Cooperative and Condominium Archives

Dec 2, 2008

Insurance: Prompt Notice of Claims

We have frequently reminded clients of the importance of promptly notifying their insurers of any actual, threatened or possible claims against them. This has been especially important in New York because the New York Court of Appeals has held that an insurer may deny coverage due to late notification, regardless of whether the delay actually prejudiced the insurer. During its 231st session, the New York State Legislature attempted to overrule this case law through legislation. Under an amendment to Section 3420 of the New York Insurance Law, an insurer may now no longer deny a claim for untimely notice unless… Read more

Apr 7, 2008

Authorization of Board Action

On March 31, 2008, the Supreme Court for New York County rendered a decision illustrating the importance for cooperatives and condominiums of documenting board and owner action properly. As cooperatives and condominiums age, the proper keeping of records has become an issue for many of them. It is an issue that should not be overlooked. In Pello v. 425 E. 50 Owners Corp. et al., 2008 N.Y. Slip Op. 30939(U) (Sup.Ct., N.Y. Co., Walter Tolub, J., March 31, 2008), a cooperative claimed to have enacted and subsequently modified a flip tax by board amendments to its by-laws. However, the coop… Read more

Dec 26, 2007

Amendment to the 80/20 Rule

On December 20, 2007, President Bush signed into law legislation dramatically liberalizing the so-called “80/20 Rule” restricting the amount of non-shareholder income cooperatives may receive.[1] As a practical matter, the legislation will eliminate commercial income restrictions for most cooperatives. Under the former rule, in order for a cooperative shareholder to receive the tax benefits normally afforded a homeowner, the cooperative could receive no more than 20% of its income from non-shareholder sources. As a result of this rule, cooperatives controlling substantial commercial space have often capped the rents payable by their commercial tenants below market rents in order to keep… Read more

Feb 15, 2007

Transfer on Death Designation

A provision was recently added to New York’s Estates, Powers and Trusts Law which may affect the ownership of cooperative apartments. Under the revised statute, transfer on death (“TOD”) designations may now be used for securities in New York State. These permit the owner of stock to designate a beneficiary on the stock registration so, that upon the death of the stockholder, the stock automatically transfers to the designated beneficiary without the expense and delay of a probate proceeding. The same result could be obtained previously by designating an individual as a “joint tenant”, but a joint tenant is a… Read more

Oct 5, 2006

Mold

The New York County Supreme Court issued a decision on September 27, 2006, finding that current scientific evidence does not support a conclusion that mold or damp indoor environments cause illness. The lengthy decision was issued after an extensive hearing. This is a very important decision for all landlords, including cooperative and condominium boards, and indicates a growing trend among courts across the country to view evidence of mold-caused illnesses with increasing skepticism. In Fraser v. 301-52 Township Corp., the plaintiffs (husband, wife, and child) sued their cooperative for personal injuries allegedly caused by mold in their water-damaged apartment. The… Read more

Aug 23, 2006

Interest on Unpaid Maintenance and Common Charges

Most cooperative proprietary leases and condominium by-laws permit the board to charge interest on unpaid maintenance or common charges and set forth a fixed percentage or amount for the interest. Some leases and by-laws, including the forms recommended by our firm to its clients, provide authority to the board to set and change the interest rate or late fees from time-to-time. However, where the by-laws or lease set a fixed interest rate or formula, it is important that the interest actually charged by the board and managing agent complies with the terms of the lease and by-laws. The amount of… Read more

Apr 28, 2006

Board Elections and Shareholder Status

As we enter the season when many cooperatives and condominiums hold their annual meetings, it is important to make certain that the election of board members is conducted properly. Sometimes this can be difficult, especially in buildings that have contradictory or ambiguous by-law provisions. These uncertainties lead to acrimony and, occasionally, to litigation. As an example of ambiguity, one provision may simply require that to become a board member the candidate must be a resident of the building (or sometimes just a resident of the state) and over 18 years of age, but not require that the candidate be a… Read more

Nov 7, 2005

Protecting Against Theft of Building Funds

In the wake of recent news reports about a cooperative’s board member and treasurer who allegedly embezzled over $4.7 million, a number of our clients have asked what they should be doing to prevent similar cases in their cooperatives or condominiums. It is impossible to prevent all thefts under all circumstances, and the methods of financial control and supervision may vary from building to building or managing agent to managing agent. In most cases, though, some basic steps may be followed without much difficulty: Boards should confer with the building’s accountant to confirm that conventional financial controls are in place… Read more

Oct 28, 2005

Liability of Condominium Managers and Unit Owners for Injuries to Third Parties

On October 25, 2005, New York’s intermediate appellate court issued a decision of concern to both condominium boards and individual unit owners. Although the decision, on its face, appears to limit the personal liability of unit owners for claims made against the condominium by third parties, it, in fact, poses new and troubling issues regarding the personal liability of condominium board members while not ultimately providing unit owners real protection. We described the case involved, Pekelnaya v. Allyn, in our March 24, 2004 memorandum. The lawsuit was commenced after a section of chain link fence fell from the rooftop of… Read more

Aug 9, 2005

Condominium Boards’ Right to Restrict Sales

A recent court decision has generated a considerable amount of confusion among some condominium boards and condominium unit owners regarding the power of condominiums to regulate the sale of units in a manner similar to cooperatives. We hope that this memorandum will help to clarify matters. The decision, Demchick v. 90 East End Avenue Condominium, 18 A.D.3d 383, 796 N.Y.S.2d 62 (1st Dep’t 2005), was issued on May 31, 2005 by the Appellate Division for the First Department (which covers Manhattan and the Bronx). The condominium at issue sought, through the amendment of its by-laws, to limit the sale of… Read more