HABITAT
Courts Letting Board Members Be Sued
Sharon Grubin and Deborah Lans, owners of an apartment at The Gotham Condominium, sued the board, individual board members and the managing agent over defects they said had plagued them 2004: a defective security system; holes in the walls from the board's failed attempts to repair the security system; buckling and deteriorating floors that had been inadequately corrected with non-matching wood and dangerous wood panels; inadequate heat; dirty tap water; damage to the walls, floors, and terrace railings; and a non-functioning air-conditioning unit.
Grubin and Lans claimed that the board had agreed to repair the conditions but did not do so. They also complained that because of exterior repair that the building underwent he contractors and others used their terraces as a staging area and scratched, dented, and severely damaged the terraces. Workers left coffee cups and garbage on the terraces. Grubin and Lans asserted that, as a result of these conditions, they could not use the terraces for two years, nor use their bathrooms from 8 a.m. to 5 p.m. because workmen were watching them. While the workers put up a blue tarp to give them privacy, the tarp was frequently blown down. The workmen left the stairwells to the terraces unlocked, creating a security problem. And the condo board allowed the workmen to leave without repairing the damage to the terraces or cleaning the terraces.
Further, Grubin and Lans complained of continuous leaks in the kitchen and dining room during rainstorms, which they said the defendants knew were caused by structural defects in the roof flashing that the board had just blithely spackled.
When Board Members Lie
Grubin and Lans asserted they didn't sue earlier because the condo boards had agreed to fix the terraces and the apartment after fixing the roof. But as that roof project continued, Grubin and Lans found that the terraces were being further damaged, as portions of the terraces that had not been damaged were now being bombarded with garbage, equipment, workers' clothing and debris. Further, the condo board's lawyer asked that Grubin and Lans not bring suit while counsel brought in a construction expert to take charge of the repairs.
Grubin and Lans continued to pay common charges. On October 28, 2008, the defendants wrote to Grubin and Lans and stated that they would not repair the conditions in the apartment (apparently other than repair of the parapet railing) unless Grubin and Lans released the defendants from all claims. As to the railings, Grubin and Lans complained that they were not installed properly, so that they were actually deprived of the use of their terrace for seven years.
The court dismissed the complaint against all board members except two, and it discussed the Business Judgment Rule, set forth by New York's highest court in 1990 in Levandusky vs. One Fifth Avenue Apartment Corp. In that famous case, the court held that the same rule governing decisions by the boards of traditional corporations also applied to cooperative and condominium boards. This court explained that to hold an individual board member liable, the complaint had to plead that the board member engaged in independent tortious acts. Thus, while an allegation of unequal treatment may have been sufficient to maintain the case against the board, the failure of the complaint to allege any tortious acts against individual board members results in dismissal.
Throw Off Your Shackles
The court explained that these strong protections were in place for good reason: Owners had to be willing to participate in governance, and "shackling" them with individual liability would deter them from participating. Thus, only individual and separate acts of self-dealing or other personally corrupt activities should burden them with liability.
The complaint here did allege specific and separate tortious acts by two board members. One, said Grubin and Lans, claimed that the flooring companies he contacted no longer manufactured the proper flooring to replace Grubin and Lans' flooring and that he sent an e-mail with the names of companies he had contacted. However, Grubin and Lans asserted in the complaint that many of those companies continued to manufacture the proper flooring. Another board member, the complaint alleged, advised that terrace railings had been paid for and delivered; however, one month later, the board's counsel stated that the railings had not even been ordered.
Next page: What the Business Judgment Rule doesn't protect >>
Board Talk
Engage, enrage, ask questions and give answers with your community of board members. Submit your questions and comments here!
Habitat Week by Week
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.
Ask the Experts
learn moreLearn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments
Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise
Subscribe
join nowGot elected? Are you on your co-op/condo board?
Then don’t miss a beat! Stories you can use to make your building better, keep it out of trouble, save money, enhance market value, and make your board life a whole lot easier!