Look Who

Depending on which side you're talking to, the concrete pier erected by a resident at Edgewater Point, an exclusive 28-family housing association on the shores of Long Island Sound in Mamaroneck, is either a step up from what was previously accepted by the board or is a towering monstrosity. Either way it is described, one thing is certain: rather than preventing waves it has caused them. A single complainant has filed nine lawsuits since the pier went up in 1999, dealing with a number of related and unrelated issues. The most interesting and pertinent suit was filed against the board of the HOA by the angry resident demanding that the board take action against the pier's owner.

Suing the board so that it will sue a resident? Sound like an unusual step? It is. But these aren't exactly usual circumstances. This is a 14-acre site with homes in the $10-$15 million range. That sort of expense creates a certain amount of expectation. For the litigant, the expectation is that he paid that sum of money so that a board of directors would uphold the restrictions in the community. For the board defending itself, it is more along the lines of the homeowners being entitled to as much freedom and privacy as they wish inside their own property. Have a problem with a neighbor, deal with the neighbor. Have a problem with a pothole in the street, see the board.

Who is right? That's not an easy one...

THE CRUMBLING PIER

The problems started in 1992. After that year's big storm, a wooden pier jutting out into the bay had taken its last abuse. The homeowner at the time, wishing to fix the pier, had plans drafted and reviewed by various government agencies and the board of Edgewater. The plans were accepted, but then Dean and Elizabeth Kehler moved in. According to William Mulligan, the board's attorney and a partner with Bleakley Platt & Schmidt, the Kehlers had plans of their own and proceeded to "smooth over" the pier in 1999, essentially replacing the wooden structure with a concrete one that, he says, was smaller in size than the previously planned one.

Smooth isn't how the Kehlers' neighbor saw it. Developer Melvyn Kaufman complained that the concrete pier they had erected was blocking the tides and fouling his beach. "They built this 40-foot [long], six-foot high cement block," says Nativ Winiarsky, attorney for Kaufman and a partner in Kucker & Bruh. "It was redirecting water flow and it turned his sandy shorefront into a mudflat."

Kaufman wrote letters to the Kehlers complaining of the problem. When that didn't get results, he wrote letters to the Department of Environmental Conservation. When that agency inspected the pier in May 2000 and determined it had no negative effect on the coastal area, he wrote letters to the board demanding that they cure the problem. The board chose not to get involved. Kaufman then sued the village of Mamaroneck to have it do something. The judge told him he'd have to sue his neighbor instead. So he did.

Upset that the board hadn't done anything to enforce its rules against the Kehlers, he then took the step that has caused some in the industry to scratch their heads, wondering on its significance: he sued the board. He cited covenant No. 9, which states, in part, that, "No boat house, bath house, private dock, pier or landing stage or structure of any character shall be erected or maintained at or upon the shore line of any plo which has direct water frontage ... without the written consent of the said Association first obtained." The board, says Winiarsky, never approved of the Kehlers' plans.

Strangely, it seems, Mulligan agrees. The board did not approve the plans, but once the members saw what was being done and decided that it was smaller in scope than what they had approved, they chose to stay out of the dispute. What about the restrictions, though? The rules? Isn't it a board's duty to apply its rules?

Not exactly so, says the board. According to one Edgewater board member, their duties as a board deal more with public elements, such as road repair, security, a budget, and the beaches. The Kehlers' pier is on private property and thus not under the HOA's jurisdiction.

The same would hold true for two other lawsuits Kaufman filed against neighbors — one alleging a home business, and the other charging someone with running a lodging house. Rule No. 2 in the covenants states that "no manufacturing, trade or business of any kind shall at any time hereafter be erected, maintained or permitted …The term 'business' shall be deemed to prohibit the operation or maintenance of a school, hotel, or boarding or lodging house … " The association's covenants, the board member says, which date back to before 1930, provide relief in situations like the Kaufman cases in the form of homeowner — not board — action.

