An Unhealthy Health Club Agreement?

You have used your condominium’s health club facility for years when your board changes its required membership agreement. You refuse to sign it, so the board denies you access to the club. Does that constitute a violation of the bylaws? What about the Condominium Act? Or did the board overreach in the language of the agreement so that it was in violation of another statute? Those are the questions that brought the parties to court in John Oriogun v. Board of Managers of Hampton House Condominium and Hampton House Condominium.

Background

Hampton House, located at 404 East 79th Street in Manhattan, has a health club facility within the common elements of the condominium. The board used a membership agreement that it periodically reviewed and amended. The agreement, among other things, required the person using the club to assume responsibility for injury. In other words, if you hurt yourself working out, it was your responsibility and not the responsibility of the condominium.

In September 2011, the building underwent an elevator upgrade so that a key fob system was installed. When John Oriogun, a unit-owner in the building, sought to obtain a key fob to the health club floor, the board told Oriogun that he had to first sign the membership agreement, which contained a liability release. Oriogun sued, alleging, among other things, that as a unit-owner, he had the right to use the area; that the board had no right to modify the membership agreement; and that the agreement was improper because it required a full and complete waiver of liability.

Bylaws and the Condominium Act

The court first looked at the question of whether the membership agreement was proper under the condominium’s bylaws and the Condominium Act. The court was clear – the board had the right to unilaterally modify the contractual relationship between the board and unit-owners in such a situation. The bylaws specifically allowed the board to adopt administrative rules and regulations concerning the common elements, and the health club was within the common elements. In fact, the board had the right to amend the rules at any time, and those amended rules are binding on all unit-owners.

The court specifically rejected Oriogun’s claim that he had a personal, vested right in the use of the health club facility that created a basis for his individual contractual negotiation with the board.

Oriogun then claimed that the board was in violation of the Condominium Act, which states that “[e]ach unit owner may use the common elements in accordance with the purpose for which they were intended... but this subsection shall not be deemed to prevent some unit or units from enjoying substantially exclusive advantages in a part or parts of the common elements as expressed in the declaration or by-laws.” The court found that the board’s action was precisely in compliance with this section of the Condominium Act – the statute does not require that unit-owners have “absolute access to all common elements.” On the contrary, the court found, some unit-owners are allowed to enjoy “substantially exclusive benefits.” In this case, unit-owners who signed the agreement with the liability release were granted an exclusive advantage in that they could use the health club.

As to the bylaws and the Condominium Act, the court ruled that the board acted within its authority and within its business judgment except to the extent that the board violated the General Obligations Law – there can be no business judgment protection when violating a statute.

General Obligations Law

The General Obligations Law (GOL) is clear. Any agreement between a gym operator and user of the gym in which the operator receives a fee or other compensation exempting the operator from liability for damage caused by the operator’s negligence is void and unenforceable. The court determined that the “hold harmless” provision in the membership agreement violated the GOL provision and was void; however, the court did not to reject the entire membership agreement. Instead, it directed the board to remove the hold harmless provision. Once removed, the board was to release a key fob to Oriogun, provided that he signed the new membership agreement without including the offending provision.

The Takeaway

When a building wants to offer health club facilities to its apartment owners, it is important to consult insurance professionals, have them review maintenance contracts for equipment, and draft waivers, releases, and see that documents generally comply with the building’s governing documents and with applicable law. The GOL provision at issue here specifically provides that any waiver of liability as a result of the negligence of the operator of the gym – whether the condominium or a third-party operator – is void. We have seen cases where a failure to carve out negligent acts of the operator – or in the case of other GOL provisions, the owner of a premises – renders the entire provision void, so that even if the owner/operator was not negligent, there will be no enforceable waiver of liability. It is thus important that these provisions be drafted carefully.

We note that the GOL provision, however, requires that some payment be made in consideration for using the gym facility. We presume Hampton House requires a payment, but do not know how the court would address the issue if maintenance or payment to the gym were merely a budget item in common charge calculations.

Further, it appears as if the court in this case determined that the hold harmless provision be removed. We do not know what would happen if the provision were merely redrafted to comply with the GOL by carving out the negligence of the operator.

Attorneys For Plaintiff: Law Offices of Obayomi Awoyinfa

For Defendant: Law Offices of Charles J. Siegel