedures and effectiveness of legal remedies for nonpayment differ substantially as between cooperatives and condominiums. Cooperative apartment owners are tenants for collection purposes,… Read more