Michael Manzi, partner at Smith, Gambrell & Russell

A tenant-shareholder is renovating her apartment. She has done everything right: she applied to the board, which has approved the renovation, and, she signed an alteration agreement. Everything is going smoothly.

Then, one of her contractor’s workers is injured on the job. Presumably, he wasn't happy with his worker’s comp because he sues the co-op, which is not an employer, and the managing agent. They are not troubled because the alteration agreement states that the tenant-shareholder will indemnify the board and the managing agent against any claims lost, as well as any damages and attorney’s fees that arise out of the work. So she'll have to cover it. She refuses, so they sue her. In court, she points out to the judge that there's a problem because of Section 5-321 of the General Obligations Law.

This statute voids any provision in a lease or an agreement related to a lease – such as an alteration agreement – which exempts the landlord from liability for negligence. In this case, that's exactly what the indemnification provision in the alteration agreement purportedly did. The judge threw out the co-op’s case because of this provision.

If the alteration agreement had said that this provision did not apply to any claims arising out of the landlord's negligence, the situation would have been fine. So, for the lack of a simple sentence, the co-op in this case was out of luck. So all you have to do is make sure that your alteration agreement has this provision. You would think that every alteration agreement would have it, but these cases keep popping up.

So it's important to keep an eye on the alteration agreement. What often happens is you use the same agreement year after year and sometimes you fix it, but then an older version creeps back in and the next thing you know, you're in the position that this co-op was in. So it's important to take a look at that alteration agreement periodically. It’s worth doing because in this case it was a very simple fix that could have saved a lot of bother.