Steven Sladkus, Wolf Haldenstein Adler Freeman & Herz

Wolf Haldenstein Adler Freeman & Herz, Partner

Steven Sladkus

The client’s tale. Our firm represents a board of managers at a residential condominium building in downtown Manhattan that was forced to address repeated rule violations by one of its unit-owners. The woman was running a short-term rooming house at the condominium, renting out the unit for days or weeks at a time to transients who came and went while the unit-owner actually resided elsewhere.

Upon first learning of this conduct, which violated both the condo’s bylaws and the New York Multiple Dwelling Law, the board circulated a building-wide notice reminding all residents of the restrictions against short-term rentals and that fines would be imposed against anyone who committed a violation. When this notice proved ineffective and the unit-owner continued renting, the board then asked us to send a “cease and desist” letter to her, hoping it would persuade her to stop engaging in short-term rentals.

Even after our letter was met with vitriol, the board was still wary about starting an action against a member of its community and spending legal fees to do it. The turning point came when the board’s examination of a lobby log book and video cameras revealed that the unit-owner’s short-term rental business was posing an imminent threat to the safety and security of the residents of the condominium, as it allowed for a daily flow of undocumented strangers through the lobby and hallways and into and out of the unit. (The occupants also asked the concierge of the building how they could get “fresh towels and soap” as if they were staying in a hotel.) At one point, the police were even notified when the transient guests began smoking marijuana and becoming unruly.

The lawyer’s take. Normally, a board’s “sugar over vinegar” approach may yield a much better result with problematic unit-owners. That said, when the method does not work and there is also a significant risk, the board has a fiduciary and contractual duty under the bylaws to enforce its rules. Thus, this initially reluctant board eventually concluded that it had to act, commit funds to the process, and stand firm. The board ultimately succeeded and the unit-owner stopped the short-term rentals.

Another side lesson is to amend the bylaws to permit recovery of legal fees in cases where any action is taken, not just the start of a legal action. Most bylaws only permit such recovery when a board is seeking to recover unpaid common charges or assessments. This amendment provided for recovery of legal fees for any breach of the bylaws, which may further discourage short-term rentals or other bylaw violations.

Case closed. Many of our clients are reluctant to strictly enforce the governing documents of their buildings for fear that enforcement may either cost too much money or cause unrest in the community. Rules, however, whether in a cooperative or condominium, exist for a reason: to help maintain order within the building and its community and protect the economic interests of its shareholders and unit-owners. A hard lesson may be learned if a board turns a blind eye to a violation of the rules – especially when the security of residents is at stake.