Your Health Club Agreement Might Need a Workout

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 amend the rules at any time, and those amended rules are binding on all unit-owners.

The court rejected Oriogun’s claim that he had a personal, vested right to use the health club facility. Oriogun also 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 bylaws.” 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.

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. And there can be no business judgment protection when violating a statute.

Limiting Liability
The General Obligations Law (GOL) is clear. If an agreement between a gym operator and user of the gym allows the operator to receive a fee or other compensation, the agreement cannot exempt the operator from liability for damage caused by the operator’s negligence. The court determined that the “hold harmless” provision in the Hampton House 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 he signed the new membership agreement.

The Takeaway
When a building wants to offer health club facilities to its apartment owners, it is important to 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. It is therefore important that these agreements be drafted carefully.