Garage sale? You’re Busted

May a condominium board impose a fine on a unit-owner for creating what it viewed as a nuisance where it had no specific authority to impose a fine? In Blumberg vs. Albicocco, the plaintiff contended that the fine imposed upon her by the board that governs “the little democratic sub-society” that is her condominium was not only unwise, but illegal.

The defendants, individual members of the board of directors of the Landmark Colony at Oyster Bay Homeowners Association (HOA), and the association itself, applied to the court for an order granting them summary judgment dismissing the complaint and awarding them $4,237.60 plus interest costs and disbursements on their counterclaim. Plaintiff Diana Blumberg, the owner of a home within the Landmark Colony at Oyster Bay, opposed the motion.

The Landmark Colony is a 33-unit condominium comprising eight buildings, the first public offering of which was held in 1979. Blumberg and her husband at the time purchased Unit 14, Adams Court, in 1982. Under the Declaration of Covenants, Restrictions, Easements, Charges, and Liens, each unit-owner is a member of the Landmark Colony at Oyster Bay Homeowners Association (the declaration). An undated document, “By-Laws of Landmark Colony at Oyster Bay Homeowners Association, Inc.,” was presented to the court as the bylaws by which the homeowners association, a not-for-profit corporation, was governed.

The complaint alleged that on March 20 and 21, 1999, Blumberg conducted a garage sale at 14 Adams Court. Although Blumberg’s answer admitted this allegation, both the HOA and Blumberg referred to a garage sale on June 20 and 21 of 1999. The complaint further alleged that Blumberg was thereupon fined $250 for each day of the garage sale, or a total of $500, for violating Article XI(d) of the Declaration.

That provision stated: “No nuisance shall be allowed upon the property, nor shall any use or practice be allowed which is a source of annoyance to residents or which interferes with the peaceful possession and proper use of the property by its residents.” Although the HOA’s answer denied this allegation, defense counsel averred that, “the HOA modestly fined Blumberg $250 per day, for a total of $500 for creating the nuisance and annoyance.” Blumberg refused to pay the fine, and in her first cause of action, sought a declaration that the imposition of the fine was null and void. In her second cause of action, Blumberg sought a declaration that the lien filed against her unit arising out of the fine was null and void.

The subject matter of the third and fourth causes of action was a claim that the HOA had failed in its duty to maintain and repair the common areas associated with the Blumberg unit. The third cause of action sought a mandate that such maintenance and repair work be done, and the fourth cause of action sought an award of punitive damages premised on Blumberg’s contention that the HOAs’conduct was motivated by bad faith. Finally, as a fifth cause of action, Blumberg sought an award for the attorney’s fees she had incurred. The HOA’s answer, in addition to denials and defenses, included a counterclaim for $4,237.60 for homeowners’ dues, common charges, and late fees.

The court cited Levandusky vs. One Fifth Avenue Apartment Corp. where the Court of Appeals not only employed the oft-quoted description of a cooperative or condominium association as, “a little democratic sub-society of necessity,” but further characterized it as a “quasi-government.” Fleshing out this analogy, the Court of Appeals said: “Through the exercise of this authority, to which would-be apartment owners must generally acquiesce, a governing board may significantly restrict the bundle of rights a property owner normally enjoys. Moreover, as with any authority to govern, the broad powers of a cooperative board hold potential for abuse through arbitrary and malicious decision-making, favoritism, discrimination and the like.”

While it acknowledged the potential for abuse of power, the state’s highest court found that the standard to be applied for the review of co-op or condo board actions should be modeled on the elastic Business Judgment Rule from the corporate sphere. Those purposes were stated to be “protection of the interest of the entire community of residents in an environment managed by the board for the common benefit.”

Before reviewing a condominium board’s exercise of any power under the business judgment standard, however, the court said that it must first make a determination as to whether the board in fact possessed the power it purported to exercise. After all, it said, no democratic principle is more fundamental than that all governments ultimately derive their powers from the consent of the governed. Thus, the power claimed by the board must either be granted by statute or derived from the declaration or the bylaws of the condominium.

