Somewhat surprisingly, our attorney told us that the board cannot vote to impose monetary fines, whether by altering the by-laws or otherwise. Such a fine would be considered a material term of the proprietary lease, and most leases can only be modified by a supermajority vote of shareholders (2/3 of shares, in most cases).

Your proprietary lease may be atypical - and you should check - but it would be very unusual for the board to have the power to amend the lease in any way. And they certainly can't vote to give themselves a power they don't have! The by-laws, however, can typically be amended by the board alone, but not if the changes exceed the scope of the board's authority. "All shareholders must paint their apartments entirely in purple."

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Your lawyer is right and wrong at the same time.

House rules such as a late fine for not paying maint on time etc the average owner does not know in a court of law you cant enforce it. We charge them, put them on the bill and folks pay them.

It is time consuming to do a 2/3rds vote and then to update your by-laws require legal fees and a trip to Albany. Meanwhile 90% of time it is not necessary.

Your lawyer is spliting hairs. You can set up"house rules" the question of whether legally you can enforce them is a different matter.

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CondoGuy1, you're right that a board might get away with instituting a fine that can't be legally enforced. The board might even get shareholders to pay fines that they aren't obligated to pay. But it looks really bad if the board gets caught exceeding their authority, especially if they *knew* they had no right to impose those fines. And even if the fines were enacted with the belief that they were okay, it's still pretty embarrassing if the truth comes to light.

There have been numerous cases where boards passed seemingly reasonable fines in good faith, and had to back down when they were challenged. This doesn't instill confidence in the board, and undermines shareholders' perceptions of the fairness and competence of the board.

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A postscript to my own posting -

I do agree that token fines for objectively clear misdeeds aren't going to raise many hackles in practice. No one really objects to a small late fee for an overdue maintenance payment, for example, especially since the board *is* entitled to interest in that case.

The problem is imposing larger fines, or enacting fines for more problematic areas such as violations of house rules. Someone who's a big enough jerk to regularly violate house rules isn't going to fork over a fine without a fight. And unfortunately, they'll win the argument about the fine, possibly undermining the board's legitimate argument about the house rule in the process.

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OP here.
I'm familiar with the North Broadway Estates decision holding that a Board may not amend House Rules to create fines. But, have other courts reached the same decision? Did this rule survive Levandusky?

Also -- In my case, the Board would not be using its authority to amend the House Rules, but the authority to amend the By-Laws. It's one thing to say that a Board's authorization to amend House Rules is not sufficient to allow the Board to impose fines. But the By-Laws are one of the core governing documents. If the Board is given the authority to amend it, why can't it exercise that authority under the BJR to impose reasonable fines?

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No, Levandusky doesn't give the board the authority to impose fines. One of the prongs of Levandusky is that the Business Judgment Rule (BJR) only protects the board's actions if they are acting within the scope of their authority. They can't create new powers they don't have.

It's true that the by-laws are a core governing document, but they don't trump the lease. A board's inability to impose monetary fines is a special case of a larger issue: the board can't change any material term of the Proprietary Lease. That can only be done by shareholder vote, in the case of most leases.

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We have an inefficient, and ethically questionable President and Secretary of the Board already for 15 years; The Board is making constantly wrong decisions and doesn't like to be questioned. I am highly surprised reading all your comments, how most of the shareholders have access to some information that in our Building we do not even heard about. For example "Contracts", once my husband who is an attorney asked in one of the annual meetings about a specific contract which was a disaster, and the President said "me" my husband asked: "did you read it? his answer was: "no" and there are so many examples. Eventually, there are some of us that want to do something to change this situation. Do you have any suggestion?

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