Hard Cell

May condominium unit-owners stop their board from permitting a cell tower to be installed on the roof of their building? The answer was “yes” in Kaung v. Board of Managers of Biltmore Towers Condominium Association.

Plaintiffs Rose Kaung and other residents of Biltmore Towers Condominium asked the court for an order enjoining the construction of cell towers on the roof of the residential condominium building. They sued the condominium, individual board members, and MetroPCS New York, which had entered into a 25-year lease with the condominium allowing Metro to erect and maintain eight cell towers on the roof of the building. This case challenged the board’s right to enter into the lease.

The court described the matter as a classic case of NIMBY – Not in My Backyard (or rather, NOMR – Not On My Roof). The court noted that it was not uncommon for a proposed improvement that could benefit the public generally to be opposed by those in the neighborhood in which it was to be located. Indeed, the court noted that, while the use of cell phones was ubiquitous and users were frustrated when their calls were dropped, relatively few users were interested in having a cell tower built on their property or even nearby.

The court granted a temporary restraining order to prevent Metro from proceeding with the construction of the cell towers and the parties moved for summary judgment. Plaintiffs contended that, based on provisions found in the governing documents, the board was without authority to enter into the lease without the approval of a majority of the unit-owners. Plaintiffs argued that the lease involved a commercial use of the roof and thus violated the governing documents, which required the board to maintain the residential character of the condominium. Not only did the bylaws limit the units’ use to residential uses, the governing documents provided that “the common elements shall be used only for the furnishing of services and facilities for which they are reasonably intended and which are incident to the use and occupancy of units.”

Plaintiffs also cited various studies that they contended showed the substantial health hazards posed by cellular towers to support their claim of irreparable injury and that the equities weighed in their favor.

In opposition, Metro asserted that, in connection with its federal license to provide advanced wireless services to the public in the greater New York area, it had invested millions of dollars and had plans to construct 10 rooftop wireless sites within White Plains. Metro contended that the site was essential to providing the services Metro is obligated to provide.

Metro submitted a report from its expert stating that the cell towers would comply with FCC regulations, concluding that they were safe. Metro claimed that it would be irreparably injured if it were not allowed to install the cell towers. This was because, given the time it took to obtain zoning approvals and permits and to obtain the lease, Metro would be unable to redesign the network and find, lease, zone and construct any alternative site in time for its intended launch in the first half of 2009.

Metro also attached the minutes from the board meeting held on December 6, 2007, at which the board resolved to allow the proposed cell towers to be installed. According to Metro, the only issue for the court to determine was whether wireless services were “incident to” residential uses of units, under the bylaws. Metro claimed that the cell tower was as incidental to the residential use of the units as were landlines and cable services, which were already in the building. This prior course of dealing, Metro argued, should have been determinative of the meaning to be ascribed to the provisions of the bylaws.

The board members opposed plaintiffs’ motions and cross-moved for summary judgment. According to them, the plaintiffs’ opposition was based on their subjective belief that cellular antennas posed a health risk, which was unsupported by accepted scientific evidence. The board defendants submitted an affidavit from the board president who asserted that based on his experience, the board was within its rights to enter into the lease since the board had previously entered into leases involving the common elements of the premises which generate revenue (i.e., washers and dryers, XM Satellite Radio for antennas to be placed on the roof, and an agreement with Verizon FIOS for equipment to be installed in common areas).

The board defendants argued that the board had the authority to enter into the lease and the Business Judgment Rule governed its action. Because the board was empowered to administer the affairs of the condominium, including the management and control of the common elements, it was within the board’s province to determine, under the bylaws, whether the placement of the cellular towers was “reasonably suited and ... incident to the use and occupancy of units.” According to the board defendants, the roof cellular antennas were reasonably suited for placement on the roof since the roof already housed similar items (e.g., air conditioner towers, roof antenna, elevator equipment room, roof fans), the roof had not been used for any residential purposes, and the residents were not permitted on the roof.

The board insisted that the condominium’s house rule seven specifically addressed the authority of the board to approve the placement of the cellular tower on the roof since it provided “No... radio or television aerial shall be attached or hung from the exterior of the Building ... except as shall have been approved in writing by the Board of Managers or the managing agent or the manager, which approval shall not be unreasonably withheld....” To support their decision that the lease would be incident to the residential use of the buildings, the board defendants argued that it would generate more than $270,000 in revenues.

With regard to the individual liability of the board members, the board defendants argued that the complaint was devoid of any factual allegations that they acted in their individual capacities and, therefore, that the Business Judgment Rule protected them from individual liability.

The court discussed the seminal case of Levandusky v One Fifth Ave. Apt. Corp., which addressed the standard of review to be applied to decisions made by condominium boards and which sought to minimize judicial interference with decisions of boards.

