Legal Liability

“I think most of the lawsuits are going to be based upon one of two things,” says David Berkey, a partner at the law firm Gallet Dreyer & Berkey. “Either the board members were negligent in their actions, or the board members breached their fiduciary duties to their shareholders or unit-owners because they didn’t maintain the building in an appropriate way to preserve its value and its safety. If, by reason of the (board’s) inability to control the staff and what is going on in the building, some people are subjected to COVID-19 and, God forbid, contract it, those people are going to make claims.”
The seeds of this liability may be that old board nemesis: money. New York co-op and condo residents are among the millions of Americans who find themselves suddenly out of work. If unemployed residents have trouble paying monthly maintenance or common charges, boards are quite likely to feel the squeeze of declining income. The temptation to cut corners – or to cut people slack – could prove disastrous.
“A lot of boards now are being confronted with people who say they can’t pay, and boards don’t know how to respond to this,” says Julie Schechter, a partner at the law firm Armstrong Teasdale. “It’s especially difficult when it’s your neighbor who you’ve known for 20 years, and you want to cut them a break. But the building still has to pay for real estate taxes and probably an underlying mortgage, so if a board waived maintenance or common charges without coming up with a payment plan, that could rise to a breach of fiduciary duty.”
Beyond exercising fiscal responsibility, the most pressing task for boards – and the one they will be judged most harshly on – is keeping their building as disease-free as possible. Most boards have already ramped up cleaning and disinfecting schedules and closed community rooms, gyms and other common areas where residents might congregate. Except one.
“The one thing that really has to remain open are laundry rooms, because people still need to do their laundry,” Schechter says.
Robert Ferrara, the president of the Ferrara Management Group, agrees: “You want people to be able to wash and disinfect. So we’ve put up notices with recommendations about what people should do. One, don’t have too many people in the laundry room. Some of the properties are limiting the number of people who can be there at one time, or they’re asking people to put their clothes in, leave the laundry room, and time it as best they can and come back.”
Other buildings are designating certain days of the week for different floors to do their laundry, or they’re leaving laundry rooms open around the clock to encourage residents to spread out their washing and preserve social distancing.
While such good-faith measures are not fail-safe, they can protect residents from infection and boards from legal liability. The key is to take prudent preventive measures and stick with them. Don’t disinfect once; disinfect repeatedly. Don’t let delivery workers wander the hallways. Don’t let people congregate in the lobby or other common areas.
If preventive measures fail and a resident or staff member tests positive, the board’s true test begins. Attorneys agree that if the board is informed of a confirmed case of COVID-19 in the building, careful communication is key to preventing additional infections and legal liability.
“Our recommendation is to send a general letter to all residents when you know of an infected person,” Berkey says. “It should say, ‘In our building there is at least one person who is infected or has self-quarantined. These are the procedures we strongly recommend you follow in order to maintain safe and healthy practices.’ And then outline what you believe people should be doing. I wouldn’t divulge the names or the apartment numbers unless you get consent, because I think that’s an invasion of people’s privacy.”
Residents are not required to disclose their health status to a co-op or condo board. But boards should encourage residents who are infected or self-quarantining to inform the board confidentially. “We have found that people have been pretty forthcoming,” Schechter says. “We’re not seeing anyone’s test results, so a lot of the times that you hear that someone tested positive, it may be hearsay. There are HIPAA (Health Insurance Portability and Accountability Act) rules, and there are harassment laws that you have to worry about. You don’t want to be identifying anybody in a way where there could be backlash, but you do want to let people know. When we alert the people that there’s somebody in the building who tested positive, we remind everybody to follow the CDC’s (Centers for Disease Control and Prevention) regulations. Because the truth is, even if we were to identify the person, the response would be the same: Wash your hands, and stay inside.”
Many New Yorkers fled the city when the pandemic first hit. Some boards and their professionals are wondering if their communities will ever get stitched back together after the pandemic has passed.
“I’m surprised how many people just left,” says Helene Hartig, head of her eponymous law firm. “I think the big issue is going to be: Who’s going to return, and who’s not going to return? Apartments have been taken off the market. Are those going to be put back on the market? Are people breaking their leases in the middle? Is life ever going to get back to normal? And if it does, what’s going to be the fallout? I mean, we just don’t know right now.”
She believes there is one thing we do know: “Buildings are going to have a lot of challenges in the months to come.”