The Dangers of the Buildingnet

So you want to put in that cool new building-wide communication system? Your feeling is that anything that improves communication with the owners is beneficial.

Well, yes. But be warned: there is also a serious issue involving such systems, an issue that could come back and bite you. We’re talking liability. Big time.

This concern arose earlier this year, when the board of a large condominium that I have represented for years decided to improve its connection to the unit-owners by signing up for one of these systems, installing it in the building, and allowing unit-owners to use the system by posting information to their co-owners.

It seemed like a great idea until the site became a source of not only useful information but also of derogatory statements by several of the owners. It is important to note that anything appearing on an open communications network that the cooperative or condominium supports and that is distributed to the residents could be libelous and place the property in jeopardy.

Libel is a written defamatory statement, while slander is spoken. Something is defamatory if it is a false statement that places the person in a negative light and the person who said it or wrote it made no reasonable attempt to learn if the information were true or false. Possibly libelous material may have been distributed by unit-owners before the new communications system was introduced, but if it was distributed by the author and not through the auspices of the co-op or condo, then the cooperative or the condominium would not be involved and would not be subject to damages for libel.

However, the introduction of a building-wide communications system, which is seemingly under the control of the condominium, changes the risk. The problem in 2014 (and future years) is that the condominium now participates in the system, which is made available by the co-op or condo to the shareholders or unit-owners, which means that the co-op or condo can be sued by the individual who is libeled. Since the co-op or condo controls the means of dissemination, it could be held responsible and liable for damages to anyone who is libeled by material distributed via the system.

I would strongly urge boards to limit the material that can be distributed on the communications systems; or make the author indemnify the co-op or condo, the board, the managing agent, and the shareholders or unit-owners; or appoint someone as editor of the system to review all material for potential abuse. Although the latter may seem to be censorship, it is not, because that person would just make certain that any statement is absolutely accurate. In other words, this is no different from when a fact-checker from The New York Times or New York magazine calls people who are being quoted in a story to confirm the accuracy of their remarks. In essence, your co-op or condo is becoming a media company. You must protect yourselves from risk.

Moreover, the risk is magnified by the potential liability that the cooperative or condominium has to the owner of the communications system. For example, a review of one system’s agreement with the condominium I represent provides the following indemnifications provision:

“6. INDEMNIFICATION. You agree to defend, indemnify, and hold harmless [COMPANY] and its employees, contractors, officers, agents and managers from all liabilities, claims, and expenses, including attorney’s fees that arise from your use of the program. [COMPANY] reserves the right, at its own expense, to assume the exclusive defense and control of any matter for which you are obligated to indemnify [COMPANY]. If [COMPANY] chooses to assume the defense of any matter that is subject to indemnification by you, you will cooperate with [COMPANY], at its expense, in any respect reasonably requested by [COMPANY].”

In other words, the co-op or condo has to pay the costs of defending the communications service if it is sued because of something that a shareholder, unit-owner, or third party sends over the communications system.

Accordingly, the co-op or condo that utilizes any such service can both be liable to the libeled shareholder or unit-owner and is also indemnifying the communications service. Moreover, if the plaintiff names the service as a defendant, the cooperative or condominium still has to pay the defense costs if the statement is not libel. Therefore, if you choose to have a communications system that your residents can use to broadcast their personal gripes, you should alert your insurance carrier as soon as possible.