The court explained that the bylaws were a contract between the unit-owners and the board. Thus, the provisions of the bylaws controlled whether the board had the authority to enter into the lease. The court did not agree with the board defendants’ claim that the board was empowered to enter into the lease by house rule seven. That rule regulated the behavior of unit-owners by preventing the marring of the exterior appearance of the building by a plethora of aerials protruding from the residents’ windows. The provision was not related to whether the board could allow installation of a cell tower.

The bylaws limited the uses to which the common elements could be put, stating: “The common elements shall be used only for the furnishing of the services and facilities for which they are reasonably suited and which are incident to the use and occupancy of the units.” Thus, the crux of this action was an interpretation of the provisions restricting the uses to which the residences and common elements could be put.

To the extent that the board defendants argued that the cell antennas were reasonably suited for placement on the roof, the court agreed. The real question was the second part of the two-part test – whether the use was incidental to the use and occupancy of the units.

The court explained that the word “incident” was defined as “something contingent upon or related to something else” and “incidental” as “of a minor, causal or subordinate nature.” Metro argued that it meant “something dependent on or subordinate to something else of greater or principal importance.” Defendants argued that the cell towers would be incidental to residential use because (1) 17 percent of the property owners did not use landlines anymore, and (2) the revenues generated by the lease would be used to reduce the amount the unit-owners had to pay towards the condominium’s future maintenance of the common elements. The court found these arguments without merit.

As to the first contention, the only support submitted was an article from the New York Times which itself relied on a Nielsen survey. Further, the 17 percent figure was for American households, not households in White Plains, and, not households at the Biltmore. More importantly, there was no evidence that Biltmore residents were presently unable to use cell phones from their units.

Regarding the second contention, the fact that the lease would generate revenues that would offset future maintenance expenses did not warrant a conclusion that the cell towers were incident to residential use. If Metro’s reasoning were accepted, then any revenue-producing activity anywhere in or on the building would be incident to residential use. Moreover, the subject use must be incident to the use of the units – not incident to the financial betterment of unit-owners.

The board defendants’ arguments, based on historical examples, fared no better. It was customary for multi-unit dwellings to have a laundry room where washers and dryers were located for residents to use.

Likewise, the board’s permission to allow Verizon FIOS – an internet service – to install equipment in the common areas was an incidental, residential use. The installation of a satellite radio receiver on the roof so as to permit residents and those within the receiving parameters of the building to have satellite radio reception was also incidental to residential use. Furthermore, unlike the existing equipment found on the roof of the premises which was required to be placed within a close vicinity in order for the unit owners to enjoy the services, and, therefore, incident to or ancillary to the residential uses, the cell towers did not have to be on the building in order to provide, or improve, service to the unit-owners.

Ultimately, the court found that Metro’s placement of cell towers on the roof, for the purpose of becoming a provider of wireless communications to a vast area of White Plains could not be said to be “incident to” the residential use of the units, particularly where there was no evidence that the residents lacked cell service or had complaints about the quality of the cell service.

Further, the substantial rental payments that Metro was willing to make to the board in return for its placement of the cell towers combined with the revenues Metro would receive supported the conclusion that the lease was commercial and not incidental to the residential use of the units. Thus, the court concluded that the board did not have the authority to enter into the lease.

Plaintiffs sought $1.75 million in damages based on the individual defendants’ alleged breaches of fiduciary duties by entering into the lease without proper notice to the unit-owners and an opportunity to be heard. The court explained that individual board members have fiduciary duties owed to the condominium and its unit-owners. Plaintiffs’ complaint was devoid of any specific allegations of fraud, self-dealing, or other wrongdoing that would support a finding of individual liability. Indeed, the only acts alleged were that the board members incorrectly construed that they had the authority to enter into the lease. Such a claim could not support a breach of fiduciary duty.

Plaintiffs also sought a mandatory injunction removing the current board members from their positions on the board based on their alleged breaches of fiduciary duty (i.e., ignoring the provisions of the bylaws and disenfranchising the unit-owners by not putting the issue to a vote). The court found that this did not state a claim upon which relief could be granted. The board defendants’ acts, while mistaken in the sense that the court disagreed with them, were not illegal or fraudulent and, in any event, provisions for the removal of the directors could be found in the bylaws.

Comment: We are once again faced with a situation where the courts look to the precise language of a condominium’s bylaws to establish the rights and responsibilities of the condominium and its unit-owners. Here, the bylaws did not permit the board to enter into a cell tower lease because the court found that the tower was not “incidental” to the residential use and occupancy of the building, as required by the bylaws.

However, the court also held that – notwithstanding the board members’ incorrect interpretation of the by-laws – the board members’ decision to enter into the lease that allowed the cell tower to be installed was not actionable. The board members entered into the lease in accordance with their business judgment and their failure to properly interpret the document did not form the basis for a cause of action against them.

Counsel in the Case
Attorneys for Plaintiffs:
Danzig Fishman & Decea
Attorneys for the Condo Defendants:
Marin Goodman
Attorneys for the Metro PCS
Defendants: Cuddy & Fedder