The court examined provisions of the New York Condominium Act (Real Property Law, Article 9b), which provided that the operation of the condominium property “shall be governed by bylaws, a true copy of which shall be annexed to the declaration. No modification of, or amendment to, the bylaws shall be valid unless set forth in an amendment to the declaration and such amendment is duly recorded.” The bylaws may impose such restrictions on and requirements respecting the use of units; “as are designed to prevent unreasonable interference with the use of their respective units and of the common elements by the several unit owners.” The bylaws may be amended upon a sufficient vote of the unit-owners.

The court said that, while a validly adopted bylaw banning all garage sales within the condominium would be sustainable under the Business Judgment Rule, no such bylaw was in effect at the time Blumberg held her garage sale. Rather, the HOA contended that the holding of a garage sale violated the above-quoted portions of the declaration that proscribed any “nuisance” and “any use or practice...which is a source of annoyance.”

The court reviewed the meaning of “nuisance.” It determined that, as a general term, it describes the consequences of conduct – the inconvenience of others – rather than the type of conduct involved. An element of a private action for nuisance was that the inconvenience caused by the conduct complained of be substantial. To prosecute a private claim for a public nuisance, a plaintiff must prove particular damage resulting from the public nuisance. There was no evidence that the garage sale either substantially inconvenienced other condominium residents nor caused them particular damage. While these deficiencies would pose no obstacle to the enforcement of a specific bylaw prohibiting garage sales or an appropriately adopted resolution by the board of directors defining garage sales as a nuisance, the court said that no such bylaw or resolution existed at the time in question.

There was no evidence that two members of the board had warned Blumberg that a garage sale constituted a prohibited nuisance and that they were authorized by the board to relay such warnings.

The complaint alleged that the HOA failed to provide certain maintenance and repairs for Blumberg’s unit. The performance of repairs and maintenance were matters well within the authority of the HOA board to which the Business Judgment Rule applied, said the court. It said: “So long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith, courts will not substitute their judgment for the board’s.”

The HOA had offered sworn testimony that maintenance and repairs were done on an “as needed,” non-discriminatory basis and sometimes performed at the discretion of the workman employed to perform the task. In her affidavit in opposition, Blumberg specified three items that she claimed demonstrated the board’s bad faith. She claimed: “There has been no trimming of her bushes that are under 12-feet-high, nor has there been lawn maintenance.”

However, what she relied upon as an admission by the HOA referred to the spraying of trees, not trimming. The court noted that Blumberg somewhat disingenuously claimed that her unit had never been painted, but later states: “... when it was painted during the course of this litigation in 2005, no steps were taken to repair the rotted wood.”

With regard to the rotted wood, Blumberg offered no grounds for her assertion that such a condition should be the responsibility of the HOA. Article IX, Section 2, of the declaration made individual unit-owners responsible for maintenance “not otherwise directed by the provisions of this Declaration to be performed by the Association...

Finally, the HOA acknowledged that Blumberg’s driveway was in need of repair and was one of five units awaiting such repairs. Blumberg neither alleged nor offered any evidence that those driveways resurfaced before hers were not at least equally in need of repair.

The HOA’s motion for summary judgment dismissing the first and second causes of action was denied and the court granted summary judgment to Blumberg on these causes of action. The court declared that the action of the board of directors imposing a fine premised on the garage sale was null and void, as were all subsequent actions intended to collect and enforce the fine. The HOA’s motion for summary judgment dismissing the third, fourth, and fifth causes of action were granted and such actions were dismissed.

Comment: This case is consistent with a number of prior co-op and condo decisions holding that a board’s power to fine a cooperative or condominium unit-owner for not paying or other objectionable conduct must be expressed in the governing documents of the entity – usually the proprietary lease or bylaws –- and will not be implied by the court. The solution is to amend the governing documents by the requisite vote of unit-owners to give a board the power to fine in specific instances.