FINING CO-OP SHAREHOLDERS, P.2

For some boards, using that club has been downright disastrous. Bruce Cholst, an attorney and partner at Rosen Livingston & Cholst, is litigating a case on behalf of an upstate condo owner who distributed letters critical of the board. The letters charged that the building's reserve fund is not empty, as claimed by the board, but actually contains $36,000. For making what it regards as "baseless attacks," the board slapped the unit-owner with four fines of $100 apiece — then added $3,000 to his common charges to cover lawyer's fees. The unit-owner sued the board, seeking dismissal of the fines and charges.

"The board has no fining authority in the original bylaws," says Cholst. "They do have authority to fine for breaking house rules and failure to pay common charges. But even that's through a board resolution — not from a supermajority of unit-owners."

Some people think fines are misguided. "Fines don't control behavior, and they don't create harmony," argues James Samson, a partner with the law firm Samson Fink & Dubow. "If a problem is so great, you ought to deal with it instead of slapping a $25 fine on the guy. I don't like the fact that these controls on the quality of life are turned into revenue producers. In a condo, you need fines. But in a co-op, if you do it right, a person risks losing his apartment for his behavior. You send a default notice and he has to go to court to stop you. He has to prove his case."

Castle Village's Fingerhut begs to differ. "I'm in total agreement that you shouldn't have to impose fines," he says. "But that's naive. There is no way short of hitting them in their pocketbook to make some people behave."

"Imposing fines has got to be done right," Cholst says. "Otherwise it's unenforceable and it will actually spawn litigation."

Adapted from Habitat May 2010. Join our Archive >>