The Board and the “Over Board”

Many condominiums are governed by a single board of managers. Many others, however, have “sections” and each section typically has its own board. So, for example, a residential section will have its board manage all residential issues; a commercial section board will operate and oversee commercial common elements; perhaps there is a parking board, a rental board, an office board. Depending on the structure of your condominium’s declaration and bylaws, there are many possible ways for sections to be divided. When separate boards are given power and authority for their respective sections, there is typically an “over board” – a supervising entity – that determines issues that affect the entire condominium.

More often than not, the commercial board doesn’t care what the residential board does and vice versa, in which case there is no reason for a supervising board to be involved. In fact, in some buildings, this over board never actually has to meet, the intent being that each sectional board be permitted to operate its section with as little interference as possible. But what happens when the boards have competing interests, or simply don’t believe the other board is doing the right thing for the building?

Questions concerning board authority were addressed by the court in OA Manhattan LLC v Condo Board of Managers of Cassa NY Condominium and Residential Board of Managers of Cassa NY Condominium, located at 70 West 45th Street in Manhattan. OA Manhattan is the owner of an apartment at the Cassa New York Condominium, which has a residential board to govern the residential units and a condominium “over board” to govern the operation of the building’s residential and commercial units. The two boards had competing applications for preliminary injunctive relief. In order for a board to prevail, it would have to show that the equities balanced in its favor, that in the absence of injunctive relief the board was likely to suffer irreparable harm, and that the board was likely to succeed on the merits of its application.

The Residential Board Claims

The residential board alleged that the 2014 budget was adopted in violation of the bylaws because notices served prior to the board meeting at which the budget was adopted were improper. It therefore sought a preliminary injunction to prevent the condominium board (1) from undertaking any action against it or its residential owners relating to unpaid common charges in the 2014 budget; and (2) from implementing the 2015 budget.

From the record, however, it appeared that even if the initial meeting notices were somehow improper, the budget was re-adopted at a later meeting, which was properly called. Accordingly, the court determined that the residential board did not establish that it was likely to succeed on this claim.

The residential board also argued that the over board’s attempt to enforce common charge liens that were levied under the 2014 budget also violated the bylaws. In addition to making arguments about the notice of meeting, the residential board argued that the over board “trampled on [its] rights” as sole lien holder with the right of first enforcement. Under the condominium’s bylaws, the residential board had exclusive enforcement rights in the event of a default by a residential unit-owner, and was required to use commercially reasonable efforts to cause the defaulting residential unit-owner to cure its default.

However, the bylaws also provided that if the residential board failed to get a residential unit-owner to cure its default within 45 days after a demand was made by the over board, then the over board had the right to exercise its right to cure.

The court found that the over board did what it was supposed to do – it gave the residential board 45 days notice before it took action. Accordingly, the residential board’s request for an injunction blocking the over board’s attempt to collect money based on the 2014 budget was denied.

Now let’s look at the residential board’s request to stop implementation of the 2015 budget. The residential board claimed that the over board, by stonewalling and ignoring the residential board’s request for backup documents and information, effectively abrogated the residential board’s right to participate in the budget process. The parties submitted to the court e-mails in which the over board responded to the residential board’s concerns. The court concluded that the e-mails disproved the residential board’s claim that it lacked access to information.

Finally, the residential board argued that the inclusion in the 2014 budget of a special assessment to satisfy the 2013 budget shortfall was expressly forbidden by the bylaws. Again, the court looked to the bylaws and concluded that the plain language of the bylaws permitted collection of a prior year’s shortfall by special assessment.

The Over Board Claims

The court then turned to the over board’s requests for preliminary injunctions. The over board had alleged that the residential board, without approval by the over board, had installed new locks and issued new cards for the residential units on 20 floors, as well as the elevators leading to those floors.

Therefore, the over board’s first request for relief was for an order allowing it to access all residential units on those 20 floors of the building. Specifically, the over board argued that it was entitled to full access to the entire building, based both on the declaration and on statutory law.

The residential board argued, and the court agreed, that although the declaration provided that the over board was entitled to full access to all parts of the building, the over board had not demonstrated the other elements required for the grant of a preliminary injunction – namely, that it would be irreparably injured, or that the balance of the equities required that the court grant the relief sought.

The over board also sought an injunction requiring the residential board to comply with and correct a fire department violation that would stop residential owners from renting their apartments to transient occupants (as if in a hotel). The court looked to the bylaws, which required that there be no transient occupancy, and noted that the request for an injunction had to be denied because unit-owners are bound to comply with the bylaws. And unlike the situation with co-ops, there is a dearth of statutory law that defines the relationship between a unit-owner and a condominium board, or between the various boards. So if the sponsor of a condominium and the unit-owners amend the governing documents, they should chart their course in terms of their rights, responsibilities, and obligations to each other. We recognize that governing documents are often lengthy and dense. But it is important to remember that a court will hold parties to their obligations under those same documents..

Attorneys:

For Plaintiff: Warshaw Burstein

For Defendant Board: Gallet Dreyer & Berkey

For Defendant Residential Board: Nadel & Ciarlo