In Canela v. TLH 140 Perry St., LLC, Jose Canela was injured while completing alterations to a condo unit owned by TLH 140 Perry Street, LLC and David Smilow (“unit owners”).

When the Kings County Supreme Court found Andrews Building Corp and 140 Perry Street Condominium liable for the injuries, Andrews and 140 settled with Canela and paid him an unspecified sum.

After that payment was made, a dispute arose as to whether the unit owners were responsible for the monies remitted to Canela. When the court denied the reimbursement claim, an appeal to the Appellate Division, Second Department, ensued.

Since the condo’s by-laws provided that “all unit owners making alterations to their units are deemed to agree to indemnify and hold the [building owners] harmless from and against any liability, cost and expense arising from such alteration work,” the unit owners were required to reimburse Andrews and 140 for the sums paid to Canela together with all defense-related litigation costs.

Killed by the by-laws! (There's no altering that.)

To download a copy of the Appellate Division’s decision, please use this link: Canela v. TLH 140 Perry St., LLC

Posted by Lucas A. Ferrara, Esq. at 3:25 PM | Permalink | TrackBacks (0) | Comments (0)

In Breezy Point Cooperative v. Young, the Appellate Term, Second and Eleventh Judicial Districts, affirmed a summary judgment ruling, which allowed a cooperative board to end a shareholder's lease due to objectionable conduct.

Young’s proprietary lease with Breezy Point Cooperative permitted termination for "objectionable conduct," which was defined as the repeated disregard of the co-op's rules and regulations.

In early 2004, 225 stockholders signed a petition calling for a vote at the annual stockholders’ meeting on whether to terminate Young’s lease. After he and other shareholders addressed the annual meeting's attendees, the group voted overwhelmingly in favor of termination. (1,259 to 121)

In October 2004, Breezy served Young with the requisite notice and subsequently initiated a holdover proceeding against him in Queens County Civil Court.

Breezy alleged that, from 1986 to 2004, Young engaged in some 94 instances of objectionable conduct, which included "the repeated harassment of security officers, the defacement of cooperative property, [and] numerous violations of noise, litter, animal and motor vehicle regulations." The co-op also alleged that Young had filed a number of meritless lawsuits, which caused the cooperative to incur hundreds of thousands of dollars in legal fees.

When the Civil Court granted Breezy’s motion for summary judgment on its holdover petition, Young appealed to the Appellate Term, Second and Eleventh Judicial Districts, which affirmed. The "business judgment rule" requires courts to "exercise restraint and defer to good faith decisions made by boards of directors in business settings." Absent a showing of fraud, self-dealing, or other misconduct, courts will usually refrain from overriding a board’s decision, even if the latter may be unwise or improvident.

Because Young was unable to offer any evidence that the board engaged in any wrongdoing, and since the termination process transpired in accordance with the cooperative’s bylaws and the parties' lease, the AT2 deferred to the entity’s determination to terminate Young’s interests in the subject premises.

So, ultimately, Young suffered a Breezy eviction.

For a copy of the Appellate Term's decision, please use this link: Breezy Point Cooperative v. Young

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

Many purchasers prefer condominiums to cooperatives, because they believe condominiums afford owners greater flexibility to lease or sell their units. But that could not be farther from the truth. Frequently, condominiums take a highly restrictive stance on sales and leasing, as demonstrated by the case of Demchick v. 90 E. End Ave. Condominium.

The building in question consists of 43 residential units, 38 of which are described as "large, expensive, multi-bedroom units," with the remaining five comprising "small, relatively inexpensive studios." Apparently, it was the custom and practice of this full-service, luxury building to allow owners to utilize the studio units for their "household help," and it was understood that these studios could not be sold to anyone who did not already live in the building. Interestingly, these restrictions were not reserved in the offering plan or bylaws.

After the Plaintiffs purchased their four-bedroom apartment and a studio unit (which was used for storage), the Board circulated a proposed amendment to the condominium's bylaws formalizing the building's prior practice which restricted the leasing or sale of the studio apartments. Over Plaintiffs' objections, the amendment was adopted by a majority of the building's unit owners. Plaintiffs subsequently commenced suit in the New York County Supreme Court declaring the amendment "illegal," on the grounds that it constituted "an unreasonable restraint on alienation."

An array of common-law, constitutional and statutory protections are in place to prevent "undesirable" limits on the transfer of real estate. Restrictions which are "unjustified" run afoul of these safeguards and comprise a form of "unreasonable restraint" which will not be honored or enforced by the Courts.

The Supreme Court found the Condominium's amendment "unreasonable" and granted relief in the Plaintiffs' favor. On appeal, the Appellate Division, First Department, reversed, noting that Real Property Law section 339-v(2) grants condominiums the power to control the "alienation, conveyance, sale, leasing, purchase, ownership and occupancy of units," so long as those restrictions do not serve as a pretext or basis for discriminatory conduct. As the Appellate Division observed:

The restriction on the leasing of studios does not constitute an unreasonable restraint on alienation...Nor can it be said that the purpose of the restrictions of sale of the studio units--to preserve the character of the Condominium--is unreasonable. Although the duration of the restriction appears to be unlimited on its face, the restriction can be modified or removed at any time by a duly called meeting of the unit owners to further amend the bylaws. While there appear to be no New York cases on this point, other states have found such a restriction not to be an unreasonable restraint on alienation...The reasoning set forth in those cases is sound and applicable here.

With all due respect to the Plaintiffs in this case, we can't get over the fact that a residential unit in a luxury building across from the East River and Carl Schurz Park was being used for storage. Now, how decadent is that?

But then again, after watching a replay of Disney's 1991 blockbuster, "Beauty and the Beast," who wouldn't agree that household items--like Chip, Cogsworth, Feather Buster, Footstool, Lumiere and Mrs. Potts--only deserve the very best?

For a copy of the Court's decision in Demchick v. 90 E. End Ave. Condominium, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2005/2005_04322.htm

Posted by Robert Finkelstein, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)