(Covenants are restrictions placed in the original deed. They differ from bylaws in that the board does not have the authority by itself to change or amend or add to them. They also can be enforced by either the board or the individual owners. However, covenants, which are found in condos and homeowners associations, are similar in intent to bylaws, which are used in co-ops. Both are rules used to govern the property. In applying them, though, co-op boards have the added power of being in a landlord/shareholder relationship, meaning the board can terminate or threaten to terminate the lease and evict a troublesome tenant. In condos and HOAs, there is no such relationship, therefore the only way to enforce rules is to get a court order forcing the party to comply, a much more difficult, time-consuming, and expensive process.)

"We start with the assumption that homeowners are not going to do things that would diminish the value of their homes. For us to take action against a homeowner, the offense would have to be very egregious," the director notes. "We would then act as a conduit, a vehicle for the community, if a number of homeowners brought [reports of] such a situation to us." However, as long as all the other approvals by city and state agencies are met, the board is not likely to get involved. "We are not a police force," he adds.

THE COURT'S DECISION

According to attorney Mulligan, Edgewater's covenants specifically give authority only to the individual members to enforce the covenants. There is no specific duty imposed on the association. So should an issue arise with a neighbor breaking the covenants, the remedy is in the hand of the homeowner. The Westchester Supreme Court agreed with Mulligan and dismissed Kaufman's suit against the association in May, stating:

"…this Court must agree that there is no 'duty' imposed upon defendant Edgewater to enforce said covenant or institute any action or proceeding at law…against any person violating or threatening to violate any of the restrictive covenants. Rather such right inures to the individual owner of the property."

Not surprisingly, Winiarsky says the court has got it all wrong and is appealing the decision. "The Westchester Supreme Court, in two short innocuous sentences, destroyed the very purpose, function, value, and integrity of every cooperative, condominium, property owners association, homeowners association, and like organization throughout this state," he claims. "The simple fact is that an association's instruments, including the bylaws and the covenants and restrictions, are a contract that govern the legal rights between the association and its members. If this commitment is ignored or breached, then the very fabric of the community is threatened with unraveling. In allowing the board to shirk away from its considerable responsibilities, and encouraging the individual members to litigate against each other, the court has indirectly and perhaps unintentionally shaken the very foundation of every association throughout this state."

In response, Mulligan argues that such comments miss the point. "You have to stick with the documents and, in this case, they don't say what he thinks they say. You can't sue for a breach of a duty that doesn't exist. And even if the covenants did say that, we would still have the business judgment rule. When the directors do not breach their fiduciary obligation to the corporation, board decisions are beyond question."

One attorney not directly involved in the case likened Kaufman's claim to demanding that the police enforce every rule on the books, giving equal attention to jaywalkers and felons. If a board is not allowed to decide when it should act, it would be flooded with more work than it could handle.

All told, Kaufman has racked up more than $500,000 in legal fees over the past two years trying to win his point. And still, the fight continues. The court has found for the board and the homeowner defendants in all but one instance. The original suit against the Kehlers goes on. Kaufman also sought the dissolution of the association, arguing basically that, since it wasn't enforcing the rules, what purpose was it serving? This suit was withdrawn.

THE WAVES

What will be the end result of the Kaufman litigation? A "proliferation of lawsuits," according to Winiarsky. With the board not acting as enforcer, he believes homeowners will be stuck having to litigate disagreements they have among themselves. "Havoc will be created," he predicts. "This is going to have far-reaching implications." Among those, he half-jokes, are future tests to the board's philosophy of how it should act, such as Kaufman putting up a pizza parlor or hotel and seeing what the board does. Will it act or leave it to homeowners to litigate?

Mulligan and the board representative disagree that their actions will lead to a flood of litigation. Pointing out that several other disputes in the past few years have all been resolved amicably among the homeowners, the board member says the other members have no intention of changing how they act as a board. And unless an appellate court tells them they must, they don't have any need to. Whether the court's decision will ripple into the co-op world — and the onus of enforcing bylaws suddenly handed to shareholders — remains to be seen. Also awaiting a future verdict is whether the decision may somehow give license to selective enforcement. Only time, and future litigation, will tell.